John J. Tormey III, Esq., Entertainment Attorney

New York Entertainment Attorney John J. Tormey III, Esq. John J. Tormey III, PLLC: My name is John J. Tormey III. This is my blog. I am a New York lawyer, also admitted to practice in California and the District of Columbia. My focus is on entertainment, art, media, copyright, trademark, limited liability company law, and music A and R (Artist and Repertoire) matters. I formerly served as Counsel to The Walt Disney Company, and Senior Counsel and Senior Litigation Counsel to Miramax Films.

Monday, December 31, 2012

This Article Is Brought To You By The Letter Blank: Written By New York Entertainment Lawyer And Trademark Attorney John J. Tormey III, Esq.

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Law Office of John J. Tormey III, Esq. – Entertainment Lawyer, Entertainment Attorney

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This Article Is Brought To You By The Letter Blank: Written By New York Entertainment Lawyer And Trademark Attorney John J. Tormey III, Esq.

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally.

Most of the American public including most all entertainment lawyers, heard about one of Oprah Winfrey’s well-publicized litigations a number of years ago. My understanding was that she was sued in Texas by a commercial cattle-oriented conglomerate. The plaintiffs apparently claimed that Oprah had inaccurately and unfairly maligned the culinary safety of cow meat, during one of her television programs. The Texas case seemed vaguely surreal and comic, even from the perspective of an entertainment lawyer - sort of like an overly-imaginative law school exam question. But next we must go from the sublime to the ridiculous. This next case was an entertainment lawyer and trademark lawyer’s delight. Talk about the eradication of your sacred cows. The local press in New York reported that a German “fetish magazine” named “O” sued one of Oprah’s companies and her publisher, over the sale of Oprah’s magazine bearing the equally-expansive title of “O”. Query if it was really a service mark dispute as opposed to a trademark dispute.

Perhaps even more befuddling, from the entertainment lawyer or publishing lawyer perspective or otherwise, the German “fetish” magazine somehow derived its own title from the erotic novel “Story of O” - serving as even more of a reminder that there is truly nothing new under the sun. And if this were not bizarre enough, the local press reported that Oprah’s company and publisher were prepared to change the name of her magazine to “O, The Oprah Magazine”, in an apparent attempt to assuage the seething service mark or trademark plaintiff and make the distinction between the two magazines more apparent.

Coincidentally, this lawsuit received even more attention from trademark lawyers, entertainment lawyers, and others, than usual, since Lions Gate was slated to release a film called “O” around the same time the suit materialized. I understand the Lions Gate film was somehow loosely based upon Shakespeare’s “Othello”. The Bard himself referred to the Globe Theatre as “this wooden ‘O’“. Maybe if we find Shakespeare’s heirs - perhaps arguably incarnate in the Bacon Brothers - we can thereby locate the real plaintiff who has something to complain about?

But come on. All kidding aside, could this trademark (or service mark) lawsuit really be happening? Yes. Yes it could. But maybe it shouldn’t be allowed to happen. The minds of reasonable trademark lawyers, entertainment lawyers, and others, may differ.

Let’s back up a step. Generally speaking, as entertainment lawyers or trademark lawyers will advise, one acquires trademark rights or service mark rights under U.S. law, by consistently using a trademark or service mark in connection with goods or services, and/or by registering the trademark or service mark with one or more appropriate governmental authorities.

Most people and businesses pick lousy names from a trademark or service mark perspective, and most people pick those names without the assistance of an entertainment lawyer or a trademark lawyer. The majority of marks go unregistered, and the majority of trademarks or service marks are never properly searched and cleared by a trademark lawyer, entertainment lawyer, or anyone else before use. Again, there is very little new under the sun, and as most all trademark and entertainment lawyers will attest, most word-paths have been tread upon by someone else previously. Then again, searching and registering a trademark or service mark, with or even without a trademark lawyer or entertainment lawyer, is not without cost. So, many cost-constrained start-up businesses elect to just “wing it” and dispense with the search until they can afford to “get around to it”. And surprisingly, sometimes even major-league companies who can otherwise afford to so it, dispense with the trademark or service mark search, dispense with the services of the trademark lawyer or entertainment lawyer, and just go ahead and use the proposed name. Ironically, this type of decision keeps trademark and entertainment lawyer litigators who work the back-end of these fact patterns, in business.

Trademark lawyers and entertainment lawyers may sometimes advise their clients to select multiple-word names rather than one-word names - as rock-band-name trademarks or service marks, for example - since the statistical chances of infringing some other band’s name and trademark or service mark are likely thereby somewhat reduced. Most artists, on the other hand, are solely concerned about the aesthetics of the band name, and if a one-word band name sounds right to them, they will use it and darn the torpedoes. This type of decision can also keep trademark and entertainment lawyer litigators who work the back-end of these fact patterns, in business.

I have admittedly not yet trademark-searched any of the following band names. But as a trademark and entertainment lawyer, a proposed one-word band name like “Blur”, at first blush, would trouble me a bit more than the two-word “Def Leppard”, from a trademark or service mark perspective - since, without knowing anything else about the underlying facts, I would assume that the statistical chances were somewhat higher that another band might be named (or might have been recently named) “Blur”. When a trademark lawyer or entertainment lawyer performs a search on a trademark or service mark or proposed mark, these kinds of concerns and historical analyses come into play.

Trademark lawyers and entertainment lawyers may also sometimes advise their clients to try to use more incongruous word combinations as band-name trademarks or service marks, rather than predictable word combinations. By this rationale, “Squirrel Nut Zippers” (the first time, for the candy, that is!), or “Stone Temple Pilots” start to look pretty good as far as their trademark or service mark prospects, to say nothing I suppose about “Orchestral Manoeuvres In The Dark”. After all, what are the odds, the trademark lawyer queries, that the full name “Orchestral Manoeuvres In The Dark” name was used as a trademark or service mark by any other pop or rock band prior to or contemporaneously with 1986’s “If You Leave”? Then again, apart from entertainment lawyer legal concerns, the band and its handlers may have had trouble fitting the full name onto a record jacket sleeve, and may also have had trouble convincing record label A&R executives that the choice of name should be supported.

One must understand, therefore, that the prospect of trying to protect, let alone enforce and prevent others from using - a one-letter trademark or service mark, is the trademark lawyer’s or entertainment lawyer’s equivalent to fingernails scraping on a chalkboard. If a client walks into the office of a trademark lawyer or entertainment lawyer and says “Hi. I’d like to protect, for my own exclusive use, the letter ‘W’“ - well, then absent some extreme fact pattern perhaps relating to a powerful Texas family, that lawyer can expect at least a long and tough road ahead - and perhaps a few broadsides of ridicule from the bench and other trademark lawyers and entertainment lawyers at the bar as well. They might think that the so-subscribing lawyer took Sesame Street’s commercial endorsement announcement “This program was brought to you by the letter ‘W’”, a little too seriously when younger.

Most Americans conceive of “monopolies” as something anti-competitive, unfair to the consumer, and ultimately evil - especially given publicity in recent years accorded to the Microsoft case. But what is interesting about copyrights and trademarks and service marks, as a trademark lawyer or entertainment lawyer will tell you, is that they are in fact legal monopolies protected by federal statute. A property right is, essentially, the right to exclude others from using that same property. That is conceptually quite similar to a monopoly. If I own my house, I can keep you off my land with a fence, and the law will back me up on that. If a company owns a registered trademark in “Chock Full o’ Nuts”, for example, then, through the efforts of its trademark lawyer or entertainment lawyer counsel or otherwise, that company owns the right to exclude others from using the same name in connection with the sale of coffee, and perhaps related goods and services as well.

So here is the trademark lawyer entertainment lawyer philosopher question. Haven’t we as a society gone too far, when we even entertain the prospect of a company, or a celebrity, laying claim to a single LETTER of the ALPHABET as a service mark or trademark? Indeed, should any prior claimant be able to use the services if a trademark lawyer or entertainment lawyer to legally monopolize the use of a letter of the alphabet, in connection with ANY kind of goods or services, magazine or otherwise? Should they and their trademark lawyers and entertainment lawyers even be allowed into court with that kind of argument?

Are all individual Arabic numerals also now in play for trademark lawyers and entertainment lawyers? We might as well allow some corporate behemoth to pull the character of Santa Claus out of the public domain, into the realm of copyright-protection, and charge a royalty whenever the fat man’s name or image is evoked. As for trademark versus service mark, does Mr. Claus provide goods or a service, when you get right down to it? And what about prior sources? Do the publishers of the first edition of Webster’s dictionary, or their successors, now have a valid trademark claim to assert through their trademark lawyer or entertainment lawyer litigators, against Oprah and the German magazine, for the use of “their” letter of the alphabet as a service mark or trademark?

Harkening back to the Oprah cattle litigation, some cows are sacred. Some things should simply stay in the public domain. Section 105 of the U.S. Copyright Act, for example, excludes works “of the United States Government” from copyright protection. Shouldn’t letters of the alphabet be treated the same way, as non-service mark non-trademark public commodities exempt from any monopolistic endeavors, upon instruction to all trademark lawyers and entertainment lawyers who might try to argue otherwise? There may well already be case law holding unitary alphabet letters to be disqualified from trademark and service mark protection under certain circumstances. The U.S. Patent and Trademark Office likely has trademark application and registration procedures, possibly reading to similar effect. If so, why not simply codify that common-sense principle in all applicable trademark statutes and other laws, as a de facto and de jure standing instruction to all trademark lawyers and entertainment lawyers and their clients? Among other things, a decisive action like this one could eliminate, or at least mandate a shorter life-span for, court-clogging trademark and service mark lawsuits like the “O” story.

And what’s next? Will the adjudicated winner of the O litigation also be awarded a legally-sanctioned monopoly as trademark or service mark over the corresponding three dashes in “- - -”; that is, in the International Morse Code symbol for the letter “O”? Will that be some other trademark lawyer’s or entertainment lawyer’s next argument? Or should that control instead now be awarded to the heirs of Morse, wherever they may be? And what about our National Anthem? Am I at risk of being enjoined by another trademark lawyer or entertainment lawyer from singing “O(h) say can you see...” at the start of baseball games at Shea Stadium – I mean, CitiField? And what about Tic-Tac-Toe? Must there now be a Congressional mandate that “X” must always win, and must always occupy all 9 cells on the grid, so as not to “infringe” the trademark or service mark rights of the clients of any other trademark lawyers or entertainment lawyers? And if so, what about the fate of Whoopi Goldberg and Hollywood Squares in syndication?

A number of entertainers use single-word names, and we as a society tolerate that – as do, apparently, the trademark lawyers and entertainment lawyers that represent and enable the talent. We tolerate the Gilbert Gottfried “One-Named Boy” routine moreso if the entertainer has the talent to back it up: “Elvis”. “Sting”. Now, “Prince” is, of course, a variation on the theme, an entertainer who at one point dispensed with his chosen one-word name in favor of an arcane symbol not found in the American alphabet – with or without his trademark lawyer’s or entertainment lawyer’s imprimatur. The general point here is that, Prince aside, the trademark lawyer and entertainment lawyer will advise the entertainer that he or she may be able to build up some trademark or service mark protection in his or her continuous and uninterrupted use of the [a]rtist’s one-word name, particularly if that entertainer is extremely well-known.

But some of us trademark and entertainment lawyers and others may feel that claiming one of the 26 letters of the alphabet as your own, takes its own special brand of... uh... chutzpah. Basketball’s Oscar Robertson was known as “The Big O”, probably because fans and the press tagged him with that moniker – probably not because his trademark lawyer or entertainment lawyer told him to use it - and probably not because Oscar adopted it for himself. Oscar Robertson may not have been as well-liked a guy, if instead he himself had arrogated “The Big O” nickname for his own use! And speaking of Oscar, asks the trademark and entertainment lawyer, how ‘come he hasn’t appeared yet in this lawsuit?

In similar vein, some trademark lawyers, entertainment lawyers, and others may feel that Oprah should have been satisfied to call her magazine “Oprah” rather than, simply, “O”. It is unlikely that Oprah’s decision as to how to name the magazine was forced upon her by her colleagues – entertainment lawyers or otherwise. In other words, a different P.R. decision may have had incidental legal benefit, too.

Sure, there is precedent in the entertainment field, as trademark and entertainment lawyers are aware, for trademark or service mark use predicated upon a single letter of the alphabet. The musical group “M” had a number-one hit with “Pop Muzik” in 1979, and that was kind of cute - but the group seemed to disappear from the music scene before anyone even began to consider the trademark or service mark implications of their continued use of their band name. Perhaps the group’s trademark lawyer or entertainment lawyer will read this article and write to this website to weigh-in.

The television company “E!” of Chelsea Handler and Talk Soup renown has apparently been successful in establishing a brand name for itself, presumably with trademark lawyer and entertainment lawyer counsel and assistance, accepting the inherent challenge in generating trademark and service mark rights in a one-letter name. But the E! Network’s use of the exclamation point, and their occasional use of the linked phrase “entertainment network”, arguably properly distinguishes them from the alphabet-usurping pack. The Motion Picture Association of America (MPAA), along with the help of its trademark lawyer counsel, lays claim to its single-letter-ratings as trademarks or service marks in some fashion - that is, currently, “G”, and “R”. But then again, I suspect that the MPAA would carefully refrain from threatening another company’s use of the letter “G” or “R”, unless that use was made in the context of ratings or otherwise in connection with motion pictures or filmed entertainment.

The point is, there is something disturbing about this O lawsuit filed in the district court in Manhattan, from the perspective of an entertainment lawyer and trademark lawyer, and perhaps to others as well. What if a schoolteacher reads about this lawsuit, and now tries to find a trademark lawyer lay personal service mark claim to the letter grades “A” through “F” as used on student-graded papers? What if that same teacher starts invoicing all other teachers who grade papers in the U.S., demanding trademark royalty payments? And speaking of damage to the world of education, what will Grover, Elmo, and the gang at Sesame Street do, when they can no longer boast that a particular program is “brought to you by the letter ‘W’”, at least not without their entertainment lawyer or trademark lawyer counsel present on set? Worse yet, will that entertainment lawyer or trademark lawyer be required to wear an over-the-head costume or be a muppeteer to blend-in on the set when doing so? The consternation is enough to press the ghost of O. Henry and his trademark lawyer back into active service - the only question being, if O. Henry rejoins the non-ethereal world and joins the lawsuit, will he join as party-plaintiff or party-defendant on the advice of counsel? And, will O. Henry’s apparently-prescient use of the period after his “O” render him impervious to trademark or service mark liability?

But seriously folks, in defense of Oprah and the trademark and entertainment lawyers that love and enable her, it is apparently not her or her entertainment or trademark counsel or entities that initiated the aggressive attempts to exclude others from use of the letter “O”. Rather, according to the news reports, it was the German “kinky fashion” magazine promoting leather and garters that decided to attack Oprah’s company in the context of the New York court, and the magazine then sought out a trademark lawyer for that purpose. And in response, Oprah and her affiliates, presumably on trademark lawyer or entertainment lawyer advice, apparently decided to expand her magazine title, to make the bright-line distinction between the two magazines more apparent to all, including the consumers. Maybe as a matter of reciprocal international courtesy, and in an effort to keep this dispute from wasting further judicial resources or using up more trademark lawyer or entertainment lawyer time, the leather and garter crew should agree to change their magazine’s name from “O” to “Ouch!” But query if they thereby would risk receiving an adverse trademark or service mark claim from the ‘E!’ network based upon the use of ‘E!’s exclamation point.

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My trademark law practice as a publishing and entertainment attorney includes all fields of entertainment and media including music, film, publishing, television, Internet, and all other media and art forms – and trademark, service mark, and copyright work. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

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Copyright Registration Is Not A Pre-Condition To Protection: Written By New York Entertainment Attorney And Copyright Lawyer John J. Tormey III, Esq.

http://www.tormey.org/copyright.htm

Law Office of John J. Tormey III, Esq. – Entertainment Lawyer, Entertainment Attorney

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

Copyright Registration Is Not A Pre-Condition To Protection: Written By New York Entertainment Attorney And Copyright Lawyer John J. Tormey III, Esq.

Contrary to the near-indefatigable lay assumption that entertainment attorneys like myself hear all the time, one is not required to register a copyright in one’s work with the U.S. Copyright Office (USCO) at the Library of Congress in Washington, D.C. (or elsewhere) as a condition precedent for U.S. copyright protection. In other words, the New York-based author in Chelsea, for example, already has copyright protection in his or her finished original work of authorship, under U.S. federal law, just as soon as the work is reduced to a tangible medium of expression in New York. That copyright protection is automatic, and inheres in the Chelsea-situate New York author immediately, his or her entertainment lawyer will opine.

Therefore, when the New York entertainment attorney hears the Chelsea-based New York writer saying “I ‘copyrighted’ my novel by registering it with the Library of Congress and the Copyright Office in Washington , D.C.”, the writer is usually operating under a mistaken set of geographic and legal assumptions. It is incumbent upon entertainment lawyers to correct those assumptions. This one is a particularly difficult myth to explode - because members of Congress, those that write and edit case law, and a few jurisprudential scholars have been known to use “copyrighted” as a verb form, too. When I hear it, it sounds to me like nails on a chalkboard.

So, “No”, the New York entertainment attorney replies to the New York writer in Chelsea, “you already had automatic copyright protection in your work as soon as you wrote down the text - as soon as you reduced your vision to a ‘tangible medium of expression’. Your act of mailing it from a post office on Manhattan’s West Side in New York City, to Washington D.C., isn’t what engendered the copyright. Rather, your prior act of crystallizing it in a tangible medium here in downtown West Side New York – pen to paper, or keystroke to hard-drive – is what caused the copyright in your work to be born. The New York entertainment attorney then explains that the phrases and verb forms “to copyright” or “I copyrighted” should probably be avoided outright – certainly avoided as synonyms for “registration” or “filing” - specifically to prevent that kind of lay confusion. After all, if the Chelsea screenwriter in New York “copyrighted”[sic] his or her work only by mailing it to Washington D.C. on Friday morning, then that would imply that no copyright yet existed in the work when he or she completed the final draft, hit the “Save” button on his keyboard, and printed it out in hard-copy form in his or her Chelsea home office in Manhattan on the Thursday evening prior – and that conclusion would be legally incorrect. In that fact pattern, the entertainment lawyer opines, the copyright existed and the screenwriter owned it as of Thursday evening based upon the events that happened in downtown West Side New York.

The process of U.S. copyright registration is just an after-occurring formality, though it is one which entertainment attorneys (from New York, and yes, even elsewhere in places like Hollywood) handle for their clients often. In other words, the work is already copyright-protected prior to one’s mailed submission of the work from New York or any other city, to the U.S. Copyright Office and Library of Congress in Washington, D.C. Yes, U.S. copyright registration does thereafter provide certain advantages over unregistered works, as your entertainment lawyer will tell you. But copyright registration is not itself a pre-requisite for copyright protection. The copyright protection exists first. The copyright filing comes second.

After all, the USCO form specifically asks the filer when – in what year - his or her work was completed. You could in theory file in 2011 for a 2006-completed work. In that case, the copyright would have existed as of 2006.

Under the U.S. Copyright Act, (which can be found at various locations on the Internet, at 17 United States Code [U.S.C.] Section 101 and following)

http://www.law.cornell.edu/uscode/html/uscode17/usc_sup_01_17.html

the author of an original and otherwise-protectable work automatically possesses a copyright in that work as soon as the work is reduced to a “tangible medium of expression”. No later.

http://www.law.cornell.edu/uscode/html/uscode17/usc_sec_17_00000102----000-.html

The New York choreographer on Manhattan’s West Side improvises a new set of dance steps for her students - fleeting, in the air - but owns no copyright in these movements or their performance or rendition. However, the moment she writes down the original dance steps using a detailed graphic chart, or videotapes herself performing them in her New York studio – perhaps at her entertainment lawyer’s suggestion - she may then have a chance to claim some copyright-protected work. The key, again, is the work’s reduction to a fixed medium.

http://www.law.cornell.edu/uscode/html/uscode17/usc_sec_17_00000102----000-.html

In fact, she may own the copyright in that material without ever interacting with Washington, D.C. – even though her entertainment attorney will tell her that it sure would be a good idea to thereafter mail a filing to D.C. if the original work of authorship is perceived to have any economic or other long-term value.

And this makes sense. Look at it from the perspective of copyright enforcement – from the perspective of the New York entertainment attorney litigator trying to prove or disprove copyright infringement in a court of law downtown at 500 Pearl Street. How difficult would the job be of a federal judge or jury in a U.S. copyright infringement litigation in the Southern or Eastern Districts of New York, or that of a U.S. Copyright Office Examiner in Washington, D.C., if the U.S. Congress allowed all of us to claim copyright in the inchoate and evanescent? The courts in New York and indeed nationwide would be inundated with strike suits and other spurious copyright claims, perhaps more often brought by pro se litigants rather than their entertainment lawyers if any. Therefore, Congress doesn’t let us get away with it. Congress requires reduction to a “tangible medium of expression” as a pre-condition for copyright protection. But no, Congress does not require copyright registration as a pre-condition to copyright ownership itself - rather, copyright registration at or around the time of creation is discretionary with the copyright owner. Congress only requires copyright registration as a pre-condition to filing a lawsuit for copyright infringement – something that your entertainment lawyer litigator won’t miss when reviewing the statute pre-filing of the federal court lawsuit:

http://www.law.cornell.edu/uscode/html/uscode17/usc_sec_17_00000411----000-.html

Yes, your entertainment attorney will tell you that after-occurring copyright registration of a work does provide certain strategic advantages, relative to unregistered works. Copyright registration notifies those of us in New York, and in California, the U.S., and the rest of the world, at least constructively, that the copyright claimant thinks he or she owns the copyright in that registered work. Practically speaking, copyright registration creates a likelihood that another company including its own entertainment attorney performing a copyright search, will “pick up” (i.e., see, or notice) the previously-registered work, when that company or its entertainment lawyer counsel later conduct a thorough professional (or for that matter even a cursory and informal) ocular copyright search of the public records of the Washington, D.C.-based U.S. Copyright Office.

http://www.copyright.gov/records/

Most film studios and their entertainment attorneys perform thorough copyright searches as a matter of course, for example, before optioning an author’s literary work.

As discussed above, whether you live in New York, Los Angeles, or elsewhere, copyright registration with the U.S. Copyright Office in the Library of Congress in Washington D.C. is also a necessary precursor to your entertainment attorney litigator bringing a copyright infringement litigation in a U.S. federal court. For this reason, in practice, individuals and companies and their entertainment lawyers have been occasionally known to register their copyrights days - or even hours, paying an emergency rush filing fee using a New York-to-D.C. Fed Ex - before they sue for copyright infringement in federal court. Of course, the entertainment lawyer will tell you that it is better to register the work at an earlier stage than that. Filing a copyright infringement litigation predicated upon a USCO copyright registration in turn allows for the entertainment attorney litigator to recover certain types of damages afforded by the U.S. Copyright Act, such as “statutory” damages, and plaintiffs’ attorneys fees. These types of damages would not be availing to the copyright plaintiff if his or her entertainment lawyer sued using a different common law theory. A copyright registration may also work advantages in terms of certain international copyright protections.

Click the “Articles” button at:

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to return to the main Articles page.

My practice as a New York entertainment attorney includes copyright registration work in music, film, television, publishing, Internet, media, and all artistic fields. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

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Sunday, December 30, 2012

Publishing and Digital and Electronic Rights - Part II: Written By New York Entertainment Attorney And Publishing Lawyer John J. Tormey III, Esq.

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Law Office of John J. Tormey III, Esq. – Entertainment Lawyer, Entertainment Attorney

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

Publishing and Digital and Electronic Rights - Part II: Written By New York Entertainment Attorney And Publishing Lawyer John J. Tormey III, Esq.

Part I of this article discussed how phrases like the “digital right” or “electronic right” should not be assumed to be self-defining, even by and between publishing lawyers and entertainment attorneys, and how it is incumbent upon authors to reserve needed rights like the digital right or the electronic right to themselves in the context of a publishing deal. Next up, this Part II examines concepts such as the digital right or electronic right from the perspective of the publishing lawyer and entertainment attorney, and the standpoint of fairness - who between author and publisher should in fact hold on to the digital right and electronic right, once and assuming that they are first properly defined?

3. Yes, Digital Right And Electronic Right Uses Do Compete With Traditional Book Publishing Uses.

A publishing lawyer or entertainment attorney may be called upon to handle an author-side deal. A publishing lawyer or entertainment attorney may also be called upon to handle, under different factual circumstances, a publisher-side deal. So, now, a few words in defense of publishers, I suppose.

There is a perception in the author and Internet communities that publishers should not be taking broad grants of the digital right or electronic right from authors, since “digital rights and electronic rights do not compete or interfere with traditional book publishing and other media rights”.

Not true. Not anymore. For proof of that fact, ask a few veteran news desk editors whether or not they followed, or were otherwise concerned about, what appeared on the Drudge Report during the Clinton administration. Ask the CFO’s or in-house publishing lawyers of a few traditional encyclopedia companies how they feel about Wikipedia.

Incidentally, although as a publishing lawyer and entertainment attorney and unlike some others, I tend to use the phrase “electronic right” or even “digital right” in the singular number, there probably tends to be no single consensus as to what constitutes and collectively comprises the singular “electronic right” or “digital right”. There has not been sufficient time for the publishing, media, or entertainment industries to fully crystallize accurate and complete definitions of phrases like “electronic publishing”, “web publishing”, “electronic right[s]”, “e-rights”, “digital right[s]”, or “first electronic rights”.

Nevertheless, electronic media and specifically the digital right and electronic right, have already changed our history. You can be sure that they will have some effect, at a minimum, on most author’s individual publishing deals henceforth, and will be the fodder of publishing lawyer and entertainment attorney discussion for years to come. The fact is, electronic uses inherent in the digital right and the electronic right already do compete with older, more traditional uses - particularly because digital and electronic uses are cheaper and faster to deploy, and can potentially reach millions of users in less than, as Jackson Browne might say, the blink of an eye.

Commerce is increasingly relying upon the Internet and other electronic phenomena, and the linchpin of this reliance is the digital right and electronic right. After all, you are reading this article, and ostensibly gleaning some information or material from it. The Web, for example, has already put a sizable dent in dictionary and encyclopedia sales, and anyone who tells you otherwise is probably an employee in a dictionary or encyclopedia publishing company or publishing lawyer in-houser in denial of the digital and electronic right, trying to protect his/her stock options. As the recent and well-known Stephen King pilot program will attest, fiction is the next subject matter area to be affected. Many of us book lovers including publishing lawyers and entertainment attorneys don’t like to think about it, but bound hard-copy books may soon become the sole province of book collectors and publishing lawyer vanity bookcases alone. The vast majority of book readers, however, may so wholly embrace the digital right and electronic right that they soon even lose the patience to wait for their “amazon.com” mailed shipment.

Very few people who work in the publishing, media, and entertainment industries, including as amongst fair-minded publishing lawyers and entertainment attorneys, should dispute that electronic uses inherent in the digital right and electronic right can easily cannibalize the older and more traditional forms and formats. This cannibalization will only increase, not decrease, as time goes on. Again, the author should put himself/herself in the mind-set of the publisher or its in-house publishing lawyer, when having this digital right/electronic right argument with the publisher or publishing lawyer. The publisher otherwise may want to invest marketing and personnel support in the author’s work, and perhaps even pay the author an advance for the writing. In their view, though, the publisher’s publishing lawyer or entertainment attorney argues, why should they do so, and not also capture the author’s digital right or electronic right?

The last thing that the publisher or its publishing lawyer or entertainment attorney wants to do is to pay the author - and then discover that the author has “scooped” the publication with the author-reserved digital right or electronic right, stolen the publisher’s proverbial fire, and undermined the publisher’s investment in the author and the writing. The concern of the publisher and the book company’s in-house publishing lawyer or outside entertainment attorney is rational and valid. If the publisher allows the author to potentially undercut the book by exploiting author’s reserved digital right or electronic right, then the publisher is threatening the publisher’s own investment in the author and in the written work. (And on some subliminal level at least, the company’s in-house publishing lawyer also knows that this could come out of his or her future comp).

Compromises are available. One traditional compromise effected between publishing lawyers or entertainment attorneys is a so-called “hold-back” on the digital right or electronic right, whereby the author promises not to use or license-out any author-reserved digital right or electronic right for a certain period of time following publication. The author will need some leverage to get a publisher to agree to such a compromise, though. And a publishing lawyer or entertainment attorney should draft the clause - the author’s publishing lawyer or entertainment attorney, not the publisher’s counsel!

An author may think that small “portfolio” uses (e.g., tucked inside greeting cards, on an author’s personal web site, etc.) are so minor, that they will never compete with publishing rights granted for the same work, and may tell the publisher or the company’s publishing lawyer or entertainment attorney as much. The greeting card example does seem innocuous enough, but the publisher and its entertainment or publishing lawyer will likely not agree with the author regarding the author’s personal web site. It is the electronic right or the digital right that really scares publishers and their publishing lawyers and entertainment attorneys, and is perceived as threatening to their long-term investment in the author and his or her work.

The distinction to be made here is between hard-copy portfolio uses, and digital right or electronic right “portfolio uses”. The fact is that computer-uploaded text is so easy and quick to transmit, receive, and read. The posted content’s popularity could also spread like digital wildfire, so quickly - for example, if a company hyper-links to the author’s site, or if “Yahoo” bumps the author’s site up in their search-engine pecking-order. Many successes have already been made by virtue of digital right and electronic right self-publishing, and more will follow. Traditional (book) publishers and their publishing lawyers and entertainment attorneys already realize this fact. Accordingly, traditional book publishers and their counsel also realize that once they acknowledge an author’s reservation of a “self-promotion” digital right or electronic right, they risk losing control of a potential wildfire dissemination method. Again, this would put the publisher’s investment at risk - but smart business people and companies and the publishing lawyers and entertainment attorneys that represent them, don’t put their own investments at risk.

4. The Party To The Contract That Has The Better And More Immediate Means and Resources To Exploit The Electronic Rights, Should Be The One Who Takes The Electronic Rights.

Here is the final point. If a contracting party has no means and resources to exploit a digital right or electronic right or a given bundle of them, then that same party has no business taking (or reserving to themselves) those same digital or electronic rights by contract or even negotiating such a position by and between publishing lawyers or entertainment attorneys. To analogize, if I am a screenwriter who options or sells my script to the Acme Production Company, LLC, through an entertainment lawyer, how should I react if Acme asks me to specifically and contractually grant them “theme park rights” in my literary property in the negotiation between the entertainment attorneys? (Don’t laugh - this practice is now very prevalent in film and entertainment deals).

Well, if Acme doesn’t have its own theme park, I (or my entertainment attorney) now have a powerful argument for reserving the theme park rights to myself instead. “Hey, Acme”, I (or my entertainment attorney) say, “... how do you have the unmitigated gall to ask me for my theme park rights, when you don’t even have the ability to exploit or use them yourself? You don’t even have a theme park!” I (or my entertainment attorney) then make it clear to Acme that I don’t intend to be giving them any trophies that they can put on a shelf to collect proverbial dust.

The same argument can work in the publishing context, particularly as argued between publishing lawyers and entertainment attorneys, regarding the digital right or the electronic right. The author can proverbially cross-examine the publisher (or try to cross-examine the company’s publishing lawyer or entertainment attorney) as to what successful past uses they have made of other author’s digital rights or electronic rights across multiple books. The company President may fudge the answer, but the publishing lawyer or entertainment attorney representing the publisher must answer truthfully. (One good reason to negotiate through counsel).

If the true answer to the question is “none”, then the author can use the “trophy” argument stated above. If the true answer is, alternatively, “some”, then the author has a negotiating opportunity to compel the publisher and its publishing lawyer and entertainment attorney to contractually commit to digitally and electronically publish the author’s work, too. The author can argue: “I won’t grant you the digital right or electronic right unless you, publisher, contractually commit in advance as to how specifically you will exploit them, and how much money you will spend in their development and marketing”. The author or the author’s publishing lawyer or entertainment attorney can then carve those electronic right and digital right commitments right directly into the contract, if the author has the leverage to do so. Again, one should not try this at home - but instead use a publishing lawyer or entertainment attorney.

Needless to say, once the author makes the publisher commit, presumably through publishing lawyer or entertainment attorney counsel, to a development budget or other marketing or “release” commitment for the digital right or the electronic right, then both the author and the publisher might thereby also have some basis for numerical valuation of the rights themselves. And, it is an entirely reasonable argument for an author or author’s publishing lawyer or entertainment attorney to say to a publisher that: “I will license/sell you the following listed digital right[s] or electronic right[s] if you pay me the following additional amounts for them:_____________________. And in the blank space, the rights can be listed like menu options as they have been broken out in Item #1 above, each to which separate dollar values – that is, price-tags - are now assigned.

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My media law practice as a publishing lawyer and entertainment attorney includes the drafting, editing, negotiation, and closure of agreements including digital and electronic rights matters as they may arise therein, as well as in the fields of film, music, television, Internet, and other media and art forms. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

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(212) 410-2380 (fax)

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Publishing and Digital and Electronic Rights - Part II

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LLC’s, Corporations, And Other Business Structures - Part II: Written By New York Entertainment Attorney And LLC Counsel John J. Tormey III, Esq.

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LLC’s, Corporations, And Other Business Structures - Part II: Written By New York Entertainment Attorney And LLC Counsel John J. Tormey III, Esq.

Part I of this article discussed the process of selecting a new name for a business, typically a limited liability company (LLC) or a corporation in this day and age. Many people choose to incorporate or form an LLC, so as to minimize their personal liability for the debts, liabilities, and obligations of their business. There is cost to forming an entity, but the cost is often worth it. What follows is a brief discussion of “personal liability”, and the types of entities that may be available. These types of issues regarding corporations and limited liability companies (LLC’s) are often brought to an entertainment attorney such as myself in the context of new entertainment venture start-up companies and otherwise, but are in fact universal concerns across manifold sectors and industries besides entertainment.

2. Choosing an Entity.

A full description of all the differences between an S-corporation (S-corp), a C-corporation (C-corp), and a limited liability company (LLC) would be beyond the scope of this article. Besides, the distinctions are often altered - some would say “blurred” - by changes in the Internal Revenue Code and state laws. Even by the time you read this article, further changes to relevant tax laws and state laws may be made, further affecting your entity choice as between a limited liability company (LLC), a corporation, or other available form of entity such as a partnership or trust. The bottom line is that a choice of entity should be made upon current information only, with the assistance of a lawyer and an accountant. To do it any other way is to risk making a bad choice that one will later regret, especially when the first or successive tax returns relating to the LLC or corporation are filed. Though in this day and age an entertainment attorney will typically be asked to form and file a limited liability company (LLC) rather than an alternate form of entity in the context of a new media or entertainment business start-up, the choice of entity should still be carefully examined by the entertainment attorney and the business-owner at the outset – just as it should be carefully examined in any other sector or industry.

The distinctions between an S-corp, C-corp, and limited liability company (LLC) make sense when taken in the historical perspective. Look at them as the product of a kind of Darwinian evolution. In that vein, the S-corp and C-corp may someday become but extinct historical artifacts, while the LLC could become the only entity “fittest” to survive. The LLC may be the best choice of entity - if affordable, and if one is not otherwise precluded from forming it by virtue of one’s own tax profile or one’s home state’s current restrictions on LLC’s.

At some point in history it was realized that persons involved in businesses could be thereby putting their own personal assets at risk as a result. That principle still applies, by the way. If one runs an unincorporated or non-LLC business out of one’s house, that business owner may risk later losing that same house, not to mention cars, bank accounts, and other assets, to the debts, liabilities and obligations of one’s business. This is what “personal liability” is all about. A business owner wants to avoid personal liability, at all costs. The owner wants to shield his or her assets - like a house, cars, and personal bank accounts - from the risks engendered by the business. For these reasons, understandable and common to all humanity, the concept of a corporation was first formulated, many years ago. Rights deals in the context of film, music, television, and publishing, particularly, tend to be liability-evocative, and so it is not uncommon for an entertainment attorney to first focus on the structure of the business vehicle through which the deal is intended to run, before looking at the proposed deal itself.

The traditional and old-fashioned form of corporation in the U.S. still exists as of this writing - in the form of the C-corporation, named after a “Subchapter-C” in the Internal Revenue Code. When properly filed and maintained, the C-corp shields the business-owner/principal from personal liability. For example, if there is US$10,000 in the C-corp’s corporate bank account, then, in theory, only that US$10,000 amount can be used to satisfy a civil (court) judgment against the corporation - even if the President and sole shareholder of the corporation has an additional $50,000 in his/her personal bank account. A “wall”, “shield”, or “veil” is put up between the two sets of assets.

But the C-corp posed historical problems, principally that of so-called “double taxation”. Those C-corp owners filed corporate tax returns as well as individual tax returns. The unsuspecting were thereupon often disheartened to find out that they were subjected to an extra tax hit. The C-corp would be taxed on corporate earnings. In addition, the shareholders could also be taxed personally on monies withdrawn from the corporation by way of dividends. The net effect wasn’t always necessarily a 100% increase in otherwise-prevailing tax (as the somewhat-misleading phrase “double taxation” might otherwise suggest). But, on the other hand, the monies generated by the C-corp were required to filter through two “layers” of taxation as opposed to one.

In this regard, a number of business owners, including some in the entertainment business, realized that they would have oddly been better off from a tax perspective if not incorporated - a bizarre result if there ever was one. Why should the tax code and state corporation law encourage you to take unacceptable personal risk, after all? Some persons thereupon decided to simply not incorporate (or “un-incorporate”, dissolving a pre-existing corporation), and thereupon take the oft-significant risk of individual liability so as to minimize taxes. If continued, one would expect the rate of commercial litigations and personal bankruptcies to rise as result, an event which in no way would be in the public interest. Other persons instead opted out of corporate and business ownership entirely. As an entertainment attorney practicing in New York, I still encounter many companies who have yet to incorporate or form a limited liability company (LLC) – they are typically either sole proprietorships or de factopartnerships, the risks of which their principals are still assuming personal liability whether aware of it or not.

The next installment of this article will address how society responded to the growing dissatisfaction with the C-corp - namely, the creation of the S-corp and the limited liability company (LLC) thereafter.

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My entertainment law practice includes incorporations and the formation of limited liability companies (LLC’s). If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC
1324 Lexington Avenue, PMB 188
New York, NY 10128 USA
(212) 410-4142 (phone)
(212) 410-2380 (fax)
brightline@att.net
http://www.tormey.org

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Business Structures - Part II

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