Category: business

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Blockchain Copyright Services: Seductive, but Unwise

Kodak is joining the list of companies offering blockchain-related services for photographers. While I applaud the idea of photographers getting paid, I’m not a fan of these services. Mostly, the financials are not, in the long run, good for photographers.
Not by a long shot.

I know exactly what many people are going to say: without much effort, photographers will get paid for uses they didn’t get paid for before. Thing is, that may not be true at all; and, even when it is true, the amounts will be less than they could get if they pursued these infringements, and they are infringements. Most of all, photographers will be giving up way too much for the convenience these services are selling.

Let’s back up a bit and look at the process and the financials…

First, a photographer makes a photograph and registers the copyright in it using one of these services (any of ‘em–let’s call our hypothetical company “Block,” just for ease). Block submits the registration to the USCO and, hopefully, doesn’t make any significant error on the registration application (this is the first problem, in my book, because registrations are not just “fill in the blank” easy and if it gets screwed up… ouch). Anyway, Block also assigns the work its unique ID via blockchain. It also incorporates all sorts of things that sound fabulously whizbangy and techno-impressive, like connected thumbnails of the deposit copy and the registration.

The big selling point is that the services will patrol the interwebs looking for your image and, if the image is used, will pursue payment if previously unlicensed. These uses are billed for, through Block, who then collects on these “post-use licenses” in part because the blockchain ID will “authenticate” the image.
In theory.

The reality is not so fabulous.

First, what the hell does “authenticate” even mean here and what good does it do? I mean, seriously, is an infringer going to bend over and pay just because you have blockchain proof it is your registered-copyright photo and, thus, that they infringed? Nope. No more than infringers do now when confronted with existing forms of evidence (evidence, by the way, that has been used by courts long before blockchain came into being[1]). Infringers, and these are infringements we’re talking about, will refuse to pay just as they do now.

Maybe there’s one exception: infringers might pay more often, but only if the amounts demanded are tiny. This is the business theory, at least, for these companies: they will collect something for more of the infringements and that those amounts will add up. While this is great for those companies, who will make lots in volume, this is short-term thinking at best for individual creative pros (who will not make it up in volume and who lose more…keep reading).

Let’s say that Block bills a whopping $50 per blog use infringement (again, they are calling it a “post-use license” to sell it to the infringers, because it sounds nicer than calling them infringers). If you are a pro, I think you should NEVER sell a license for $50. Ever. Even for a personal blog use. It lowers the value of your work. I don’t care if it’s used on some tiny not-for-profit or personal blog, if you are a pro, a license to display your art is worth more than $50. But still, let’s stick with that amount (which, I suspect, may even be high for these services) because, at that number, Block (etc.) will get a bunch of these “sales.”

The individual artist, however, will have to collect on 15 of these $50 “licenses” to earn the minimum statutory damages owed, under the law, for a single infringement ($750)[2]. Worse yet: I’ve heard that some of these “services” charge 45-55% of the fees collected (a ridiculously high percentage, by the way), so now you’re looking at double that 15, just to get the minimum the law says you must get for a single infringement of a photograph whose copyright was registered before the infringement. And remember, the first thing you did here was register the copyright with the US Copyright Office so, um, yeah.

In other words, you’ve done the (allegedly) hard part–registering the copyright–so why in the hell are you giving away all the financial benefits of doing that?!?

But it gets even worse on the financial side. Let’s say you, through Block, have granted a bunch of these $50 licenses for online use. In fact, let’s say Block even billed and collected $500 for a “post-use license” for use on a small business commercial blog (extremely unlikely, but still). Now, that same photograph gets used by MegaCorp on its website and, in the negotiations, MegaCorp says it will pay $2500 to settle–five times the largest amount you ever got for a license for that photograph. You know that the license is worth more like $10,000 so you refuse (assuming you can–the agreement with the service may have you waive the right of refusal) and the case goes to court. Not only is it very possible that the court will not award you more than $2500, because, in part, of your low price history, it is unlikely that you will collect attorneys’ fees since you refused what appears to be, in that context, a reasonable offer, pre-suit[3]. You have, in essence, set your value at almost nothing because Block licensed your work (post-use!) for almost nothing, over and over. Even if you have licenses that you have issued that are more valuable, you will have to fight it out in court because your own evidence shows you will accept less. Ugh.

Now, as if the financials could be balanced by the services provided, let’s look at the blockchain proof these services are touting: short answer is you don’t need it. Really, it is of no added benefit to you, although it might make Block’s work easier. Sure, if you are asking for essentially a micro-payment and can wave the evidence of registration, etc., at the infringer, you might get paid quickly. However, in fact, in some ways by doing this, Block (and thus you) is doing the work of the defendant and that removes a tactical tool for later (litigation) use.

For example, assuming you registered the copyright shortly after creation of the work, you don’t need to prove that the work is validly registered. Under the law, if you registered the copyright to the photograph before or within 5 years of its first publication, then the legal burden is on the defendant to prove that the work is NOT properly registered, not on you to prove that it is[4]. It’s expensive to get deposit copies and the defendant should bear those costs since it bears the burden of breaking the registration. So, actually, you aren’t making it easier for them to pay you, you are taking away some of the tools your attorney can use to pursue them.

Oh, and about “your attorney,” if you use one of these services you likely agree to use their attorneys for any litigation resulting from a use they found. Their attorneys are contract attorneys who are getting paid very, very little to handle your case. I know because I have been approached by and refused to work with some of these companies as the rates offered were unreasonable.

Finally, and not for nothing, at least Kodak is using its own cryptocurrency for payment. This fad is not a good thing, as Warren Buffet has noted, and I agree. There is way too much uncertainty in the values, including the very likely possibility of total loss. Get paid in real currency, if for no other reason then you know that it isn’t financing North Korea or human trafficking or other crimes[5].

Look, I totally understand that creative pros want the business side of their lives to be easier. Technology can help with that. It’s easier than ever to register your copyrights yourself and to track your works for infringements, again by yourself. If you don’t want to do the work of pursuing the cases, you can hire someone in-house to handle a lot of it, like a studio manager or even a (paid) intern. You’ll still end up way ahead of what you would get with these services. There are also lawyers like me who will help you, even for many of the small cases, and (usually) for a lower percentage than these services charge.

In my opinion, if you are a creative professional, you owe it to yourself to treat your business like a business, and that means making decisions not on the basis of “how easy is it?” but rather “what will benefit my business the most?” When it comes to infringements, that means not giving away the farm for seductively easy now.
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[1] Like, for example, you can (and should) make copies of the deposit copies yourself and keep them in your own files with the registration. The metadata in these files will authenticate them.

[2] For a timely registered work, statutory damages must be between $750 and $30,000 for non-willful infringement, and up to $150,000 for willful. 17 USC §504.

[3] Courts have wide discretion in the award of attorneys’ fees under 17 USC §505 and, these days, are less likely to award them if a plaintiff has refused an objectively reasonable settlement offer.

[4] 17 USC §410(c): In any judicial proceedings the certificate of a registration made before or within five years after first publication of the work shall constitute prima facie evidence of the validity of the copyright and of the facts stated in the certificate.

[5] See, e.g., http://www.businessinsider.com/why-bitcoin-and-other-cryptocurrencies-will-inevitably-become-tools-of-the-rich-powerful-and-criminal-2013-12; http://www.springfieldnewssun.com/business/crime-and-cryptocurrency-how-local-criminals-use-bitcoin-illegally/ispfn3mqvwWcsPRI1AKC0L/; and, https://www.inc.com/will-yakowicz/startups-law-enforcement-agencies-catch-criminals-who-use-cryptocurrency.html

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Words Matter

I’ve worked full-time in creative industries since I left my PhD program[1] in the late 1990s, long before I went to law school. I’ve taught the business-side of being a creative pro, at the university level. Law school added to my quiver of skills and knowledge, but let’s just say that I have an understanding of the professional creative world and the business world. If there is one thing I’d love to impart to all creative pros, it is this: words matter.

Sounds kind of flippant, but it’s not. When you let those whose interests are opposed to yours dictate the language used to discuss those interests, you start from a very weak position. In fact, you may have already lost.

In that context, there are two words that immediately spring to mind that creative professionals must stop using: content and plagiarism.

Let’s start with the latter first: plagiarism is not a synonym for copyright infringement and we must stop using it as such. Plagiarism is a failure to attribute the original creator of something, usually words, cited in something else[2]. For example, if someone writes an article that includes:

Law school added to my quiver of skills and knowledge, but let’s just say that I have an understanding of the professional creative world

without noting that it was a quote of something I wrote, that would be plagiarism but it may or may not be infringement. Plagiarism is a passing off as one’s own work the work of another, and almost exclusively in the academic world, although it can appear in written work like journalism, too. In many ways, plagiarism has a closer connection to publicity rights (and definitely to moral rights, which we do not really have in the USA), since it is about attribution to the original author.

Importantly, if you take and use someone’s work and include an attribution to that person, it is not plagiarism…
…but it may very well be copyright infringement.

When we use plagiarize for infringe, we muddy the waters. A lot. This misuse leads to people thinking that they can use any work for free, just as long as they include a credit line or other form of attribution. It also contributes to the misguided notion that, if a work appears without a copyright notice or attribution, then it’s free to use.

I spend a lot of my time teaching infringers that hard (and, often, expensive) lesson; but what worries me is that the more people see attribution as a free-pass to use, use that is really infringing, the more likely Congress will enact laws reflecting that notion or courts will give it more weight than they ought in fair use analyses.

To protect against that, we must be diligent to use the proper words. For most non-academics, your concern will be about infringement, not plagiarism–call it by its correct term.

Turning to the other word, content, this one could practically drive me to drink.
Heavily.
Early in the morning.
Alone.

Using the word content is a great way to turn any creative work into nothing more than filler–something of no value itself. It also subconsciously makes the holder of the content into someone more important than the creator and even more important than the work itself.

Content reduces the value of your work to practically nothing[3]. Content gets shared (that is, freely displayed and distributed) on platforms[4] that don’t even value it enough to monetize it. Instead, these platforms monetize the data provided by the people who use the platforms. And those platform companies are all valued in the billions of dollars, because of that data they gather and sell.

The heartbreaking reality is that artists have been sold the idea that their content isnt really worth anything but that exposure of their content on these platforms will lead to riches. If your content trends, then some big company will call and offer you a huge contract to make art for it–lucky you! While that is vaguely possible, it is about as likely as winning the Powerball lottery. In other words, it’s business insanity to rely on that minuscule chance.

Sadly, each time you post a work on one of these commercial platforms, for free, for others to “like” or share, the only involved person/entity not making money from the exploitation of your work is…
wait for it…
you.

However, the reality is that what you create is of enormous value and should not be reduced to the notion of being filler (content). It is what draws users to the platforms! If you are offering your creative work on these platforms, free to share on those platforms (if not more broadly), you are giving away too much. Again, the art/photos/words/music you create is what draws users to the platforms and those users are what makes those platforms money! No content means no users means no money for the tech overlords or the advertising businesses that suck off their data teats.

Adding insult to injury is that by freely offering your work on these platforms, you are helping to train the average user of those platforms that your work is of no value. Your photograph, painstakingly created with a crew and lights and years of experience, is of the same value as any users pic of their cat, because you both got paid the same amount to post it on that platform. Same for your writing, same for your music, same for your illustrations. Courts think that way more than you know. AND, if your work is free on platform X, then why should anyone have to pay to post it on platform Q or, for that matter, on their blog or small business website? After all, it is only content and content is free stuff the purpose of which is to get freely shared. Try proving up the value of your work when you’ve been giving it away this way–it’s the stuff to give lawyers nightmares.

To be absolutely clear, no one will ever value your work more than you demand or more than you value it. When have you ever given an estimate to a client for a project and had that client say it will pay you double that amount? Call your work what it is, by its proper name: art, photograph, essay, book, song, composition, illustration, painting, whatever. Don’t let the tech overlords tell you what your work is or what it is worth by controlling the language.

Honor yourself and honor your creative work by using its proper name and insisting others do as well. Also, register your copyrights in your art, don’t give it away, and finally, go after infringers. It is your work, your creation, and you deserve more than just attribution.

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[1]Large parts of my graduate studies were in linguistics, by the way.

[2] See the Merriam-Webster Dictionary definition here: https://www.merriam-webster.com/dictionary/plagiarizing

[3] Worse yet, an artist or author of any stripe calling her/himself a content creator is tantamount to that person saying I make stuff of no real intrinsic or extrinsic value. Do not be that person.

[4] Platform itself means something higher than its surroundings, so the tech companies have taught us to value their works much more than the creative work on them.

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We Are All Afraid

First, an apology for not posting anything for a bit. In my defense, I have been extraordinarily busy: on top of my practice, Im prepping for a move next week (packing is such a time-sucking chore) and have been hosting my niece for a couple of weeks while she does an externship in emergency veterinary medicine.

Im very proud of my niece. I have no right to be as Ive had nothing to do with her upbringing beyond sending presents and good thoughts across the country (shes from Atlanta and goes to the University of Georgia School of Veterinary Medicine in Athens, GA), but Ill claim the privilege of relation. Contrary to the stereotype millennial, she has worked hard to get where she is. In case you werent aware, getting into vet school is harder than human medical school–there are many fewer schools and the competition is fierce. She will be awarded her doctorate next spring.

My niece reminds me of the value of work and a good attitude. She could have been daunted by the odds, by the amount of work, by the cost of school, by a whole host of things that could go wrong, but she did it anyway. I’m sure she was afraid, more than a bit, of failing at many points along the way. But she did it and shows every sign of becoming a very good and successful vet–maybe even specializing in surgery. Wow!

She, and my upcoming move, remind me of how facing our fears and doing (whatever) anyway is the best route to success. Speaking of which, I wrote the following in 2006 and it holds true today…

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Ive written about fear in one of my Manuals[1], but there is something about fear and business that I may not have been clear about: we all have it. Every single businessperson has fearsuccessful people do, just as less successful ones do. The difference is in how one deals with the fear.

If you are afraid and own up to it, face it, and challenge the fear, you are more likely to be successful. Some call that courage, and if that word works for you, then use it. What it is, whatever you call it, is taking risks and being open to living with the results.

We do that every day. Every day we take a risk driving (accidents), playing a sport (hurting yourself) or even just eating (food poisoning). Theres a risk in taking a shower (you could slip) or taking some medication (side effects) and there are big risks in falling in love (a broken heart). And yet we do these things regularly. Why? Because the payoffs are worth it and we know that we can live with the results, even if they are painful.

Can you imagine never being in love? Sure, youd never run the risk of getting hurt. You could protect your heart and rationalize it by saying that over 50% of relationships break up, etc. Thatsoundsreasonable. But, youd never know the joy of an intimate relationship, or passion, or the sublimely absolute trust that someone is totally there for you even in your lowest moment.

So it is in business. You can play it safe, not take risks, and be like most everyone else who is trying to do the same thing, or you can try something new and risky, but whichmightpay off in a big way.

Did you become a creative to do what others have already done, or did you do it because you see things differently and/or you want to express something more in your work?

Take the riskbe your whole self and show your true vision. Be passionate. Put yourself out there. Yes, you may fall on your face, but youll be truly alive in the process and, more importantly, you can only be great if you try.

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[1] For those of you who dont know, when I was a rep and consultant (as Burns Auto Parts), I use to post and send to clients articles I called Manuals.

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P.S. These days we have a lot of external fears–things over which we feel we have almost no control. For many of us our country (USA) is headed in not only the wrong direction, but a truly dangerous one. We can’t let those fears stop us either. Facing these fears may mean standing up to the racist/homophobe/misogynist screaming at you without turning to violence, or running for office, or protesting, or protecting DACA kids and immigrant families of all kinds. I encourage everyone to do the right things, to stand up for the truly American way and not this hateful MAGA hypocrisy, and to know that we can and shall overcome.

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Fear and Professionalism, v.2.0

As I said in my last post, I want to share some of my previous writings on the subject of fear and professionalism. Today, a post that is very near and dear to me, being that it was made on a very important day in my life: the day I officially became a lawyer.

What I didn’t write at the time was that, when this happened, I was in the middle of a humiliating break-up and mentally at a spectacularly low point. I was looking for a place to live back in San Diego (I had moved to LA right after taking the Bar), was middle-aged, post-law-school (and post-relationship) flat broke, and quite literally I had no one physically near to celebrate with me on this day. I had considered skipping this big ceremony, fearing I would stand out for being old(er), utterly solo, and potentially looking like a loser if I ran into people from school who knew about the relationship and move but not the break-up and return. I felt like I had a big neon “PATHETIC” sign above my head and was afraid I’d burst into tears if anyone spoke to me. Of course, this was all only in my head, but it felt pretty real (and raw) at the time.

Obviously, I screwed up my courage, drove down, and attended the ceremonies. I chose to put a smile on my face and stay mindful of the event itself and all its parts. I’m so glad I did. If I hadn’t faced the fear, I would have missed out so much I hope always to remember. Here is just a bit of what I learned that day.

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Fear and the Law and the Arts[1]

Today, I took my oaths and became a real, licensed attorney. The ceremonies and speeches were rather moving and, often during the speeches, I thought about you: the photographers and other creatives with whom I have worked for so long. Surprisingly, much of what was said applied to you as well as us, the new attorneys.

There was one speech in particular that really struck me. One of the officers of the State Bar of California talked to us about fear in the profession. He explained that he had suffered from severe anxiety after being in combat, which resulted in him being afraid of speaking in public. He was afraid even to be in a room with more than one or two others. He was terrified of trying to communicate with anyone. And, during all this, he was applying for law school, wanting to pursue a profession that required him to do everything that, frankly, scared the hell out of him.

He explained that, over time, he read everything he could about fear to try and figure out what was going on (this was before we understood about PTSD). After a while, he began to realize that whatever he feared was inevitably in his path to success: from simple things like asking a girl out to his desired profession. No matter what he wanted, he’d have some fear block his path. But other things didn’t scare him and, interestingly, those things were not on his path to success. He realized that if he let the fear win, he’d never get what he wanted, so he did what he needed to, scared out of his wits as he did it.

Then, he turned and gestured to the long row of judges (federal and state appellate, about 12 or so of them) seated behind him on the dais. He said (as close as I can remember) They are afraid. Every day, they are afraid. Every day I am afraid. Every day, every one of us is afraid. He then said, essentially, that we need to lean into our fear to get where we want to go. He said that, for him, he knows now that if something scares him, that is his sign that he needs to do whatever that scary thing is. If he avoids it, he will be avoiding something that will bring him more success.

I loved that speech. It was wonderful, honest, and I knew from my own experiences that he was right. I know he was right for me and for you. Lean into your fears if you want to be successful.

There was one other thing that struck me in the speeches that I thought I should share with you. As we were about to take the oath to be admitted to the Federal District Court for the Southern District of California, an 80+ year old Federal Judge said, with deep sincerity, that whatever we do in our lives and careers, we must not stop being idealists. When he said that, I was brought to the verge of tears because, throughout my life, I have been called an idealist. This was never said as a positive, it was always said like it was something bad. Well, I am an idealist and I’m not going to apologize for it ever again[2].

I think all artists are also idealists. You have to be to do what you do. If you weren’t, if you didn’t hold the belief that art, your art, is of enough value to make a living making it, youd be an accountant or firefighter or whatever. Hold onto that idealism and don’t you apologize for it either.

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[1] Originally written and posted on June 1, 2011.

[2] For the record, I’ve stuck to that pledge. Since writing this piece I’ve received vile threats and other online bullying, but I’m proud to stand for strong copyright and my clients’ rights.

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On Amateurism v Professionalism, and Fear

This morning, I read this Farnam Street Blog post about the difference between amateurs and professionals. What I was going to write today went out the window.

I know lots of people, especially (but not exclusively) creative people, who call themselves professionals but who act and think like amateurs. It’s something I wrote about often when I was a rep and consultant; now that I’m an attorney, I see it all the more. The gist: fear versus reality.

As Mr. Parrish points out in the piece, people working from a fear-based mindset rather than a reality-based one make poorer choices and behave in limiting ways. I know this from personal experience. I was reared to respond to fear (risk-averse is an understatement!) rather than accept reality and use that reality to reach and work for more. In fact, the first half of my life (so far) was lived that way.

Then, I made a conscious change. It started small but, as Dr. Seuss might say, it grew and it grew. Now, when I look back on my life, I see that I have accomplished a lot and been more successful in many ways than I ever thought I would be. Why? Because I took risks and I pushed myself to do new things. I didn’t let the fear win.

With that in mind, over the next couple of weeks Im going to re-publish some of my previous writings on fighting fear and being a successful creative. I hope you’ll find them helpful. I’ll warn you, sometimes the language will not be entirely safe for work and some of you may not hire me because of it.

But, I’m not going to be afraid of that.

Here is the first, from June 19th, 2013:

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What Are You Waiting For?

Yesterday, I saw that a promising reporter was killed in an auto accident in Los Angeles. He was 33. This morning, there was news a best-selling novelist had died of an aggressive cancer. He was 47. And now, as I sat down to begin writing this piece, the news confirmed that James Gandolfini (star of The Sopranos) had died. He was 51.

I share this data with you not to depress but to remind you that life is unpredictable and often way too short. So, what are you waiting for?

Are you afraid of failing? Why? What is the worst that will happen? You’ll lose your home and end up living under a bridge someplace, and you have kids?

Lame excuse.
You read me right, that is just lame.
Guess what, you can do everything right and that dark future can still happen.

Or you can do everything right and get hit by a bus. Or have a heart attack or get cancer or, well, just about anything.

You have one chance at this life (well, one conscious one, if the Hindus and Buddhists, et al., are right) and you have no control over when it will end. So, I ask again, What are you waiting for?

You chose to be an artist and with that came the requirement that you have faith. Not faith in a god (not that you cant have that) but faith in yourself, in your art, and that somehow you’ll make it all work. That’s fabulous. It’s amazing. It’s actually empowering, if you stop shaking in your boots and look at it.

Being an artist requires you actually acting on that faith. You can’t say I choose to be a photographer/designer/writer and then play it safe. You have to do. You have to leap. You have to try and fail (or succeed) and try again and fail (or succeed) and keep doing that over and over again.

For the rest of your life.
That is the bargain you agreed to when you chose to be a professional artist. You have to make, and do, and (sometimes) make do.

The one thing you cannot do is wait for things to be perfect before taking the next step. I’m sick of hearing artists say I can’t send the promo because the site isn’t perfect or I’m not sure my list/promo/portfolio/edit/studio/haircut is perfect so I can’t____. I can’t. I can’t. I can’t.

If you make some excuse for not doing, then get a real fucking job because you dont deserve to be an artist. You dont have the guts.

I say that with love (you know that, I hope, by now).
But it is true.

Frankly, it’s true for any profession. It’s as true for me as it is for you. We have to get out there and do. We can’t be bound up by the fears of getting stuff wrong (which, by the way, is much worse in my profession than yours) or failing. We have to do and leap and try. Every bloody day.

Not only will doing this give you your best shot at being successful (and it will), it will make you happier in the process. Following your dream, doing what you love, isn’t that worth the risk of trying? Why be an artist if you never get to make your own art?

Life is (sadly) short for too many people. We don’t know when our last breath will come. No matter how well we treat our bodies, it is ultimately out of out control when Death will come. And each of you deserves to have loved the life you have. The only way for that to happen is to try, to do, to make your art, to follow your dream, to risk, to fail, and to do it all again the next day.

So, what are you waiting for?

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Forming an Entity: The Other Stuff

I wrote recently on some of the copyright considerations related to running your business as an entity. Today, I want to address some of the other things you have to do whenyou decide to form an entity. First, a quick reminder that I am speaking generally here and with California law in mind: each state has its own laws so your mileage may vary, so to speak.

Most creative pros start their businesses as sole proprietorships. As Ive explained before, there are no formalities required to do that, outside of maybe having to register a fictitious business name (DBA) with your county or city. Forming an entity requires filing various papers with the state, but after that is done, are you done? Not by a long shot.

Assuming youve been running your business like a business, you may have things like business banking accounts, credit cards, or insurance policies. When you have a new entity, you are going to have to convert all of these to the new entity. In some (probably most) cases, youre going to have to close existing accounts and open new ones. Youll also have to get new checks printed.

Its particularly important to talk to your insurance provider to get your policies worked out. You dont want to get caught with those proverbial pants down. This may also mean your auto policy, dont forget.

Speaking of your car, did your CPA tell you it would be best to have your company own your car? Then, youll have to transfer it (and yes, we all love the DMV, but do it). What about your other assets? Computers? Cameras? Furniture, etc.? Even if you own these things outright, it would be best to document the transfer of the assets to your new entity. Talk to your CPA before doing any of this to make sure you dont do anything to mess up her/his careful tax planning for you.

You also need to think about your IP licenses. No, not your licenses out (those you sell to other people to permit them to use your work–although you will need to update those moving forward) but the one ones you purchased for things like the software that you use in your business. Some of those will be non-transferable and you will have to purchase new licenses. Dont get angry about it and dont skip this–especially if you issue non-transferable licenses, you should understand this.

You may also have issues with any office/studio space you lease (landlords often will be fine with updating a lease) and definitely youll need to set up new payroll accounts if you have employees, including getting a new EIN number for the entity not to mention new workers comp., etc. Also, if you have a business license with the city (or county) you’ll have to get a new one for the new entity, too.

Finally, you need to learn how to sign documents properly for your entity. You may no longer sign justBetty Smith, but rather must sign as Betty Smith, Managing Member, Smith Creative, LLC, a California LLC, if you formed an LLC; or, if you did the corporation thing, Betty Smith, President, Smith Creative, Inc., a California Corporation. Yes, it’s a pain in the butt but if you don’t sign properly you can personally be liable for things. No, I’m not kidding.

Relatedly, you will need to update all your business paperwork to reflect the new entity–like your licenses you offer clientsand your contracts/estimates/invoices/model releases/etc. Also be careful in the contracts you are offered: make sure they are naming the entity and not you as the party and that there are no “Personal Guarantees” or other clauses that effectively remove the protections of the entity.

Your CPA should provide you with a lot of guidance on the financially related changes you needs to make. An attorney can help you with the rest.

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One Year

Yesterday, July 1, was the first anniversary of Burns the Attorney.
Ive been incredibly lucky. Its been a really good first year.

I have wonderful clients, both new and old, who honor me with their trust. I take very seriously their reliance on me to do my best for them because, in very important ways, it means I help them focus on being creative professionals. Think about it: which would an artist rather do, make new art or chase down people who have used existing art without permission or payment?

That is most of what I do, helping artists with copyright infringement matters. But I do other legal work as well, of course. In the past year, Ive helped clients with contracts and releases, discussed business formations and the effects of community property on clients copyrights, and, well, lots of other things too.

Not everyone gets the opportunity to do what she really loves. I do, and I am so grateful for it.

I want to thank all of my clients and, in advance, all of those who will call on me to help in the future. I intend to be here for some time, serving artists of all sorts.

If you ever need me, you know where to find me.

And thanks.

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WMFH Affects More Than Copyrights

Creative pros have been understandably angry at the words work made for hire (WMFH) for some time. I mean, clients try to sneak that into contracts all the time and it means you, creative pro, have to carefully watch out for it, lest you sign that bad boy and end up making the client the author and owner of what should be your copyrights. So sure, those words tend to raise a creative pros hackles.

But this post isn’t about how your copyrights are affected with a WMFH contract; it’s about other effects of such an agreement.

Now, before I go any further, I’m only talking about California law here. If you are in another state, the rules (probably) aren’t the same. That being said, if you ever work in California or for a company in California, you might want to pay attention.

There is another side to WMFH agreements in the Golden State. If you are a sole proprietor business (that is, not an entity of some kind, like a corporation or an LLC), and someone hires you as an independent contractor, and the signed contract includes a WMFH clause, then you are statutorily an employee and the employer has to follow the laws regarding unemployment, disability, and workers compensation insurance as if you were a regular employee. According to the California Labor Code[1], if a person is hired to create a commissioned work and the parties agree in a signed writing that the work shall be considered a work made for hire, as defined in Section 101 of Title 17 of the United States Code, then, boom, the hired person is a statutory employee. Moreover, the California Unemployment Insurance Code[2] says almost exactly the same thing. Basically, every code that deals with unemployment, disability (including paid family leave) and workers comp has something about WMFH like this.

Anyway, failure by the employer to follow the rules means the employer can be hit with substantial fines and even jail time! Yikes!

“So what?” you may be thinking, “only the state cares but it doesn’t really affect me,” but you’d be wrong. Those are rights to which you are entitled under California law. If you get injured on the project, for example, Workers Comp should pay your medical bills (roughly speaking). Also, the law is unclear[3] about other benefits that employers in California must supply to such employees, so it may be that you, as the employee, are entitled to other things beyond being paid as an employee (including having the employer pay its half of FICA) rather than an independent contractor, like having limits on time/overtime, etc.

If you live and generally work in some other state but come to California for a WMFH project, then you too would likely be considered a statutory employee under California law as well[4], and maybe if the company is here but you aren’t. Also, if you work physically here, your pay would probably be subject to California personal income tax withholding[5].

Most importantly, if you are in California (resident/business) and you hire assistants or other independent contractor workers and you have a WMFH clause in the contract you have these people sign, you also need to know this info. You have to follow these same rules! There are ways to avoid some of these issues (for example, maybe an assignment clause instead of a WMFH), but there are downsides to the other options as well. Talk to an attorney to get the best advice for your particular situation.

Oh, and don’t forget, if you are in California, you really, really must pay your people on time.
[**UPDATE** There is more time to pay now, but it’s still faster than you might think]

_________________________

[1] California Labor Code Section 3351.5(c).

[2] California Unemployment Insurance Code Section 686.

[3] The statutes don’t seem to say explicitly one way or the other; a court could possibly make the analogy and apply the same rules to pay, time off, etc.

[4]See http://www.edd.ca.gov/pdf_pub_ctr/de231d.pdf.

[5] Id. (That means, same source as I just cited, for the non-nerdy readers).

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Forming an Entity: Watch for Issues

Most creative professionals start their businesses without doing anything more than accepting the first freelance project offered. That is, they don’t bother to do anything about forming a legal entity like a corporation. That’s fine; if you don’t do anything and you work solo, you are a sole proprietor. After that first project, if you continue doing business, getting projects, cashing checks, you probably won’t think about your business structure any further.

At least for a while.

One day, you, the now-successful creative pro hires an accountant to do your taxes and that CPA tells you you should incorporate or form an LLC. The accountant is concerned about the relative tax burdens and, often, it does make immediate financial sense to form an entity; that is, you can save a bundle on your taxes. But, the accountant doesn’t (probably) know about the copyright ramifications, and (usually) neither does the average creative pro.

Yes, there are copyright ramifications.

Overall, there are a whole host of legal issues to consider when it comes to potentially forming an entity. Most people focus on the tax issues, and that makes sense, but there are other legal issues and I highly encourage anyone considering forming an entity to talk to a lawyer before taking that step. Anyway, for this post, I’m only going to focus on the copyright one as it is most often totally ignored, and it shouldn’t be.

So, let’s imagine you have formed a single-member LLC and, as per your CPA, you’ve made yourself an employee of that LLC. Your tax bill thanks you. Now, however, when you make your art (whatever kind of art you make–doesnt matter), who owns its copyright?

If you said you do, you’d be wrong. Even though you are the only member of your entity (the LLC), it’s that entity that owns the copyright in the art you make as an employee of that entity. It’s an automatic work-made-for-hire. No writing required.

Well, I hear you saying, but I am the entity so it’s the same thing. Nice try; but, under the law, no, you aren’t and no, it isn’t at all.

First, since the entity is now the author of the work, the length of the copyright is no longer life of the author plus 70 years. A copyright authored by an entity lasts either 95 years after its first publication or 120 years after its creation, whichever is shorter[1]. By the way, there is an exception to this to get back to the authors death +70 years length, but it requires more paperwork and I know how much y’all love paperwork.

Second, when you register that copyright, you need to do it correctly. You have to name the entity as the author and the claimant because you, as an individual, by law did not create and do not own the copyright. While screwing this up doesnt necessarily totally void a registration, it certainly will be an issue if you ever get infringed. You (and your lawyer) don’t want to have to fight about the validity of your registration. I’ve seen it in cases and it could result in a great case becoming a loser. Remember, if you sue for infringement and lose, you might end up being required to pay the other side’s attorneys’ fees and costs; you don’t want something like this to scuttle your otherwise watertight ship.

Third, let’s say you get hit by a bus and shuffle off the mortal coil, who gets the copyrights your entity owns? And what about existing licenses and royalties based off those copyrights–who gets the money? It’s not so easy, if you havent planned ahead. Do you have a succession plan in place for your entity?

None of these issues are insurmountable at all. For example, you can have a writing that keeps the copyrights created after the entity is formed as your own (if you want to do that and there are reasons to do that, or not). Overall, the issues beyond the tax ones that come up when you form an entity, including copyright ones, do require some thought and there are decisions that need to be made and new processes need to be learned if you decide to go ahead and incorporate.

Don’t go it alone and hope it all works out–thats a lousy business strategy. Talk to your own attorney and get good, personalized advice.

[1] 17 USC 302(c).

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Safe Harbors, Piracy, and Your Value

I could write on this issue, but I’ll save the time and point you toDavid Newhoff over at Illusion of More. In this post, Mr. Newhoff discusses the differences and, importantly, the similarities facing artists in the USA as compared to the Canadians when it comes to the (false) promises made by tech to improve the lives of artists. Miranda Mullholland made a wonderful and passionate speech to the Economic Clubof Canada about her (and others’) life as a musician–one who works her ass off but who barely makes a living. Watch her video and read Newhoff’s comments. I won’t reiterate it all here.

I will say this, though:

  • You make the art, be it music, photographs, design, illustrations, and it is art–the platforms can’t be successful without you.
  • Stop calling the art you createcontent and stop letting people rip you off both directly and by devaluing what you do (like, by calling it content).
  • Don’t rip off anyone else and support all other artists, yes, even (especially) when it costs you more.
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