1.0 Introduction

Royalties for the sale or other use of musical compositions can be an important source of revenue for some songwriters.  Prior to the onset of the Internet, foreign music publishing royalties never came into play for many artists.  However, with the advent of digital music, any artist can now sign up with a digital distributor and have their music made available, for example, through iTunes in Japan, Amazon in the UK, and Napster in Germany.  Two important publishing rights that are implicated by digital distribution of music are (a) the right to publicly perform the work (“public performance rights”), and (b) the right to make and distribute copies of the work (“mechanical rights”).

2.0 Performance Rights

For public performance rights, the administration of royalty collection abroad is very similar to public performance royalty administration in the United States.  In the United States, digital music services in many instances license musical composition performance rights through the relevant performing rights organizations (“PROs”).  Abroad it works largely the same way.  Moreover, PROs in the United States have reciprocal arrangements with the local collection societies in many territories throughout the world.  These arrangements allow US-based PROs to collect, on behalf of their members, royalties that were originally distributed to the local collection society in the applicable country.

3.0 Mechanical Rights

In the United States, online music services typically rely on their licensors[1] to clear mechanical rights in connection with permanent downloads.  Abroad however, digital music services typically obtain all mechanical licenses (including mechanical licenses for permanent downloads) from the applicable collection society(ies) in the relevant territory.  In addition, licenses from these collection societies may in some cases be mandatory, meaning that the digital music services must generally obtain a license directly from the applicable collection society.  If a publisher is not a member of the applicable collection society, royalties that the society collects for the exploitation of that publisher’s musical composition(s) may go into what is known as a “black box” (where they would typically remain for a specified period of time during which they may be claimed).  In addition, mechanical licenses are typically issued on a per-album basis (as opposed to a per-song basis), and royalties for certain digital configurations may be set as a percentage of the retail price to the customer.  Like in the case with PROs in the United States, the Harry Fox Agency[2] has reciprocal arrangements with collection societies in other territories.

4.0 Conclusion

Whether you are an artist whose content is being distributed outside the United States, or have a business that provides digital music to users outside the United States, having a strong understanding of the customs and mechanisms for rights clearance abroad is very important.  Copyright law can be very complex.  Accordingly, if you have any questions, you should consult an attorney who is well-versed in this area.

NOTE:  The information in this, and any other article on this website, is for information, discussion and academic purposes only and should not be relied on as legal advice.  Seek legal and financial counsel in your jurisdiction before acting on any ideas presented in this website.  This article does not create an attorney-client relationship. 

[2] HFA is an organization that administers mechanical rights (by issuing licenses and collecting royalties) on behalf of a large number of music publishers in the United States

 1.0  INTRODUCTION

 Online sales of music will likely surpass physical sales in the next few years, if not much sooner.  There are a variety of royalties that may be associated with online music distribution.  Online music distribution involves multiple rights, and the type(s) (and amount) of royalties that are typically payable necessarily depend on which rights are invoked by applicable online use.

As a starting point, the Copyright Act distinguishes the copyright in a sound recording from the copyright in a musical composition.  It is important to keep this distinction in mind in analyzing the various types of royalties that may be payable for online uses of music.  It is entirely possible for the copyright in a sound recording to be owned by a person or entity that differs from the person or entity owning the copyright in the underlying musical composition.  For example, for major releases, the sound recording copyrights are typically owned by the record label, while the copyrights to the underlying musical compositions are typically owned by a music publishing company.  However, as online distribution has given artists the tools for self-publication, many artists retain ownership of both their sound recordings and their musical compositions, choosing to use a digital distributor (such as IODA or CD Baby) to administrate the digital rights to their content.

 2.0   SOUND RECORDINGS

             The Copyright Act provides a limited public performance right in sound recordings. [1]  This means that the sound recording copyright holder has the exclusive right to public perform their sound recordings online.  One exception to this exclusivity, however, is the statutory (or “compulsory”) license for certain qualifying non-interactive streaming transmissions. [2]  Where a statutory license is available, the potential licensee need not ask for permission from the applicable copyright holder (though the licensee would need to comply with the statutory requirements and restrictions for the use of the music).  The statutory license for non-interactive streaming is commonly used by webcasters/internet radio service providers, who pay sound recording performance royalties to SoundExchange, a performance rights organization that collects royalties for statutory non-interactive streaming.  For other online performances (e.g., “on demand” streaming), sound recording performance licenses must be obtained from the copyright holder or their agent (such as a digital distributor), and royalties are paid directly to the copyright holder (or the agent).  Sound recording copyright holders are also entitled to royalties for digital copies (e.g., downloads) of their recordings.  These royalties are usually paid to the copyright holder, though for many independent artists, they often first flow through a digital distributor. 

 3.0.  MUSICIAL COMPOSITIONS

             For online uses that implicate the public performance right, a separate performance license is also required for the musical composition embodied in the applicable recording.  Performance rights (other than so-called “dramatic” or “grand” rights) in musical compositions are typically administered by performing rights organizations. [3]  For the public performance of musical compositions online (e.g., streaming), licenses are typically be obtained from (and corresponding royalties are paid to) the applicable performing rights organization. 

          The sale of permanent downloads implicates reproduction and distribution (“mechanical”) rights.  These rights may be obtained via (a) a direct license with the music publisher, (b) a statutory license (where available) pursuant to 17 USC § 115, or (c) a mechanical license issued by the Harry Fox Agency[4].  This type of license is also required for certain other online uses of musical compositions (e.g., ringtones, limited downloads, and on-demand streams).  Mechanical royalties are paid to the copyright holder or their agent, depending on the relevant arrangement. 

 4.0  CONCLUSION

             While there are a variety of specific types of online royalties, these royalties may be also be lumped together in a single payment.  For example, if an artist receives a payment from their digital distributor in respect of download sales, then, pursuant to the artist’s digital distribution agreement, the royalty payment would typically be inclusive of “record royalties” for the recording and “mechanical” royalties for the applicable musical composition. However, for certain online uses the artist may also be entitled to other royalties from third parties.  For this reason, artists should consider affiliating with SoundExchange as well as a PRO. 

[2] 17 U.S.C. § 114(d)(2)

[3] The Performing Rights Organizations that represent performance rights for musical compositions in the  United States are ASCAP, BMI, and SESAC.  These organizations also have reciprocal arrangements with PROs in other territories that allow for the collection of performance royalties for uses abroad.

[4] Note that Harry Fox mechanical licenses are a “variation” on the compulsory license (and, accordingly, are not private contracts).

In the previous article of this series, I discussed the importance of a band’s interactions with the music venue and venue owners. In this article, the focus will turn to the distinct components of the band, the individual musicians.  

Step 1: Appoint a Manager

When you are treating your band as a business, you should treat your fellow musicians in that band as business partners. Most legitimate businesses have some form of manager or supervisor. Similarly, it is a smart business practice for the band to assign a manager, either from within the band or as an external player. This individual is the go-to person for communication between the band and any person outside the band that will further the band’s business, i.e. venue owners, recording companies, photographers, marketing companies, and graphic designers. A specific person who is in charge of communication for such purposes will help the band to be more efficient and to appear professional to those working with the band. Although this manager should be the contact, this does not mean that this person makes the decisions alone – The manager should get the pertinent information and then bring it to the band to make all final decisions as a group. Remember, creative and innovate people in our society are a minority and are looked to as a source of potential revenue to those less innovative and creative.  If the likely manager has issues that would compromise the band (personality type, substance abuse, etc.) make sure the band dispassionately appoints the right manager and clearly communicates the expectations or limits of that authority (e.g., no contract is signed until all band members agree and obtain legal review).  So step one is appoint a manager and agree on the limitations of that member’s authority.

 Step 2: Assign the Important Tasks to Band Members

 In Step two, each band member should be assigned an individual job regarding the business that is the band. For example, one person can be in charge of promotion. This is an important job, because a large portion of a band’s success is contingent upon its ability to promote the band and bring in new fans via band posters, flyers, t-shirts, CD’s, and the like. Another band member should be in charge of booking and outreach, working to contact venues and putting together a press kit. The creation of a valuable press kit is important so that venue owners, recording companies, and radio stations have a quick snapshot at what the band is all about: a sample of the music, information on the band and the individual members, photographs of the band, and any other relevant information that will aide in booking potential gigs, landing a record deal, or getting airtime on a radio station. A well put together press kit presents a band that is professional and serious about what they do. Ensure all materials are able to be used, that is you have the intellectual property rights to republish and print any promotional materials. Intellectual property rights include copyright, trademark, trade secret, patents and moral rights.

 Step 3. Financial Controls

 Next, someone needs to be in charge of the finances of the band, accounting for revenue made, expenses paid, and relevant tax obligations if the band is a partnership, corporation, or LLC. If they can afford it (and it is actually needed), the band can hire a manager or accountant to handle the money. If not, a band member can work to keep track of the expenses associated with travel, recording, marketing, and promotion and the income from CD and digital sales and live performances. One major problem that undermines the trust among band members is opaque accounting. Hire a Certified Public Accountant as soon as financially practical.

 Step 4: Have a Voice with the Fans

 It is always helpful to have a specified band member dealing with the fans. With the amount of social networking and communications via the internet these days, there is a lot of upkeep. You must update your social networking sites, your website, and other forms of communication with the public and your fans. Don’t forget about doing things in person though too. Having a personable and reachable “front man” for the band is an invaluable detail that can really help the band to reach out to new fans and keep the current fans happy. Never lose sight of who is paying to hear you.

 Step 5: Ownership of Tangible and Intellectual Property

 There are a few steps the band can take now to avoid any unnecessary conflict in the future. First, the band should discuss early on who owns what. With some members singing, some writing lyrics, some composing, and some playing instruments, opinions may later clash when the question of who owns what comes about. Agreeing ahead of time on who did what, who should own what, and how much money each member should get for such contributions is a very helpful tool in avoiding future disagreements over ownership and rights. It is also important to determine where the materials came from as using someone else’s materials without the proper intellectual property right, such as copyright, can create huge liabilities for all band members.  Dealing with these issues early on will aid future discussions about band roles.

 Step 6: Artists Sometimes Disagree: Prepare for an Orderly Dispute Resolution Process

 Sometimes most importantly, the band must keep in mind that no ship ever sails on completely smooth waters. Band members need to be on the same page when it comes to any past, current, or potential future disputes. Disagreements often occur among the band members themselves regarding an assortment of different issues. A good way of dealing with these future disputes is by sitting down early on and discussing future dispute resolution options, i.e. what happens when the band cannot agree on an important decision? This could be done through a simple majority vote by the band members, mediation with a neutral third party, arbitration for a more binding neutral opinion, or setting up a predetermined procedure to follow when dealing with particular issues. Regardless of how you do it, it is important to realize that disputes among band members are inevitable. Thinking about these potential problems early on and having a plan for how to deal with them will be extremely useful in keeping the band happy, productive, and unruffled later on down the road.

 Step 7:  Write it Down – Forming a Collective Person

 While the above is a best practice, it will never do any good until it is written down.  Setting up some form of a business association for the band may be helpful to also demarcate these issues. A band can work as a partnership, a limited liability company (LLC), or a corporation. The business entity that the band decides to create will dictate the ins and outs of how the business is run. In setting up the business entity, the band can delineate a specific and predetermined portion of the band business that each member owns, and it can help to set up the boundaries of each band members’ contribution, ownership rights, credit, and pay. The band should seek a local entertainment law attorney to discuss which business entity option is best suited for the band and how to set one up. From allocation to dispute resolution, the business formation documents are the ultimate record of a “meeting of the minds.”

 It is important to always remember that you are a collective of very talented, but very different creative individuals. Treat each other as business partners and handle the band’s business affairs in a prepared and professional manner, and the band members will ultimately see happiness and success, both individually and as a group.

The U.S. District Court for the Southern District of New York recently granted summary judgment in favor of Verizon on the question of whether Verizon was liable for public performance fees for ringtones. [1]  ASCAP, one of the primary performing rights organizations in the United States, had opposed Verizon on the issue.

At issue, in part, was whether Verizon’s transmission of a ringtone to a user’s cellular phone constitutes a public performance.  The parties focused on the second part of the definition of the term “publicly” in 17 USC § 101, which reads in part:

(2) to transmit or otherwise communicate a performance…by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

The court ruled in favor of Verizon on the issue, saying that the transmission itself was not a public performance, further noting that “[e]ven if the customer could listen to the download as it was being received, and contemporaneously perceive it as a musical work, that would not constitute a public performance.”

The court then turned to ASCAP’s argument that a public performance occurs when a cellular phone plays a ringtone, and that Verizon is liable (both secondarily and directly) for such public performance.  In addressing the issue of secondary liability, the court turned its attention to the Copyright Act’s exemption for performances occurring within “the normal circle of a family and social acquaintances” and the Act’s additional exemption for:

[any] performance of a nondramatic literary or musical work otherwise than in transmission to the public, without any purpose of direct or indirect commercial advantage and without payment of any fee or other compensation for the performance to any of its performers, promoters, or organizers, if [ ] there is no direct or indirect admission charge…

According to the court, the first exemption would apply to the playing of a ringtone in the presence of family and friends.  Further, with respect to instances where there is the presence of a broader audience, the court said that the second exemption would apply, emphasizing that customers do not have any expectation of profit in connection with the playing of a ringtone. 

The final portion of the court’s ruling addressed the issue of direct liability for Verizon.  ASCAP’s theory was that when a ringtone plays in public on a cellular phone, Verizon is engaging in a public performance. As was the case with the other theories of liability at issue, the court dispensed with ASCAP’s argument, noting that “Verizon’s only role in the playing of a ringtone is the sending of a signal to alert a customer’s telephone to an incoming call.”  The opinion further noted that “[t]hat signal is the same whether the customer has downloaded a ringtone or not,” and that “[t]he other components of Verizon’s putative ‘control’ over the playing of the ringtone in public are too attenuated from the ‘performance’ to render Verizon liable.”

Note that this ruling concerns only public performance rights.  In the ruling the court readily acknowledged that mechanical rights are implicated in the reproduction and distribution of ringtones.  The current statutory mechanical royalty rate for a ringtone download is 24 cents.

NOTE:  The information in this, and any other article on this website, is for information, discussion and academic purposes only and should not be relied on as legal advice.  Seek legal and financial counsel in your jurisdiction before acting on any ideas presented in this website.  This article does not create an attorney-client relationship. 

If you play in a band or are involved in creating or performing music, an understanding of certain legal principles will (a) help you protect the rights you have, (b) help you stay out of trouble (by not infringing others’ rights), and (c) make you aware of steps you can take today that may prevent certain problems from arising in the future (or that may at least put you in a much better position to deal with those problems, should they arise).  This article highlights some of the legal issues that are relevant to members of music groups.

What You Own: Copyright Law

The Copyright Act of 1976 gives copyright holders certain exclusive rights in works.  Musicians should note that the Copyright Act provides protection for both sound recordings and musical compositions (these are two distinct copyrights).  The exclusive rights belonging to copyright holders under the Copyright Act include the right to reproduce the work, the right to distribute the work, and the right to prepare derivative works based on the work.  Subject to certain statutory exceptions, if you are the owner of a copyright, others will need to obtain your permission before using your work, and, conversely, if you want to use someone else’s work, you will generally need permission first. 

Once an original work of authorship is fixed in tangible form, it is automatically protected under the law.  But, there are a variety of benefits to registering a work with the United States Copyright Office, including: (1) a presumption of ownership, (2) the ability to seek statutory damages (these may be much higher than the actual damages sustained) against an infringer, and (3) the ability to seek recovery of attorney fees in actions against an infringer.  In addition, you must have a valid copyright registration in order to file a lawsuit for copyright infringement.  It is always a good idea to register your works, and registration can be done online.

Your Name and Brand: Trademark Law

The Lanham Act provides certain protections for words, marks, and symbols used in commerce to designate the origin of goods or services. Unlike the case with copyrights, trademark protection does not arise merely through the creation of a mark, but instead develops as and when the mark is actually used in commerce.  In addition, there is state-level protection for trademarks (and the registration is easy and inexpensive).  However, like in the case with copyrights, federal registration will afford the rights holder with certain additional benefits.  For instance, once your name acquires federal protection, you are given nationwide priority of use (other than in territories where someone else has previously acquired and continues to hold rights to the mark), even in states where your band has not yet performed, sold merchandise, or otherwise used the mark.

If your band name (or business name) is owned by you and subject to nationwide federal trademark protection, you will be better-positioned to prevent others from using that same name in a manner that is likely to cause confusion in the marketplace.  This is an important right that will help you protect the goodwill and recognition that your band’s name has acquired.  Additionally, with the prominence of nationwide online music sales, securing federal trademark protection is more important than ever before.

The Band: Business Entities and Band Agreements

If your band has never legally formed any kind of a limited liability entity (e.g., an LLC, a limited liability partnership, a corporation, etc.), your band would likely be considered a general partnership under the law (whether your band considers itself to be a partnership or not).  This has important legal consequences.  For example, each band member can bind the band to agreements with others. In addition, each band member is personally liable for actions of the band (and other members) in the course of the band’s business.  Forming a limited liability entity may help limit liability to the assets of the band (as opposed to personal assets), provided that the band continues to effectively operate as a separate legal entity.  A business attorney can help you decide which entity-type is most appropriate for your band (including whether to form a limited liability entity) given the facts and circumstances of your situation.

In any event, it is a very good idea for most bands to have some form of a written intra-band agreement setting forth rights and obligations of the band members.  An intra-band agreement can, for example, set forth the royalty percentage each band member receives, the number of votes required for a band action, a procedure for addressing the situation where a member quits, a provision governing ownership of the band name if the band breaks-up, etc.  It is important that you address these types of things in writing early on, since it is much easier to work through them when everyone is on friendly terms, and it can help avoid disputes later on down the line.

Registering with Performance Rights Organizations

For musicians there are two important public performance rights.  First, owners of musical compositions have the exclusive right to publicly perform their musical compositions.  Second, owners of sound recordings have the exclusive right to publicly perform their sound recordings by means of digital audio transmission (e.g., streaming).

If you are a songwriter, or music publisher, you should consider registering with a Performance Rights Organization in order to collect certain royalties that may be payable for the public performance of your musical compositions.  In the United States, the three main organizations representing performance rights in musical compositions are ASCAP, BMI, and SESAC.  In addition, performers and sound recording copyright holders should consider registering with SoundExchange, a performance rights organization that administers royalties for certain digital public performances of sound recordings (e.g., non-interactive Internet-radio).

Contracts

The music industry is built on contracts.  There are a variety of contracts that a band may be presented with over the course of its career.  Some of the contracts that you may encounter include management agreements, recording agreements, performance agreements, distribution agreements, and merchandising agreements.

You should always get your agreements with others in writing.  While contrary to popular belief, many oral contracts are enforceable, it is often very difficult to prove the existence of an oral contract.  It is best to have a formal agreement in writing, setting forth the rights and responsibilities of the parties.  However, even a brief email exchange, outlining basic terms, may be significantly more beneficial than having no written agreement at all.

The signing of a new agreement can mark the beginning of a new chapter of growth for a band’s career, and it is natural to get excited when a company expresses interest in your music.  However, signing a bad agreement – or even a good agreement with the wrong company – can have devastating consequences. Therefore, you should always have an experienced entertainment attorney look over any agreement that you are considering signing, and you should be cautious about the people or companies with whom you enter into agreements.  To that end, while a newer, less well-established company may in some cases be able to devote more time and energy towards your band, you should be especially cautious about entering into agreements with people or companies that do not have an established track record of success.

Conclusion

As illustrated by this article, there are a variety of legal issues that are relevant to members of music groups.  Addressing certain issues, such as those mentioned in this article, early can help prevent problems from arising later on (when they are generally much harder to deal with).  An experienced entertainment attorney can be of great assistance in helping you work through these issues.

NOTE:  The information in this, and any other article on this website, is for information, discussion and academic purposes only and should not be relied on as legal advice.  Seek legal and financial counsel in your jurisdiction before acting on any ideas presented in this website.  This article does not create an attorney-client relationship.

Songwriters commonly collaborate with other individuals.  However, in situations where there is more than one contributor to a song, issues may arise concerning ownership.  For a recent example, one need not look further than the recent case of Janky v. Lake County Convention and Visitors Bureau[1], a case involving joint works under the Copyright Act. 

In the case, the Lake County Convention and Visitors Bureau wanted to obtain a song it could use in promoting the miles of beachfront in the area to potential visitors.  When Henry Farag, a member of a doo-wop group known as “Stormy Weather”, learned that the Bureau was looking for a song to use to represent the county, he told his bandmates of the opportunity.  Another band member named Cheryl Janky then composed a song called “Wonders of Indiana”.  After obtaining a copyright registration for the song solely in her name, Janky then showed the song to Farag, who suggested that the lyrics be changed to more specifically focus on Lake County.  Janky adopted Farag’s suggested changes and obtained a copyright registration for the new version of the song. The registration credited Farag with co-authorship and listed the song as a “joint work”.  The band then recorded the song.

The Bureau, desiring to use the song, obtained a non-exclusive license from Farag.  The Bureau then incorporated the song into promotions, utilized it as on-hold music, and played it regularly in the visitor’s center.  Three and half years after the license was issued, however, Janky obtained a new copyright registration for the song, this time listing herself as the sole author.  She then proceeded to initiate a lawsuit against the Bureau.  The thrust of Janky’s argument was that she was the sole owner of the song, and that, accordingly, the license issued by Farag was invalid and the Bureau’s use of the song therefore constituted copyright infringement. 

The main issue under consideration by the court was whether the song was a joint work. This is because authors of a joint work each have the right to grant non-exclusive licenses for the work. [2]  Under the Copyright Act, a “joint work” is “a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.”

In the Janky case, the Seventh Circuit Court of Appeals ultimately reached the conclusion that the song was a joint work, noting Farag’s “control over what the song looked like”, Janky’s listing of Farag as a co-author and labeling the work a joint work in the earlier registration, and the fact that Farag’s contributions, while amounting for only 10% of the lyrics, were significant.  However, the court conceded that it was a close case, noting that had Farag contributed much less, his contributions would not have met the threshold required in order for him to be considered a co-author.

Rights disputes, such as the one in the Janky case, can be devastating for a songwriter.  For example, as a result of a rights dispute, a songwriter who has entered into a distribution deal may end up being responsible for the costs of the legal defense (and monetary damages) of the distributor and/or retailer(s).  This is in addition to any liability the songwriter may incur as a result of a direct lawsuit by the other contributor against the songwriter.  In other scenarios, a rights dispute may still result in content being removed from regular channels of distribution when the relevant retailer(s) and/or distributor(s) decide that carrying the content isn’t worth the trouble of dealing with the dispute.  This can, among other things, result in lost income or lost opportunities for the songwriter.

Use of a written agreement which memorializes the contributors’ understanding regarding song ownership and related rights may help to avoid later disputes.  In addition, in cases where a contributor’s contributions may not meet the threshold requirements for a joint work under the Copyright Act, use of a written agreement may be the only way to seek protection of the contributor’s expectations (royalties, ownership, attribution, etc.).  Finally, in some situations a written agreement is actually required in order to establish certain rights. [3]

An attorney experienced in drafting music contracts can be of great assistance in preparing these types of agreements.  If you have any questions regarding this issue, it is best to seek guidance as early as possible, as it is almost always easier to work these types of issues out before a dispute arises. 

NOTE:  The information in this, and any other article on this website, is for information, discussion and academic purposes only and should not be relied on as legal advice.  Seek legal and financial counsel in your jurisdiction before acting on any ideas presented in this website.  This article does not create an attorney-client relationship. 

[2]   Note that unless there is a written agreement to the contrary, a joint author must still account to the other joint author(s) for profits.

[3]   There is a certain category of works known under the Copyright Act as “works made for hire”. In a “work made for hire” situation, the person or entity for whom the work was prepared is considered the “author” for copyright purposes. In certain situations, the Copyright Act requires that there be a written agreement in order for a work to be considered a “work made for hire”.

  Swider Medeiros Haver LLP Releases Analysis of Innovation Trends Among Cities of the Western United States of America.  General trends can be seen by analyzing and comparing the number of patents issued to inventors or assignees in several Western cities from 2002 through 2008.  In almost all cases, there was a decrease in the number of patents issued to both inventors and assignees in 2005, followed by an increase starting in 2006.  However, the number of patents is some cities has decreased since 2005, while in others the number of patents has increased.

PORTLAND, Oregon, June 22, 2009.  Interesting trends can be seen by comparing high technology cities such as San Francisco and Seattle, or cities with a large amount of recent growth such as Phoenix, with other cities.  Those cities generally have a higher number of patents issued to inventors than to assignees.  Further, those cities exhibit an increase in the overall number of patents issued per year.

By contrast, cities such as Sacramento, Salt Lake City, or San Jose exhibit a general decrease in the number of patents issued since 2006.  It is worth noting that Denver is something of an anomaly, most likely due to the fact that it is a growing city without a large technology sector.  Another interesting trend can be seen in the fact that since about 2006 the number of patents issued to assignees has decreased at a greater rate than the number of patents issued to inventors in both San Diego and Los Angeles. 

It is interesting to compare the above mentioned cities to Portland.  As seen elsewhere, the number of patents issued to both inventors and assignees in Portland decreased in 2005, followed by a sharp spike in 2006.  The number of patents issued since 2006 has decreased for both inventors and assignees in Portland, although the rate of decrease has been much sharper for inventors than assignees.  This difference is significant and possibly worrisome, as it may indicate that some Portland companies are beginning to keep their headquarters local while sending their inventors into different locales.  A complete set of graphs is here on this link.

-END-

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by Tichelle Sorensen

Social networking sites are an incredibly important marketing vehicle, especially for small companies or those whose model relies upon viral or similar marketing or promotion.  Using sites such as Facebook, Myspace, and Twitter has become a key component of most marketing plans.  Which makes it even more crucial for companies’ to be aware of changes in the laws relating to these activities, as well as any changes to the policies of those sites. 

One prime example is the recent change to Facebook that allows users to claim a unique URL for their Facebook page.  Beginning Saturday, June 13^th current Facebook users had the opportunity to register unique URLs.  (Those who were not current users as of June 9th, will not be able to register for a new URL until June 28^th.)  According to the company, the change allows users to create an easier way for them to share their Facebook page with other users; instead of a group of randomly assigned numbers, registrants can obtain a URL that includes their name or another identifier.  While this may be good for companies who are able to register their name or trademark, it can pose problems for those that lost the race and are unable to obtain that URL.  It may also increase the likelihood of trademark litigation where two companies have never run into one another in the marketplace if the result is consumer confusion. 

Prior to opening the URL registration period, Facebook provided a mechanism by which trademark owners could register their marks with the site in order to prevent a user from obtaining that URL.  However, now that the pre-registration period has passed, a trademark owner that didn’t pre-register will need to use the online reporting form for those who believe their intellectual property rights have been infringed by another user.  (http://www.facebook.com/copyright.php?noncopyright_notice=1)

This change illustrates a couple of important points.  First, you should always be aware of the terms of service or use of any site that you use as well as any changes to those policies that could affect your use of those services.  Next, even if the so-called “new media” is not a component of your marketing plan it can still impact your business in unexpected ways.   Finally, those trademark owners that rely on state or common law protection may want to reconsider their strategy.  The internet will continue to increase the potential for marketplace confusion.  In this case, trademark holders were required to include registration numbers in order to qualify for pre-registration protection.  Those federal registrations, for those that qualify may be even more important than ever to provide the appropriate evidence to protect your rights.

Article 1: The Venue

by Brooklyn Baggett

Law Clerk

 
    Being in a band is more complicated than just playing music you love. If you want to make money as a band, you must all know that. A band is a business, and band members who treat it as such have greater success, make more money, and keep the band in a healthy and stable state of affairs. This piece is the first in a series of articles discussing the different business aspects that affect the pockets, legal rights, and internal sanity of band members individually and, more importantly, as a band. This first article deals with the relationship between the band and the live performance venue. While people can learn about your band via radio, Myspace, and CD distribution, your band’s live performances can generate a great deal of interest in the music and is the best source of income for the band.
   
    Having a good business relationship with venue owners and booking agents around town is an important first step. You may see your role as a musician as just that, to make music. The most successful bands are those who attack music and gigs like a job. Get up in the morning and start making calls, posting flyers, rehearsing, talking to important people. Do it until the evening, or at least until you have to go to your “I only do this to make enough money to live while I am pursuing my real passion as a musician” job. Your band is a business and each band member is thus a representative of that business: You approach the venues; bring a demo and some information about your band; be friendly, professional, and responsible. It all comes down to building a repertoire among the venue owners and booking agents locally – let them know you and your band mean business. This can only increase your chances of getting more shows at better venues. 

    A very important issue to understand is whether or not you are an employee of the venues where you perform. When a musician is the employee of the venue, that venue maintains some amount of control over the musician, owes certain legal duties to the musician, and must also pay taxes for that musician. A musician as an independent contractor, on the other hand, maintains absolute control over the performance while in another’s establishment and gets treated and paid as such. In 2007, the Oregon Employment Department interpreted an Oregon state law (ORS §657.506) so that musicians were considered employees of the venues in which they performed. The law said that musicians were employed by the venue unless a contract specifically stated otherwise. This added a whole new dimension to the professional approach musicians must take when dealing with venue owners. Although the law was originally geared towards restaurants where employees were not claiming their tips, the result of this interpretation put venue owners on the hook for employment taxes for musicians who may have only played one show at that club. Musicians were approaching venue owners as “boss” for owners had gained more responsibility over the musicians playing in their venues.
               
    “It’s true that we give money to the musicians at the end of the night.  But we only know them for a total for three hours or so.  And then they get on their tour bus and head to Albuquerque or Seattle.” Jim Brunberg[1]

    This interpretation of the law led to an uproar for reasons just like that quoted by Jim Brunberg, owner of Mississippi Studios. The uproar was successful though. Thanks to many local musicians, attorneys, and venue owners, the Oregon Legislature has undone that interpretation. On April 28^th, 2009, after passing both the House and the Senate of Congress, House Bill 2540 was signed into law by the governor. This bill eliminates the statutory requirement that a contract with specific language exist for every music engagement in Oregon. Additionally, the band member signing the contract on behalf of the band will no longer automatically be deemed the employer of the rest of the band. Most importantly, musicians are to be considered independent contractors, not employees, of the venues in which they play. 
   
    Although this repeal will be an improvement on the employment side of this issue, it might not hurt to continue to think of the venue owner as “boss.” Although he may not pay taxes for you or be responsible to you if you slip and fall off the stage mid-performance, he is still paying you to play music in his venue. Treat the venue owner with respect and interact with him in a professional manner, and you may get another gig there. Better yet, he may refer you to other venues or tell other venue owners about how great you were. A professional working relationship with any venue owner or booking agent, regardless of the venue, is an important part of treating your band like a business. Treat is as such and the individuals who truly matter to a bands ultimate success – venue owners, booking agents, promoters, marketing agents, and record labels – will respect the band that much more.

Partner, Swider Medeiros Haver

The publisher of a Harry Potter “Lexicon” was permanently enjoined from printing the book because they failed to establish that the publication would survive claims of copyright infringement and prevail on a fair use defense argument.  The court awarded author J.K. Rowling $6,750 in statutory damages. Warner Bros. Entertainment Inc. and J. K. Rowling v. RDR Books et al, __ F.Supp.2d __, 2008 WL 4126736, S.D.N.Y., September 8, 2008 (NO. 07 CIV. 9667 (RPP)).

The Lexicon was written by Steven Vander Ark, and is an encyclopedia of the people, places, objects, and events of the seven-book Harry Potter series. According to testimony the Lexicon originated as a fan based web site, derived from the middle school library media specialist’s notes and launched in 1999 and made public in 2000. There was testimony that Rowlings herself would refer to the site to check a fact while writing the later books. According to the record, Vander Ark had received positive feedback, including from Rowling and her publishers, about the value of the Lexicon website as a reference source.  In May 2004, Vander Ark read a remark by Rowling posted on her website praising his Lexicon website as follows: “This is such a great site that I have been known to sneak into an internet café while out writing and check a fact…”

Court records indicate that initially Vander Ark did not intend to publish the Lexicon in book form, but later changed his mind when RDR publisher Rapoport reassured him that he had looked into the legal issue and determined that publication of content from the Lexicon website in book form was legal. Rapoport agreed to stand by this opinion by adding an atypical clause to the publishing contract providing that RDR would defend and indemnify Vander Ark in the event of any lawsuits.

After a volley of demand letters Rowling and Warner Brothers (the copyright rights holder) filed suit to stop the publication of the book.  Why did the court come to the conclusion to enjoin publication of the Lexicon? The court was persuaded by the large amount of copying in the Lexicon – the 450 pages of a manuscript come primarily from the 4,100-page Harry Potter series.  Additionally the Lexicon’s 2,437 entries are made up from direct quotations, plot details, or summaries of scenes from the novels.  The Lexicon itself makes clear that the only source of its content is the work of J.K. Rowling. The first page of the Lexicon manuscript states: “All the information in the Harry Potter Lexicon comes from J.K. Rowling, either in the novels, the ‘schoolbooks,’ from her interviews, or from material which she developed or wrote herself.” There is no dispute that the Lexicon actually copied from Rowling’s copyrighted works. Vander Ark openly admitted that he created and updated the content of the Lexicon by taking notes while reading the Harry Potter books and by using without authorization scanned, electronic copies of the Harry Potter novels and companion books.

The court also considered that Rowling had already written and published a book on the sport Quidditch Through the Ages (2001), and another entitled Fantastic Beasts & Where to Find Them (2001) an A-to-Z encyclopedia of the imaginary beasts and beings that exist in Harry Potter’s fictional world.  Both appear in the Harry Potter series as textbooks that the students at Hogwarts use in their studies, and the companion books are marketed as such.  The companion books were written as chronicles, expanding on fictional facts that unfold in the Harry Potter series.   Vander Ark relied on these other published Rowling works as well. According to Vander Ark, additional content is drawn from outside reference sources, including Bullfinch’s Mythology, Field Guide to Little People, New Shorter Oxford English Dictionary, and online encyclopedias such as Encyclopedia Mythica.

There was testimony that prior to any discussions with RDR Books about publishing portions of the Lexicon website as a book, Vander Ark was aware of Rowling’s public statements regarding her intention to write a Harry Potter encyclopedia upon completion of the seventh book in the series.

While the court found the use “transformative” in part because the Rowling work was entertainment.  The court said the Lexicon is a reference work meant to make information about the intricate world of Harry Potter readily available to readers, the transformative character of the Lexicon is diminished because it was not consistent, and in any event, “A finding of verbatim copying in excess of what is reasonably necessary diminishes a finding of transformative use.” 

The court did take notice regarding reference guides in general as both useful and in demand, and the work the Lexicon purports to be and whether it qualifies as such (no doubt in part due to its title), fits in the narrow genre of non-fiction reference guides to fictional works. Defendant’s expert testified that the Harry Potter series is a multi-volume work of fantasy literature, similar to the works of J.R.R. Tolkien and C.S. Lewis.  Such works lend themselves to companion guides or reference works because they reveal an elaborate imaginary world involving many characters, creatures, and magical objects that appear and reappear across thousands of pages.  (The expert testified that she found 19 or 20 companion guides to J.R.R. Tolkien’s works, and about 15 guides to C.S. Lewis’s works.)

Judge Patterson rejected J. K. Rowling’s argument that the Lexicon would impair the market for an encyclopedia she planned to write.  Judge Patterson ruled that “the market for reference guides to the Harry Potter works is not exclusively hers to exploit or license, no matter the commercial success attributable to the popularity of the original works.” Judge Patterson added that “[t]he market for reference guides does not become derivative simply because the copyright holder seeks to produce or license one.”  Part of what the court found problematic was the wholesale copying of long passages, songs and poems from the books but left the fair use door open with this advice, paraphrased:  a guide’s author must take care not to copy more “highly aesthetic expression” than necessary to achieve the guide’s educational purpose. Moreover, the guide’s author must exercise even greater care when copying material from reference works created by the original author.

As in the case of the Seinfeld Aptitude Test, (Castle Rock Entertainment, Inc. v. Carol Publishing Group, Inc. 150 F.3d 132 (2d Cir. 1998)) when court held that a trivia book which tested the reader’s knowledge of “facts” from the Seinfeld series copied protected expression because “each ‘fact’ tested by [the trivia book] is in reality fictitious expression created by Seinfeld’s authors” it follows that the same qualitative conclusion, where each “fact” reported by the Lexicon is actually expression invented by Rowling. The court ultimately followed prior decisions denying the fair use defense when a book takes too much from the original, essentially usurping the market that is reserved for the original author.

Finally, the court ruled since the Lexicon has not been actually published and thus Plaintiffs have suffered no harm beyond the fact of infringement, the Court awarded Plaintiffs the minimum award under the statute for each work with respect to which Plaintiffs have established infringement.  Plaintiffs were awarded statutory damages of $750.00 for each of the seven Harry Potter novels and each of the two companion books, for a total of $6,750.00.  Scholars have pointed out that while the plaintiff did prevail there was significant acknowledgement and understanding of “fair use” in the court’s analysis, punctuated by the award of the minimum damages for infringement.

RDR Books has until Nov. 7 to file a notice of appeal.