Wednesday, February 29, 2012

Does Employer Have to Furnish Copy of NDA to Employee?

Dear Rich: Is it required by law that employers provide a copy of the signed nondisclosure agreement to the employee after they have signed it? In most states, yes, the employer must furnish a copy of each signed agreement including NDAs. If the employer doesn't provide a copy at the time of execution, then the employer usually must allow the employee to view and copy the agreement upon written request. These laws, sometimes referred to as "access to personnel records" legislation differ from state to state and you can find more about your state's law in this article.

Tuesday, February 28, 2012

Does Fundraising Documentary Require Photo Releases?

Dear Rich: I’m creating a documentary for a non-profit aquatics club that will provide background information on the organization before fundraising pitches. The documentary covers the organization’s history in relation to the surrounding area and testimonials/interviews from current members, former members, and local residents. To add visual appeal, I’d like to use photographs from a local newspaper (ranging from the 1950’s to the 1990’s), personal photographs, and professional sports team photographs spanning the facility’s history. I’ve already obtained unlimited interview and image releases from the interviewees. I’m going to contact the newspaper about the published images; and I’m going to contact the photographers who took the team photographs. Since many of these photos are old and feature many people, I will unfortunately not be able to obtain personal image releases from everyone. Are these images considered informational since they appear in a documentary presenting facts? Is this documentary considered informational even though it will be used during fundraising activities?  Personal releases shouldn't be required from people whose still images appear fleetingly in a documentary, especially in the context you're describing. (It sounds like you've got the other side of the issue -- copyright permission from the newspaper -- also covered.)
Documentaries raise funds. The fundraising aspect of the project doesn't negate the informational quality of the work. After all, just about every documentary directly or indirectly is tied to a financial cause, even if that cause is the filmmaker's pockets (yes, sad to say, Jackass 3D is considered a documentary). A documentary maker usually only needs a photo release if a person's image or personna is used to sell a product or service, or if you are invading the privacy or saying something that might be considered defamatory (we discuss these standards in more detail in this article).

Monday, February 27, 2012

Do We Have to Include Trademark Punctuation?

If a statement such as "Fly high. Fly now." is a trademark, does the punctuation need to be included in the trademark statement at the end of an advertisement? I was taught that it does, but if the trademarked phrase is not italicized or boldfaced, it looks odd. (In the example, it would appear as "Fly high. Fly now. is a trademark of the Whatzit Corporation.") The thing about those tiny trademark statements at the bottom of ads is that nobody reads them except the attorneys for the companies whose trademarks you're mentioning. So it really doesn't matter how it looks as long as  you duplicate the mark as the owner intended. (By the way, if it looks really strange, use single quotation marks to set it apart.) Also, if the mark is registered, indicate that it is federally registered, but don't make a similar statement about an unregistered mark. In some cases -- for example, if you're using a mark with the permission of the owner -- you may have a contractual obligation to use specific language. By the way we took a look at punctuation and trademarks about three years ago so we won't bore you by revisiting the Hall of Famous Punctuated Marks (although we were surprised to see that a few people have registered Punctuation as a mark).

Friday, February 24, 2012

Stand and Deliver Video Rights

Dear Rich: I am a lawyer who presents onsite training. In my marketing video for the trainings, I have included short clips from "Stand and Deliver" and "Freedom Writers" to illustrate how some of the issues play out in educational settings. I am assuming I should get permission to use the video clips but I am unclear of the the process to do so. Yes, you should seek permission if you're using the clips for marketing purposes. It's always possible your uses could qualify as a fair use (more on that in a sec) but because of your position as an attorney-trainer, we think it's best to keep risks to a minimum. We believe that the 1988 film, Stand and Deliver is owned by Warner Brothers. Here's a Warner Brothers request form with instructions for seeking use of a clip or still. (It looks a little bit worky but hopefully somebody at WB can help you through the process.) Freedom Writers looks like it's owned by Paramount. That company directs folks like you to click on their Paramount Film Clip Licensing link which unfortunately leads nowhere (or at least it did when we tried it). We also tried to find a link for MTV Films, the co-production company but all our links for that lead, alas, back to Paramount. Perhaps you'll have better luck at the Freedom Writers website but we think you get the idea. You need to find some way to contact the owners. Once you do, plead for permission, and hope your request doesn't get buried on some paralegal's desk.
The Fair Use Argument. If you can't obtain permission, you may -- depending on the length and context of the clips -- be able to justify your borrowing as a fair use. The marketing aspect of your effort works against that argument but take a look at some of the audiovisual cases (scroll down to the Artwork and Audiovisual cases) to get an idea. As always, remember that fair use is a defense, meaning that a complaining copyright owner can drag you into court to defend yourself.

Thursday, February 23, 2012

Can We Arrange Elvis Songs?

Dear Rich: I’m planning to create an arrangement of Elvis Presley tunes for string quartet. Do I need permission to just use these arrangements for my own string quartet? What if I want to sell the arrangements to others? We love your idea (and others like it, too). You're probably okay arranging and performing a few Elvis songs for private performances. That's because the owners of the music are unlikely to notice (or to care if they do find out). If you plan to perform the music, publicly, the venue would need to pay for public performance royalties (sidebar on right under U.S. copyright law). If you were to record and release the music, you'd need to pay mechanical royalties.
What if you want to do more? You will need permission if you plan on promoting sales or distribution of sheet music arrangements to other quartets (or seek to stop others who copied your arrangement). That's because the making of sheet music requires authorization whether it is a straight reproduction of the sheet music or an “arrangement” or “orchestration” that qualifies as a derivative work. In other words, you can't reproduce the underlying work -- for example, Heartbreak Hotel -- in a printed arrangement, without the publisher's permission. You can usually find the music publisher’s contact information at the following sites: Harry Fox, BMI, ASCAP, or Limelight. Also, the National Association for Music Education website has an example of a request form for permission to create musical arrangements.

No, They Didn't Dept.

Guess the Daily Beast headline writers didn't have time to read this.

Wednesday, February 22, 2012

Music Publishing and Administration Deals

Dear Rich: Can you explain the difference between a music publishing deal and an administration deal? Sure! In an administration deal  (also known as an "admin deal"), a music publisher exploits song copyrights but doesn't own them and the publisher usually earns a smaller percentage of the song's income than in a straight publishing deal - perhaps 25% compared to 50%. An administration deal is also limited to a number of years -- for example, a 5 or 10 year period whereas in a straight publishing deal (or in a variation such as a co-publishing deal), the music publisher acquires ownership of the song copyright and the term is often for the length of copyright protection (or it may be terminated after 35 years under copyright law).
Many choices. There are many, many variations on both types of deal -- for example, the arrangement might be for a complete catalog, just a few songs, or perhaps even for songs that will be written in the future -- and the deals may include varying percentages and advances. Most importantly, some publishers actively "work" songs in various media, while other publishers just sit back and wait for deals or performance royalties to roll in. As a bottom line for admin or regular publishing deals, the music publisher should guard against infringements, collect royalties, and see that the songwriter gets paid. Although this wikipedia article states that "Only the most popular song writers can even consider asking for an admin deal," we don't agree at all. Many obscure songwriters -- the Dear Rich Staff included -- have acquired admin deals with established music publishers. For more tips for songwriters, check out our article on the subject.
PS Dept. Speaking of music publishing revenue ... Elton John's song, Candle in the Wind, is believed to be the most "played" song of all time.

Tuesday, February 21, 2012

Can You Copyright a Patent?

Dear Rich: I improved an expired invention. When I prepared my provisional patent application I downloaded drawings from the old patent and made a lot of modifications to show how I had improved the original. I'm submitting these drawings as part of my provisional patent application and I'm also citing that patent as prior art and wanted to attach a copy with my application. Here's my question. What if the patent has expired, but the copyright hasn't? Let's sort out a few things first. When you refer to an expired invention, we assume you mean an expired patent, one that's run out of gas because the term is over or the owner failed to pay maintenance fees. In other words, the patent is in the public domain. Second, if it helps to explain your invention, you can include the expired patent with your application (and mention it as prior art). But it's not necessary to provide copies of prior art patents when filing a provisional patent application. As for the drawings, we think you'll be fine but there are a few things to consider.
Copyrighting a patent? It's not uncommon for a patent applicant to use text or drawings from a prior art patent when submitting an application and there have been disputes as to whether a patent’s text or drawings are protected by copyright. The USPTO takes the position that, “Subject to limited exceptions reflected in 37 CFR 1.71(d) and (e) and 1.84(s), the text and drawings of a patent are typically not subject to copyright restrictions.”
What makes the issue somewhat confusing is ... One of the exceptions to the general rule, above, is that patent examiner regulations permit patent applicants to include copyright notices and copyright claims regarding authorship in patent text or drawings. The PTO’s website also states “There are also instances where a portion of the text or drawings of a patent may be under copyright. You should consult an attorney regarding these potential trademark and copyright issues.” And then there's also a 2003 case, Rozenblat v. Sandia Corp. 69 USPQ2d 1474 (7th Cir 2003) in which the Seventh Circuit, acknowledged the copyrightability of an inventor's patent drawings (although ruling against the inventor as to the issue of infringement). Finally, Copyright Office regulations  do not prohibit registration of patent drawings.
What's an inventor to do? As a general rule, the “borrowing” of technical language or drawings is likely to qualify as fair use under copyright law. However, exercise caution if the patent from which you are copying clearly indicates it is protected by copyright—for example the patent includes a statement of copyright ownership or a copyright symbol.
BTW Dept. Last month, the USPTO's General Counsel issued a paper on fair use and non patent literature (NPLs) that must often be furnished as part of the regular patent application. The USPTO concluded, “we believe that it is fair use for an applicant to make copies of NPL and submit those copies to the USPTO during examination in an IDS.”

Friday, February 17, 2012

Can we use lyrics within artwork?

Dear Rich: Can I use lyrics in a series of art posters I'm creating? The posters are a collage featuring images of musicians and events from the year that the song was a hit. So, for example, I have images that match a few lines from Marvin Gaye's song, What's Going On, along with a few lines from the lyrics. We're not sure why you bothered asking the Dear Rich Staff. After all, the folks over at Yahoo Answers seem to have already addressed this issue. Oh wait, we see why ... because the Best Yahoo Answer kind of sucks. We're guessing it's the 'Best Answer' because it's the answer that best suits the needs of the person asking the question. Oh well, it will all be over soon!
Right, you had a question. A few months ago we answered a question about using lyrics in a book, and for the most part, the same rules apply when using lyrics in connection with artwork. Limited use of lyrics -- perhaps four or five lines -- may be excused as a fair use. But more extensive quoting of the lyrics requires permission. Of course, if you're just doing a one-of-a-kind artwork, it's unlikely to be an issue (unless you write to the lyricist to share your excitement). But if you're mass producing posters with lyrics and distributing them via the web, you're more likely to trigger a cease and desist letter.

Thursday, February 16, 2012

Changed Song Lyrics: Can I Record It?

Dear Rich: I'm curious how I can copyright a song where I used an existing song and while I changed most of the words I did not change the music. The meaning is entirely different but I'm sure I can't legally record the song without consequences. Based on your web article "How to Obtain Sample Clearance" it sounds like there is no chance for me to legally sell my version of the song if the copyright owner or artist/songwriter doesn't grant permission. The chances of me making a lot of money are slim but I'm happy to pay some type of royalty or percentage of revenue in the event it is successful. Sometimes there's gold in those changed lyrics. When Ken Darby changed the lyrics to Aura Lee (a public domain song), the result -- Love Me Tender -- became a monster hit for Elvis Presley. If you're wondering why that song is credited to Presley and Vera Matson, Darby's wife, that's because Presley demanded co-writing credit for many songs he recorded regardless of whether he actually wrote them. When asked why Darby credited his wife instead of himself, he supposedly replied, "Because she didn't write it either."
Right, you had a question. You asked how you can copyright a pre-existing song whose lyrics you have modified. We suppose you could file a Form CO, claim authorship of the lyrics and then, in section 4 (Limitation of Copyright), state that you are not claiming any copyright to the pre-existing material (name the song and provide its copyright registration number). Doing that won't really gain much for you because you still can't perform or record the song without the permission of the underlying song owners. So, we'd recommend scratching that strategy.
How can you record the modified song without being sued? We think that's the real question you're asking. Under copyright law, you need to seek permission from the song owner to record it if you materially alter the song. We doubt whether a publisher is going to grant permission to modify lyrics to a song, although it's always possible. (By the way, none of this has anything to do with sample clearance.) Of course, if you hadn't materially altered the lyrics, you wouldn't need to ask for permission, you could simply pay a fee to a service such as Songfile (Harry Fox) or Limelight, and obtain a compulsory license. Knowing this, some musicians use a halfway measure -- they pay for the compulsory license and use their modified version of the song. Even though that doesn't meet the standards of copyright law, the thinking is that by paying for the license, the musician demonstrates good faith and hopefully, the song owner won't care to hassle those who pay for licenses.

Wednesday, February 15, 2012

Can We Use Photos for Design Patent?

Dear Rich: We're getting ready to file a design patent for some gaming gloves and have not been able to get formal drawings done. We're in a hurry. Can we use photos instead of drawings? As a general rule, it's best to submit drawings. They can be prepared fairly quickly by many patent drawing services (or at least so they claim on the web). Type "patent drawings" into your search engine. As for using photographs in a design patent application, you can use them under the following circumstances:

  • Color photos. The USPTO only accepts color design photos on "rare occasions" if they are the only practical way to show the design. You must file a petition explaining why the color photographs are necessary. 
  • Black and white photos. You can use black and white photos if they are "the only practicable medium for illustrating the claimed [design]." We can't tell you if your gloves qualify under this standard but you can read more about the USPTO's standards for patent drawings

Also, you can furnish informal drawings with your application although the USPTO will not examine your application until formal drawings are furnished. By the way, we've created a design patent site where you can read more about design patent drawing rules.

Tuesday, February 14, 2012

Can We Trademark Cupid?

Dear Rich: We want to come out with a line of cat food products using Cupid in the name. What do you think? We think you're very patient. We've been saving this question for several months in order to run it on Valentine's Day and express our big love for readership and our staff. Of course, now that the big day has arrived, it seems kind of anticlimactic (though not anticlimatic).
Right you had a question. We're not sure how you will be using the term 'Cupid,' but our preliminary search of the USPTO trademark records only turned up two Cupid registrations for food products (and those were for human foods, not pets). (Reg. Nos. 3508736 and 109397.) We didn't see any Cupid registrations for pet foods or pet products. So it appears as if the coast is clear. Of course, we're not an official trademark searching service and can't guarantee our results, blah, blah, blah. Also, if you don't want to wait several months for our staff to provide your next search results, check out our trademark searching video to learn some of the tricks of the trade.

Monday, February 13, 2012

Can We Use Dragnet Tagline?

Dear Rich: I would like to reprint the line, "All we want are the facts, ma’am." I cannot confirm if this is in the public domain/fair use. Any information that you can provide is appreciated. If you do not know the answer can you refer me to someone who can help? We wish we could refer you to someone, but alas, we don't know of anyone else providing free legal information about Dragnet dialogue. So, here goes:
  • Under copyright law, you're okay to reprint the line. It's too short by itself to be protected. (We've written an article on the subject, as well.) 
  • Under trademark law, you should be okay (except for using it on entertainment services and related merchandise). No one has registered the phrase, although there have been registrations for the more well-known but never-uttered-on-Dragnet line, "Just the Facts" (made popular by a Dragnet parody.) Oddly enough, the "officially licensed" merchandise uses "Just the Facts" (Go figure!) In any case, avoid using it for entertainment services or you may hear from Jack Webb's estate. BTW, if you plan on using the phrase to sell products or services, it's always wise to search USPTO records, first.
  • For right of publicity reasons, we would advise against any attempts at commercially exploiting the phrase in connection with Jack Webb's image or personna. If the estate learns of the use, they'll likely come after you.

Thursday, February 9, 2012

Are Insurance Filings Exempt as Trade Secrets?

(c) sasha stim-fogel
Dear Rich: My question is, out of the 43 states that have adopted the Uniform Trade Secrets Act, which of those states exempt trade secrets from becoming public information in an insurance filing (insurance filing)? I need to know this for my job and I need to find out what language each state uses to exempt the insurance filing. For example, Alaska has adopted the UTSA (Alaska, Stat. Secs. 45.50.910 et seq.). So now I need to find out if Alaska exempts trade secrets from becoming public information. Our apologies, but 47 (not 43) states and the District of Columbia have adopted some version of the Uniform Trade Secrets Act (UTSA). We recently updated our site to include more current adoptees. (The remaining UTSA holdouts are New York, Massachusetts, and Texas).
Where in the world is ... We couldn't tell you which states have exempted insurance filings as trade secrets because that information -- as  far as we can tell -- is not provided in each state's UTSA. For example, Alaska's trade secret law makes no mention of Alaska's trade secret exemption for insurance filings (scroll down to Sec. 21.39.035). This article can start you on the right course but you may want to suggest that your employer subscribe to a service from a company like this. And of course, as you may know all this may be changing as the trend may be heading away from secrecy in insurance filings.

Wednesday, February 8, 2012

Claiming Glazing Technique as Trade Secret

Dear Rich: I have a crafts business and I've developed some ceramic glazing techniques that are pretty unique. I took on an assistant in 2008 and trained her to do these techniques. I've always told her not to tell anyone about the process or materials used in the glazing and as far as I know she never has. The trouble is that she has gone out on her own and is now competing against me at local fairs and stores using some of these glazing techniques. Is there anything I can do? Maybe. If you can claim that the techniques are your trade secrets, you may be able to prevent your former assistant from using them. As we explain here, you need to prove that the process is not generally known within your industry and that you've taken reasonable steps to keep it confidential. Here is an article detailing the steps you should take if a secret is stolen (and you can follow up with a cease and desist letter). You don't have to have a nondisclosure agreement (NDA) with your former assistant because most states have laws in place that prevent trade secret misappropriation (theft).  It may also make a difference if the assistant is characterized as an employee or as a contractor. By the way, in the future, you might want to use an NDA and at this site we've provided a basic one (click on the section titles for explanations) as well as a selection of specialty NDAs. Also, if the assistant has copied any of your ceramic imagery or copyrightable designs, you may be able to pursue the assistant under copyright law. Check out our crafts law book for more details.

Tuesday, February 7, 2012

Can We Republish Sports Statistics?

Dear Rich: We are frequently publishing sports books about notable persons or events in sports history. As a matter of fact, sports has - almost always - to do with statistics and results. I was very astonished to read on some websites that it is not quite clear if sports statistics are really public domain and that especially the pros like MLB, NFL, NBA and NHL are very keen on protecting what they think of could be THEIR stats and records. I would be thinking that stats are facts and can not be copyrighted at all? Yes, individual sports statistics are facts and as the Supreme Court has indicated, "No one may claim originality as to facts." (The Copyright Office seconds that emotion.) In a 1997 case, the NBA went after a paging service that borrowed a live feed from a basketball game. A court of appeals ruled that sports stats couldn't be protected -- for example, no one can claim rights to the name of the teams playing, changes in score, team in possession of the ball, whether the team was in free-throw bonus, the quarter of the game, and the remaining time in the quarter. Despite that ruling, other leagues such as the NFL, PGA, and MLB have unsuccessfully gone after fantasy sports leagues or other users who have ported their stats.
You're unlikely to run into problems because ...  Keep in mind that many of these legal battles deal with more than stats -- for example, some of these cases also dealt with a company's right to use a sports star's name or likeness. And, also, these sports franchises tend to flex their muscles in cases where they have big targets such as Motorola or Yahoo! Aside from the exceptions cited below, we think you can freely use sports statistics in your books.
When could it be an issue? You could run into problems if you seek to lift a complete database of information -- for example, you copy a 10,000 entry database entitled "A statistical analysis of home runs scored when a right handed pitcher faces a left-handed batter." That's because a collection of facts can sometimes be protected under copyright as a compilation (if selected and organized with some creativity). In addition, databases are also sometimes protected under license agreements. So, for example, if you're at a league website and you click on a "I Agree" button under which you promise not to copy data, you may be bound by that agreement despite the fact that copyright doesn't protect the underlying data.

Monday, February 6, 2012

Using Quotes and Seeing Ghosts

Dear Rich: I put together a book with quotes from various famous individuals and my own professional photos to encourage inspirational thought. I do not want to produce the book before I can clear the licenses. How does one go about clearing the licensing for that? Some authors, such as Seneca lived around 75 B.C. I guess for these authors I don't need a clearance? You guessed right. There is little chance that Seneca will rise from the grave (Dracula-style) and retain Boies, Schiller to smite all those who have malapropped his quotations. In any case, any reputable law firm would inform him that his texts, all published long before 1923 are in the public domain. As for the rest of your quotes, we think you're fine to use them for reasons we expressed two years ago and which we're too lazy to rewrite (and thereby up our SEO). You may wonder whether you can trust our response because as Seneca says, "advice is worth what you pay for it." But keep in mind he made that remark before the existence of freebies.

Saturday, February 4, 2012

Music Licensing Resources

It was great seeing everyone at the 2012 California Lawyers for the Arts Music Business Seminar in Berkeley. Here are some resources to augment the music licensing discussion:
  • Generic licensing provisions and explanations: We've posted examples and explanations for common generic content license agreement provisions. These should provide a basic understanding of the structure and organization of a typical license.
  • Licensing songs and recordings for film and TV.  There's an example of a Music Synchronization and Videogram License (with explanations) in our book, Getting Permission. That book also contains examples for a Master Use and Videogram License (for licensing sound recordings) and an agreement for licensing lyrics. You can also view examples of similar agreements online, for example here, here, and here.
  • Licensing music for videogames. This ArtistsHouse page has a relevant article and video about music licensing for videogames. As EA's Steve Schur explains, the sync and master licenses mirror the agreements used in film licensing. As Schur also explains, when creating EA's theme music, EA seeks assignments, not licenses. ASCAP has posted a nice article on the elements of a videogame license.
  •  Copyright. There's a fairly thorough explanation of music copyright, and how to distinguish co-ownership issues in our Music Law book. We've also provided free copyright information at the Stanford Library site, and at Nolo's site.
  • Getting legal help. California Lawyers for the Arts (or one of the other lawyers for the arts organizations throughout the country) should be your first stop. If there are no organizations near you, consider directories from Nolo (disclaimer: our employer) or Cornell University. Nolo also has articles on dealing with lawyers, including working with lawyersfees, and attorney-client relationships

Friday, February 3, 2012

Dear Rich Staff at CLA Music Seminar

The Dear Rich Staff is sending an emissary to speak at the California Lawyers for the Arts annual music seminar. It's Saturday, February 4, at Boalt Hall in Berkeley and we'll be part of the 2:35 panel on music licensing. Check out the details.

Invented New Word and Wants to License It

Dear Rich: I have created a new word, purchased the dot com and have filed the mark in several classes with the USPTO with "intent to use." I will need a manufacturer to produce products bearing the name of the mark and I am now quite concerned with the costs that would entail. My questions are: (1) Can I approach manufacturers to discuss licensing the mark prior to being in commerce? (2) Can I sell the mark and domains associated prior to registration? Word Up! Even though there are a quarter of a million words available, it's good to know that people are still creating new ones.
Approaching manufacturers. We think you'll have a hard time convincing manufacturers to buy rights to your word. All the made-up words that we've seen used as trademarks -- for example, Nerf, Kodak, Viagra, and Kleenex -- are usually associated with new products. (Actually, Nerf is an acronym for Non-Expanding Recreational Foam.) So unless you also have some proprietary product ideas to go with your new word, we think you're headed in the same uphill direction as Sisyphus.
Can you claim rights under an intent to use application? A manufacturer is going to want an assurance that you have rights to the mark. We know you'd like to use the word as a mark but do you actually have a bona fide intent to use the word as a mark? As this case and others have shown, without actual evidence of your intent (more than a desire to profit), your claims over the word may be subject to challenge. Here's more on the subject.
Can you sell what you have? Sure, you can sell the domain names anytime, no problem. But we don't think anyone would want to pay for the "trademark rights" because you won't have any rights until the word becomes a trademark. That occurs after the mark has been used in commerce. We think this is one of those cart-before-the-horse situations and suggest you could save money on trademark fees by reading up on some of Nolo's excellent trademark articles.

Thursday, February 2, 2012

Re-Drawing Movie Still at a Website

Dear Rich: I saw your entry on "Using Movie Stills at a Website." What if I draw a picture from the scene? Is that still copyright infringement? Would the quality of reproduction also have a factor (i.e. a very realistic recreation of the still vs. something more paint-like)? As we mentioned last February, unauthorized reproductions are infringements unless excused by a defense such as fair use. The same rules apply for unauthorized derivative works and these can trigger the same legal responses as straight infringements (as Shepard Fairey learned when he created his artsy Obama Hope imagery -- which has triggered its own derivative infringements). You don't protect yourself by making a more "artistic" derivation.  It's infringement as long as a lay observer believes that the underlying (or preexisting) work has been copied (for example, as in the example, above). In any case, this legal mumbo-jumbo we're spouting is ignored by millions of people on the web every day. So, the real question is whether your creation of an unauthorized derivative work based on a movie still will make somebody so mad that they'll come after you, take your home, car and new Mac laptop. As usual, we couldn't tell you ... though as we've mentioned before, you're likely to be better off if you use smaller images (thumbnails are best), you don't poach from popular licensing sites such as Getty Images (that regularly troll for their digital fingerprints), and you don't use the image more than once, or for commercial purposes such as merchandise. And of course, the popularity of your site may also make you a more likely target.

Wednesday, February 1, 2012

Cover Songs, Compulsory Licenses, and CPAs

Dear Rich: We decided to take the compulsory license route for seven songs on our fourth album. We were comfortable with the idea of paying monthly royalties to seven music publishers, because we only made 150 CDs and we thought the monthly task probably wouldn't last too long. We also thought it would minimize some of our initial costs in making and releasing a new album. However one music publisher sent us a letter stating that since we chose the compulsory license route, we must furnish an annual statement certified by a CPA; otherwise, we "would be in default with respect to the Compulsory License guidelines." I knew that an annual statement needed to be furnished, but I didn't know it had to be certified by a CPA. We phoned and e-mailed the other six music corporations and asked if they wanted an annual statement certified by a CPA, and all six were very nice and told us they didn't want the CPA certification and that the monthly statements were enough. We started conversations with the CPA who does my business partner's taxes, but he didn't want to take any risk of signing his name on a piece of paper that confirmed the number of CDs we sold in 2011 matched the amount of royalties we paid to Bourne. I spent about ten hours preparing clear instructions and documentation (receipts, evidence, etc.) that prove we only made 150 CDs in 2011, sold 71 in 2011, and have 79 remaining, but the CPA was only willing to sign his name if the language on the annual statement said he can't provide any assurance or guarantee that our payments and inventory are correct. To us, this seemed ridiculous, especially since we agreed to sign a waiver of liability. Do you happen to know of a CPA who speaks our language and who can probably certify our simple annual statement?  Sorry about the agony (or "ag" as the young people say). Considering that the total sum at issue appears to be $6.46 (9.1 cents per song per pressing x 71 copies = $6.46), we think there's got to be a simple solution.
What happens if you don't include a CPA statement? Congress (in 17 U.S.C. Sec. 115) empowered the Register of Copyrights to create CPA regulations (found at  37 CFR 201.19,) for compulsory licensing accounting. (And yes, Annual Accountings under compulsory licenses must be accompanied by the CPA's statement, shown way at the bottom of this blog entry). Sec. 115 (6) provides that:
"If the copyright owner does not receive the monthly payment and the monthly and annual statements of account when due, the owner may give written notice to the licensee that, unless the default is remedied within thirty days from the date of the notice, the compulsory license will be automatically terminated. Such termination renders either the making or the distribution, or both, of all phonorecords for which the royalty has not been paid, actionable as acts of infringement ... "
So, if we assume that failing to include a CPA notice places you in default, you would only be liable for any future sales (after receiving a notice of default). So perhaps an easy solution would be to pay off the remaining 79 CDs ($7.19). Once the publisher cashes that check (and assuming you don't press any more CDs), it appears that the CPA issue would be moot. Alternatively, if you don't want to pay it off and you want to continue pressing and selling the cover song, you could send a letter to the publisher explaining the situation and furnishing all of the documentation asking them to please release you from the onerous CPA requirement.
What's up with your CPA? We're lawyers so we can relate to the CYA mentality exhibited by the CPA. Standard accounting practices for small labels are fairly simple and easy to review and confirm. If you used a duplication service that can confirm 150 pressed CDs, and 79 CDs remain in inventory, it should be relatively easy for the CPA to confirm your accounting and to fulfill the requirements established in the statement, below. (As for your question, sorry, we don't know any CPAs.)
CPA statement that must be included. If you do manage to obtain a CPA's cooperation, the CPA must furnish the following statement:
"We have examined the attached “Annual Statement of Account Under Compulsory License For Making and Distributing Phonorecords” for the fiscal year ended (date) of (name of the compulsory licensee) applicable to phonorecords embodying (title or titles of nondramatic musical works embodied in phonorecords made under the compulsory license) made under the provisions of section 115 of title 17 of the United States Code, as amended by Pub. L. 94-553, and applicable regulations of the United States Copyright Office. Our examination was made in accordance with generally accepted auditing standards and accordingly, included tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances."