Month: August 2016

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I Do. What Did I Do?!

Ah, love. I love love.
Marriage, however, well, let’s say I am not such a fan. The idea of getting married gives me Humback-whale-sized willies, just as a concept. But I’m odd in that–most people want to get married at some point, including creative pros.

Many traditional wedding vows point out that a marriage shouldnt be entered into lightly or unadvisedly. Good advice, but it’s given too late, while you’re standing there in front of friends and family, sealing the deal. For creative professionals, there is an extra wisdom to that advice that you need to think about long before saying,”I do.” If you are a creative professional, particularly a self-employed one, then marriage may affect you in ways you never dreamed.

As a creative pro, you create intellectual property: copyrights. When a creative work is made, fixed in a tangible (including digital) medium, the copyright automatically comes into being. I like to tell photographers that every time the shutter clicks, a copyright is created, but its the same for any creation; when I finish writing this post, its copyright will come into being.

The initial owner of the copyright is usually the author/artist who made the work. There are exceptions, like if you are an employee and make the work as a part of your job, or if you have signed a work-for-hire agreement before creating the work; but, for independent artists, the initial owner is usually the artist. That means, if you are a self-employed creative pro, you automatically own the copyright in each work you make. You make art; boom, you make its copyright.

Copyrights are assets. They are property (there is a reason copyright, trademarks, etc., are called intellectual property). They have value separate from the art-object itself. You can buy a painting, but that does not mean you own the painting’s copyright[1]. Copyrights can be bought and sold all on their own, separate from the art-object, too. The rights associated with copyright, like to reproduce a work, can be licensed to others. If you register your copyrights (and, please, register your copyrights), you get extra tools if they are infringed but, even without registration, copyrights are valuable assets, just like a car or a house.

Because copyrights are property and are like any property acquired during a marriage, if you divorce, they can become part of the calculations for spousal support, child support, or even be a part of the actual division of assets.

If you live in a community-property state, except for California (where copyrights still matter, but differently so, and well get back to that bear–pun intended–in a minute), the value of your copyrights has to be included in the division of property calculations. They also may affect spousal support and child support, but I’m not going into those support issues in this post (trust me, it’s a nightmare). In a community-property state, virtually all assets[2] acquired (or created) during a marriage must be split 50-50 at divorce. Very roughly speaking, this means adding up the value of all the assets in the marriage and dividing by 2.

As a massively simplified example: imagine you created only 2 copyrights during your marriage and they are valued at $5000 and $45,000; your soon-to-be ex gets half that total value, that is, $5K + $45K = $50k 2 = $25,000[3]. Get out your checkbook.

Now, think about how many copyrights you create in just a month or a year. Yup, we’re talking a ton of potential value. Just determining the value of the copyrights is going to be costly. You don’t get to say They’re worthless! Nope, you will need to hire experts and it is likely your ex will as well, adding to the costs and the legal fees as this is all hashed out.

Now, if that isn’t bad enough, even more concerning is that if you get revenue from the copyrights, your ex may also be entitled to a share of that revenue. This may betrue even for future revenue, after the divorce, as long as the copyrights were created during the marriage[4]!

Turning back to the California bear, things here are even more troubling for the creator-spouse. In my adopted state, not only does the non-creator-spouse (if you split) get the (ahem) gift bag described already, the state courts have decided that the non-creator spouse, at the moment of the copyright’s creation, automatically owns an undivided half of the actual copyright in any work created by the creator-spouse during the marriage[5]. You read that right–you create and your spouse magically becomes the joint owner of the copyright, right then.

Whats the big deal with that? Well, lots (including that I think that is contrary to federal law) but, practically speaking, it means that, even without divorce, the creator-spouse loses control over her/his work. I don’t care how much you love your partner, this can really suck. The non-creator spouse in California can sell or bequeath his/her half interest in the work to anyone, without the creator-spouses permission. S/he can also license the work to anyone (assuming that thelicense is otherwise legal), again, without the creator-spouses approval; the only requirement is that revenues must be (equally) shared.

The final California insult: at divorce, if you are the creator-spouse, you’re going to have to negotiate ownership with your soon-to-be ex, which will likely mean buying him/her out. Ouch. If not that, then agreeing to transfer halves to each other, meaning that you lose ownership of some of your own work. Ouch again.

Most states are not community-property states, luckily. However, even under their various laws, the value of your copyrights may significantly affect any financial settlements in your divorce.

You can avoid much of this by getting a prenuptial agreement that includes provisions to keep copyrights as separate property and describes how revenues related to them will be handled, in the event of a split. If you are already married, you can still have such an agreement drafted (a post-nup) and (hopefully) executed by you and your spouse. As in all things, consult with your own attorney before doing anything–preferably one who does primarily family law (so, um, not me) but who understands IP law or who can collaborate with someone who does (like me).

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[1] Unless you bought that too, and that transfer has to be in a signed writing.

[2] There are some exceptions, depending on the state.

[3] See, e.g., Berry v. Berry, 277 P. 3d 968 (Hawaii 2012)

[4] See, e.g., Rodrigue v. Rodrigue, 218 F.3d 432, 443 (5th Cir. 2000)

[5] In re Marriage of Worth, 195Cal App. 3d 768, 241 Cal. Rptr. 135 (1987) is the controlling case in California.

 

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Pay Your People, NOW

If you are working in California and use crew (including models/cast) of any kind, you need to pay your crew before they leave on the last day of the project. UPDATE: As of September 5, 2019, you have up to the next REGULAR payday after the end of the project. Still, don’t screw it up. 

No, I am not kidding.

California’s labor laws are some of the most complex in the USA, but you probably already knew that. Maybe you’ve heard that some of those laws state that when you dismiss an employee, that employee must be paid in full on the day of the dismissal (that includes things like accrued vacation time, by the way). What you likely did not know is that when you hire a model or a stylist or an assistant (etc.) for a project, be that for 2 hours or 2 weeks, or 6 months, when that project ends, you are “dismissing” the person for the purposes of the applicable laws; that means that you must pay the person everything s/he is owed, on that very day. There is a minor exemption for motion pictures (it gives a little leeway) but, trust me, you don’t qualify for it.

I already know what you’re thinking: I’ll just have in my agreement with any crew that they will be paid within Xdays. Bzzz! No.Thank you for playing. The laws specifically prohibit contracting around this requirement.

This is a sneaky requirement and one that can cost you a pile of buckos (considerably more than the Benjis above), especially because there are often layers of players. For example, maybe you are contracted by an ad agency for an end client… you could end up holding the bag. The penalties are very steep–including having to pay the person’s wages for every day you haven’t paid, for up to 30 days, plus the employee can get attorneys’ fees. So, for example, you hire a stylist for $1500 a day, for a one-day shoot; then, you don’t cut the check for two weeks. You now could be on the hook for (on top of the original $1500 you’ve already paid) $1500 x 14 = $21,000, plus attorneys’ fees!

Apparently, models in particular are catching onto this and they are suing or threatening to sue photographers and their clients for these claims. To be clear, you are not out of the woods if you go through a modeling agency whichyou pay later, or a producer, or any agency. Also, trying to claim that someone is an independent contractor will also likely not save you–in California, you should assume that any individual working for you on a creative project under your direction is an employee under these laws (and others, like the workers comp laws).

Now, even if you aren’t in California, your state may have similar laws. It’s something you should definitely check on.

So, what can you do? Your best action is to pay your cast and crew on the final day of anyproject. If you are using an agency or a producer who will be paying others, still pay on the final day and have that person/entity indemnify you against any claims related to these laws (talk to your lawyer about this). Have your payroll company on notice that you need to pay on that day. Maybe arrange to pay electronically, on that final day.

In short, pay now,because you sure don’t want to have to pay later.Besides, it’s just good to pay your people immediately; stringing people on (even if you get strung by your client) is, in my opinion, a petty, nasty practice. Don’t do it. If you pay immediately, sure, you may be a bit cash-poor until you get paid but, in the end, you’re doing the right thing.

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Sit On Your Hands and Breathe

In some ways, law school is like learning to be Vulcan–you have to learn to think logically and keep your emotions out of it. It isn’t that we lawyers don’t feel (boy howdy, no!), but we have learned to be ledby logic rather than our emotions, at least when it comes to our cases. We learned to think rather than react. That difference can be rather crucial in legal matters.

My studies in Buddhism have helped me with this. I have learned to sit with thoughts and feelings, to observe them without judgement, and to make better choices from that. It takes a hell of a lot more to make me lose my temper than it used to. I still feel, and profoundly, but I can identify that as “feeling” and not let it interfere with my rational processing.

Creative clients are especially emotional sometimes. I think it is part of what makes you all artists–you make your livings by expressing emotions in some manner. For some of you, this can manifest as reacting before thinking. While that may be great for making your art, it can be very bad when faced with a legal issue.

Let’s take an infringement, for example. If you find your work being used without your permission, you’re going to be angry and hurt and you’re going to want to yell at someone, but that would be a poor choice. You could accidentally limit your recovery (or at least make it damn hard to negotiate a good settlement). You may throw a client under the bus because it accidentally shared your work (maybe if you knew that you’d forgive the client’s idiocy to keep that client). You might say something that isn’t true–my favorite is “The penalty for infringement is $150,000 per infringement!” (sigh…if only!). You may also be mistaken and the user does have a license you forgot about or it’s a legitimate fair use. If you go off half-cocked, you’re not going to catch any of that and, well, that would be bad.

So, when you find an infringement, here is what I think you should do:

  1. Immediately preserve evidence of the infringement (make screenshots, for example). Find every use you can and capture every URL, buy products that bear your work, take photos of your work being used, etc.
  2. Look up the company/person who controls the infringement, likethe website (try a Whois search, perhaps), or the manufacturer of the product. Save that info.
  3. After that, sit on your hands (i.e., do nothing) and breathe.

Do not call or email the infringer/bad actor. Do not call or email the entity you think may have “shared” your work. In fact, don’t even call or email yourattorney (yet). Nothing is going to get fixed immediately and no more harm is going to happen (in most cases)–you have time. You have three years to bring a suit for infringement in the US, so doing nothing for a couple of days after finding the infringement isn’t going to hurt your case. If your work isn’t registered and it is more than 3 months since you first published it, registering it now isn’t going to change anything for the better, even. So just sit and breathe.

After you have calmed down, maybe days later if you are really upset, look at the evidence you gathered. Search for any license you may have granted that might cover the use. Find your registration materials (assuming the work is registered). Basically, get everything together to make your case file. Then re-evaluate your case and set your goals to make you whole. Then you can plan on how to achieve thosegoals. And then you can begin to act.

This is true for many matters–that is, nothing bad is going to happen if you don’t act right that very second but you can do harm by reacting without thinking. Instead, record the evidence; sit on your hands and breathe; think/re-evaluate; set goals; act.

Now, “act” may very well be “call/email my attorney” but, by taking the time to let the emotions cool off, you haven’t hurt your case and you have thought about what really matters to you in it. The slap-in-the-face you felt will have calmed so that you can think more rationally about what you want. And you have all the materials together to help your attorney evaluate your case.

You don’t have to become Vulcan-like, but if yousave most ofyour emotions for your art, you’ll likely get better results in both your art and the law.

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Breach or Infringement?

I’ve heard that some photo organizations may be suggesting that the way to avoid the costs of litigating an infringement claim is to have a liquidated damages clause in your site’s terms of service (TOS), because then (they say) it’s a breach of contract rather than an infringement. For example, if you put something on your site’s TOS like “If you use any of the work from this site without a license, you agree to pay to PhotoBob three times his usual fees for the license” and someone uses your work, then you can bring a breach of contract case in small claims court and avoid the cost of litigating infringement in federal court.

I have to say, I think this is very bad advice. I hope that pro groups are not recommending it. Short answer? It probably won’t work and, even if it could, it’s not a good choice. Let me explain.

First, it is very possible that your TOS are not binding on your visitors. There is case law that says that in order for TOS to be binding, a user has to either click to agree to those terms (called a clickwrap agreement) or those terms have to be so obvious as to, essentially, be on each page of your site–just having a separate page with your TOS won’t cut it. (Lawyers reading this, yes, I’m generalizing from the cases–we need to know the nitty gritty but creatives really don’t.)

Second, even if you could make the TOS stick, you would be limited to winning no more than your 3X number, and you’d have to prove that you usually got $X as a license fee in the first place. 3X is likely not going to be much money. In fact, it’s going to have to be under like $5,000 if you want to stay in small claims, depending on what the small claims court rules are where you are–that is, there are limits on how big a case you can bring in small claims. Oh, and you probably can’t use a lawyer (many small claims courts bar representation) so you’re going to have to do it all yourself.

Oh, and let’s say you win a judgment in small claims and the defendant doesn’t pay. You can’t then go marching into federal court claiming that it’s now an infringement and demand a lot more money. Even if by some miracle you did pull that off, that is that the court didn’t dismiss the case immediately, the court would likely say your damages are limited to the judgment you got already or darn close to it.

Third, how are you going to prove that the infringer got the work from your website? Have you posted it anywhere else, like Instagram? Good luck enforcing your site’s TOS, then.

Fourth, and this is the big one (yes, I buried the lede): copyright pre-emption will likely make your breach claim a loser. See, copyright is exclusively federal law and can only be adjudicated in federal court; so, if you bring a claim that is really an infringement claim, a smart defendant is going to tell the small claims court “Hey, this is really infringement we’re talking about here so you have to dismiss this case because this court doesn’t have jurisdiction.” I think a defendant is going to win with that and, boom, you’ve just waisted all your time (and filing fees).

There is one possible exception to pre-emption here, but it’s a narrow window and one I don’t like anyway. That is, if you agreed to license the work to the defendant and it later failed to pay for the license, then courts have said that is a breach of contract rather than an infringement (unless the terms of the written license stated that the license was contingent upon full and timely payment). See Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 559 N.7 (9th Cir. 1990). Now, I think you should have written licenses and those licenses should specifically state that no license is granted until full and timely payment is received; but, if you have that, then the courts say it is not a breach of contract and, so, there you go… pre-emption again.

Really, I think it’s cutting off your nose to spite your face to try and convert an infringement claim into a breach of contract one. I mean, if you register your work in a timely manner (before the infringement) then you have the right to elect statutory damages and you have a decent chance at being awarded your attorneys’ fees as well. That is very, very likely going to be a much larger number than what you’d ever get in small claims court. More importantly, if you want to avoid litigation (and I always say: you want to avoid litigation), you have a better chance at negotiating a better result if you have statutory damages and maybe attorneys’ feesto back up your claim. A breach of contract claim is almost always some kind of wonky and the damages are limited–why do that to yourself?

 

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Registration Nag: No. 5226

I know, you’re likely already sick of me nagging about registering your copyrights as early as possible, but until y’all stop sitting on your hands, I’m going to keep at it.Today’s juicy reason is that sometimes a new infringement isn’t new.

The Hollywood Reporter in this article talks about a recent ruling in a copyright case involvingan artist who created some famous tattoos. The artist who created art on LeBron James did not register the copyright when he created the works and when theywere infringed by a video game company (who has Mr. James in its game), twice, it was too late to get statutory damages. So the artist registered later and when the video game company released a new version of the game, the artist tried to say it was a new infringement so that he could get statutory damages and potentially attorneys’ fees. The court, however, said the new release was the same infringement as the old ones because the use was essentially identical. If aninfringement starts before registration, the bright-line rule is you can’t get statutory damages (or attorneys’ fees), so the artist can’t get statutory damages here.

In short, his $1.2million case is now likely worth, at best, a few thousand (and he’s going to have to prove up that value).

Ouch.

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(note, the photo above is not of the tattoo in question; it isn’t even a real tattoo)

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