Bo's bLAWg - The Copyright Term

 

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org www.calawyersforthearts.org Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

Bo, several of your bLAWgs have mentioned that once a copyright term has expired, the works are then in the Public Domain.  Are my mother’s illustrations from the 1940s still subject to copyright so I can license them as copyrighted works, or are they in the Public Domain? 
Thank you!  Janet

Good question, Janet!  It gives me the opportunity to provide more particulars regarding the extension of copyright terms under the 1909 Act – applicable as to artworks published before 1978, as allowed by the 1976 Act.

The Copyright Act has been amended several times since the first was passed by Congress.  I think the original term under the first US Copyright Act from 1790, copied from Great Britain’s,  was for only 14 years, plus a renewable 14-year term!  Then again. people did not live as long in those days, did they?  As of 1900, the Term was extended to 28 years plus an additional 28-year renewal right.

That Term remained in effect until the “new” Copyright Act of 1976 came into effect Jan. 1, 1978.  The Term was extended under the 1976 Act to conform with those of many other countries:  The lifespan of the Author plus 50 years.  The 1976 Act also addressed with particularity how the Terms for works copyrighted under the 1909 Act would be treated under the new Act. 

The question of whether your mother’s 1970 artworks are still copyrighted depends upon whether or not they were ever published.  If they were published with a copyright notice as required under the 1909 Act, the Term became 95 years from date of publication.  (If the copyright had been renewed, 67-year renewal term is deemed added to the initial 28-year term.) 
If the original copyrights were not renewed by your mother or her heirs, her published works from the 1940s would be in the public domain.

So, if my calculations are right, if all of your mother’s works were published for the first time in 1940 with a copyright notice, her copyright on those illustrations will not expire until 2035.

If your mother’s illustrations were never published, those works are entitled to a Term of copyright protection through the 70th calendar year after her death, whenever that may occur.

In 1998, just as the Term of Walt Disney’s copyrights on its Mickey Mouse character were about to expire, Congress passed the Copyright Term Extension Act (CTEA) sponsored by Congressman Sonny Bono, better known as “Cher’s first husband.”  This Act amended the Copyright term to the life of the Author plus 70 years instead of 50.  For Disney and other works created by corporate entities or under “work made for hire” agreements the Term was extended to 120 years after creation or 95 years after publication, whichever endpoint is earlier.  For the time being, Mickey was saved from ignominious treatment in the Public Domain! 

The effect of CTEA was to "freeze" the advancement date of the Public Domain in the US for works covered by the older fixed term copyright rules. Under CTEA, works made in 1923 or afterwards that were still protected by copyright in 1998 will not enter the public domain until 2019 or afterward (depending on the date of the publication).  For works created by authors who died in 1932 or earlier, that day was January 1, 2003. 

However, as mentioned last month, any artwork published before 1923 was deemed to be in the Public Domain.  Anyone can use such works here in the US for any purpose, without any license or permission.

Since I want my bLAWgs to be super helpful, here is a chart that spells out the different operative Copyright terms: 

If you have a special case that needs to be analyzed, let me know.  We’ll see if we can figure out whether or not that work is still subject to copyright protection or in the Public Domain.

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

Have a legal question? email it to info@AnnGraphics.com. I will forward it to Bo. It might be a blog post! You can search "Bo's bLAWg" to read more posts. I am looking forward to your comments and thanks for sharing this great information on social media.

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Bo's bLAWg - Copyright and Derivative Use Rights

 

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org www.calawyersforthearts.org Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

Bo, can I license well known art works that I have morphed kaleidoscopically?

There is a short and long answer to this question.  The short answer is that if the artworks that you are using are in the public domain (“PD”), you can.  If they are not in the PD, you cannot without a license.

The long answer is that the issue raised is one that pertains to the fundamentals of copyright law, but at the same time has become a cutting edge issue. The fundamental right is that the Author of an original work of visual art is presumed to be the copyright holder with exclusive, theoretically inviolate, rights.  The cutting edge issue is the extent to which a second artist can so fundamentally change the original copyrighted work that it is literally and legally “transformed,” and therefore not deemed to infringe!

Exclusive Interest:

The copyright holder has the exclusive interest in the following basic rights:

1.  To reproduce the work in copies or phonorecords;
2.  To prepare derivative works based upon the work;
3.  To distribute copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
4.  To perform the work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works;
5.  To display the copyrighted work publicly, in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work; and
6.  In the case of sound recordings, to perform the work publicly by means of a digital audio transmission.
(See 17 USC 106:   http://www.copyright.gov/title17/92chap1.html#102 )

The two of these that apply particularly to visual Art are numbers 2 and 5.  In addition, Artist/Authors of works of visual fine art have the rights of attribution and integrity as described in section 106A of the Copyright Act.

A “derivative work” is defined in Section 101 as: “A work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications, which, as a whole, represent an original work of authorship, is a ‘derivative work’.”  (emphasis added)
(See http://www.copyright.gov/title17/92chap1.html#102 )

Clearly, your “kaleidoscopic” treatment of a copyrighted artwork would be derivative as a “transformation” of the original, a right that typically must be obtained from the copyright holder if you intend to license to third parties.

However, there are exceptions to this exclusive right.  The first, referenced above, is that the artwork you are altering is in the PD.  While you can presently adapt or transform any artwork published before 1923 and legally license it for use here in the US, use of the same adapted artwork in other countries will be subject to the copyright laws of that country – which could protect works created and/or published before 1923.

The second exception depends upon whether or not your derivative use “is so transformative” as to constitute a Fair Use.  I discussed Fair Use at length in my bLAWg this past March. 
See:  http://annietroe.blogspot.com/2016/03/bos-blawg-use-of-quotes-and-song-lyrics.html

The essence of Fair Use boils down to whether or not the derivative use is a free speech right under the First Amendment to the US Constitution. If the copyrighted work is being “copied” in conjunction with news and reporting about it or its author, or as part of a critical review, these uses are fundamentally “speech-based” and the copyright work may be used for these purposes as long as the amount of use does not significantly damage the market for the original work.

This is the essence of the first of the four Fair Use factor:  “The purpose and character of the use.”  The US Supreme Court in recent years has begun to expand upon the traditional ‘news and critical comment’ purpose to apply Fair Use due to the extent that the second work is “transformative” of the copyrighted original.  The seminal case was Campbell v. Acuff-Rose Music, Inc. (1994), in which the Court deemed 2 Live Crew’s rap using a few lyrics and some music from the Roy Orbison song, “Pretty Woman” to be parody.  Even under a traditional Free Speech analysis, this makes sense.  Parody is a form of speech.  Since you need to use the original work to make fun of it, the use has been deemed Fair. Obviously, the 2 Live Crew recording did not damage the market for the Orbison original.

Since 2 Live Crew, there have been other cases expanding upon the scope of transformative use so that it can be applied to visual art as well as music.  The purpose of the transformation no longer is limited to “parody.”  The Court now examine whether or not the derivative work  “merely supersedes the objects of the original creation…or instead adds something new, with a further purpose or different character.”  (Campbell)   A work can be deemed transformative “if it adds value to the original; basically uses the original as a raw material which is then transformed “in the creation of new information, new aesthetics, new insights and understandings.”  (Castle Rock)   When considering whether a work is transformative, the courts are now evaluating factors such as changes in aesthetics and meaning.  (Cariou v. Prince).

Clearly, there is a legal argument to be made that your kaleidoscopic treatment of these copyrighted works is sufficiently transformative as to be deemed Fair Use.  However, this in no way prevents you from being sued for copyright infringement.  Fair Use is only a legal defense, not a bar to an infringement action.  And, because each Fair Use case has to be considered upon its own merits, there is a good chance that you will not learn whether or not you are entitled to use the copyrighted work in this fashion or if it will be deemed an illegal infringement  until the case is tried in court.  And then the decision of the trial court is subject to appeal!  Is this a risk you can afford?

I should also mention that a ‘creative’ litigation attorney could also make a Right of Publicity claim against you if you use the name of the artist of the underlying work in the promotion of your own transformative artworks.  As discussed at length in my bLAWg from this past February, the essence of the Right of Publicity is that under these state statutes, a person who knowingly uses the name or image of a person for commercial purposes without their permission is liable to that party. (See http://annietroe.blogspot.com/2016/02/bos-blawg-right-of-publicity.html )

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

Have a legal question? email it to info@AnnGraphics.com. I will forward it to Bo. It might be a blog post! You can search "Bo's bLAWg" to read more posts. I am looking forward to your comments and thanks for sharing this great information on social media.

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Bo's bLAWg - Licensing Agents

 

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

Recently I was asked to sign a non-compete for an image broker who wanted to help me license my work. Is it standard to ask for this sort of exclusive? In what scenario would a non-compete be necessary? Thank you, in advance, for your guidance!

The short answer is that people in business as ‘image brokers” or professionally as Licensing Agents may reasonably expect to represent the Artist exclusively.  Whether or not the exclusive representation will apply to specific illustrations or specific goods is subject to negotiation.  However, once the scope of exclusivity is mutually agreed upon, it would reasonably be expected that the Artist would not compete with the Agent of licensing opportunities within that scope.

I should mention, there is a legal difference between licensing exclusively through an Agent, and giving an Agent an exclusive right to license your works.  With the former the Agent would expect that the Artist would use the Agent for all licensing deals.  The Artist would be expected to accept a non-compete provision in the Representation Agreement.  The Agent does not want her pursuing licensing opportunities that might interfere with the Agent’s own efforts.

Sometimes, it is possible for an Artist to obtain express permission from her exclusive Agent to pursue a lead or contact a person with a given company whose name has been given to her for possible interest in her work.  However, I would recommend that it is simply good professional manners to get the express permission of the Agent before she does make such a call.  To pursue such a lead without the knowledge of the exclusive Agent could have various negative ramifications.  It may be that the Agent has a planned pitch meeting with the same company, or knows who really has the power to license at that entity.  To pursue such a lead without the intent to pay the Agent her expected commission would be directly adverse to the Agent’s interest in representing the Artist in the first place.

Taking your own initiative to pursue licensing can also ‘muddy the water’ as to whether the Artist is or is not represented by a given Agent, this damaging the reputations of one or both.

However, the main reason I suspect that an Agent would not want her represented Artist to pursue such leads with or without her permission, even if the Artist were prepared to pay her Agent’s commission anyway, is that such initiatives undermine the Artist’s interests as well.  It is the Agent’s job to know what the particular company is looking for by way of new imagery.  S/he should know what trends are hot and which of her clients’ illustrations might best fill the needs of  one or another company given the strengths (and weaknesses) of their existing product lines.  S/he has likely spent years building up a professional relationship with that company that she expects to lead to greater confidence in her recommendations to those clients.  

Were the Artist to pursue her own licensing with such a company, she may very well undercut or destroy the Agent’s business plan to sell that Artist’s line with a more profitable competing company and at better royalty rates than the Artist might be willing to settle for! 

Even where an Agent is the Artist’s exclusive representative only for a particular line of illustrations or for a specific limited line of Licensed Products (i.e. greeting cards and paper products as distinguished from magnets, plastics and fabrics), the Artist can cause an Agent havoc by pursuing the same corporate Licensees for their interest in a different group of her illustrations or for use of her illustrations in ‘other’ product lines also handled by the company. 

Just last week I had a client call who had been ‘balled out’ by her Agent who took exception to her independent efforts to license her imagery for product lines not handled by the Agent.  It was clear to me that per her Agency contract, she had a legal right to pursue personally such licensing opportunities, but I could well understand the Agent’s resentment.  How was he supposed to pitch her illustrations as fresh, new and particularly appropriate to this regular company client of his, if his own Artist has already pitched them for other products.  It was very clear that the Agent would sooner pitch another Artist’s imagery than risk that scenario.

Accordingly, it is simply good business politics to be clear on the front end of an Agency relationship what if any independent marketing the Artist can look to do on her own behalf  -- if any.  One solution is for the parties to give each other a list of prospective licensees they would like to pitch, and for what illustrations and product lines, and determine if it is in the best interest of the Artist to make any such marketing forays on her own account.  If it is, she should not do anything to undercut her Agent’s expectations as to Licensee royalty rates payable, and may offer to pay the Agent a discounted commission on Licenses she obtains – at least from company clients of the Agent if not from others.

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

Have a legal question? email it to info@AnnGraphics.com. I will forward it to Bo. It might be a blog post! You can search "Bo's bLAWg" to read more posts. I am looking forward to your comments and thanks for sharing this great information on social media.

Make my day! and Buy me a cup of coffee (PayPal Link in right side bar, you don't need a PayPal acct.), follow this blog, and/or click an ad (you don't need to buy ;-)

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Bo's bLAWg - “Flat Fee” and “Royalty” Licensing Fees

 

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO! 

 

A Reader asks:  What is “flat fee licensing” (for graphic design work or commissions)?

 
I want to use your question to compare and contrast the two common kinds of licensing fees:  Royalties and Flat Fees.  So, hypothetically, let’s assume you have been offered a License that lets you choose between a Royalty and a Flat Fee.  Which are you going to accept?  You need to have a good understanding of both, and the surrounding circumstances, to make the best choice for yourself.
 

“Royalties” are the compensation paid for the Artist illustration use rights based upon the Licensee’s sales of the product on which the licensed illustration is used.  The percentage rate is usually 5-10% of the merchandizer’s gross (or an appropriately-limited “adjusted gross”**).  When considering a Royalty-based License offer, there are a number of factors to weigh.
 

First, what kind of sales might you expect of products with your design under the License? This initial question raises a bunch of others:  Are there many different products on which your illustration will appear, or just one?  Do purchasers of the Licensee’s product have a wide choice of imagery to choose from, or just yours?  Does this manufacturer have lots of competitors with a wide range of competing imagery, or is the product reasonably unique?  Does the Licensee have a dynamic website and generate a large number of retail sales directly, or is it by and large (or entirely) a wholesaler that uses distributors?  If this manufacturer relies on its distributor to generate sales, do its goods (I mean Your goods) get distributed to the largest national chains, Walmart, Costco, Target and/or Sears?  (Greater volume sales at a lower Royalty are better than minimal sales at a higher Royalty rate.  Do the math!)
 

How much of the Licensee’s sales are generated through Amazon and subject to a larger discount on wholesale prices than might otherwise be the case?  What is the quality of this manufacturer’s goods?  Are they well-regarded in the marketplace?  When looking at this merchandizer’s quality and price-lines, how do they compare with those of other manufacturers?  (Are consumers more likely to pay something more for your Licensee’s goods because of the goodwill associated in the brand, or if not, is the price point remarkably less than a better-known brand, but likely to generate a much larger volume of sales due to the lower price?)

I can think of a bunch more such questions, but these are the main ones; the ones you want to do your best to assess to determine whether a Royalty is the best way for you to go on this license, or whether a Flat Rate might be a better prospect.

** “Adjusted Gross” is Gross minus sales tax and delivery costs as applicable instead of the Licensee’s Net proceeds.  Why Gross or Adjusted Gross instead of a high Net percentage?  Because you never know what the Licensee is going to actually spend on production, marketing and distribution.  Terrible business decisions could be made by the Licensee that make the entire undertaking unprofitable.  This need not deprive the Artist of her right to Royalties. 

Of course, if possible, you also want to obtain an Advance on the Royalties you are to earn.  An “Advance” is a pre-payment (made at the time the License is signed) on the Royalties you will be entitled to once the Licensee begins receiving income on sales of products with your imagery.  The amount of the Advance is “recoupable” by the Licensee from the first Royalties you would otherwise be paid.  Even a small Advance is better than none.  Being out-of-pocket on the front end for rights serves as incentive for the Licensee to move forward on the product manufacture so that they can recoup what they have paid out in Advances.  It gives you something for your rights even if for any reason the Licensee decides not to move forward with the product use.

Before I get to Flat Fees, two negotiation strategies to offer on Advances:  1) If a Licensee is unable or unwilling to offer a reasonable Advance on Royalties, use that unwillingness to leverage a higher starting Royalty rate; and/or 2) Obtain Stepped-Up Royalty rates.  Find out as possible what the Licensee thinks would be a successful level of sales, and look to obtain an increased Royalty rate for all sales in excess of that reasonable expectation.  If product sales ‘take off,’ both parties will benefit.  If they do not, the increased Royalty rate will never have triggered and the Licensee will not have paid anything for the additional consideration to you.

(See also my October 2015 bLAWg on Minimum Thre$holds for a Licensee to maintain rights over a term of years.  http://annietroe.blogspot.com/2015/10/bos-blawg-get-back-your-rights-royalty.html )
 

The alternative approach for Artist compensation is a Flat Fee.  A “Flat Fee” is just what it sounds like:  A single fee paid for the Licensed rights regardless of sales.  I remember a call from a prospective client who asked if they could get out of a License that provided for a single Flat Fee for a calendar cover image.  It turns out that image was the best-selling calendar ever sold by that large publisher.  The $1,500 Flat Fee looked good at the time that the time the deal was made.  However, compared with 5% of the $5 adjusted gross received by that publisher on 500,000 calendar sales, ($125,000 in Royalties), it was a lousy deal for the Artist!  Of course, if only 5000 calendars had been sold, the $1,500 was better than the 5% royalty. 

If the License is for a term of years and a Flat Fee offered does not meet your minimum expectations, raise the prospect that a larger overall amount be paid in installments:  An Annual Flat Fee for rights.  On occasions when I have obtained Annual Flat Fees through the License Term, the manufacturer Rep has made the reasonable argument that the Annual Fee should reduce after the first few years as product sales decrease.  This refers to what is known in business as the Product Life Cycle. Historically, new product sales numbers will rise for the first couple years, then will usually fall off as the product become ‘old’ and there are new versions and increased competition.   (A good graphic image and further explanation of this can be found at this link:  http://www.tutor2u.net/business/reference/product-life-cycle )

So, going back to our hypothetical choice of Royalty or Flat Fee, how do you know which deal to take?  By finding out what the projected sales are going to be and what the Licensee’s gross receipts are expected to be.  Just ask!  These are reasonable considerations that the prospective Licensee should answer if they want your Rights!  But also do your own market research as best you can.  There is a more sales data available online than there has ever been before.  Consider asking other Licensor Illustrators what kind of sales there have been on their similar product licenses.  Make an “informed decision” on what kind of deal is in your best interest.  Do not feel compelled to take the first offer without doing this ‘due diligence!’  If despite your best efforts, you are uncertain, I suggest that you look to keep the Term shorter than you might otherwise do.  That way, if you are unhappy with the choice, as the end of the Term approaches, you may be in a position to extend the Term on alternative Royalty rates more beneficial to you.

As for the situation where you have been asked to create new graphics or “commissions” for prospective licensing purposes, I recommend that there be a minimum ”service fee” for the preparation of such new imagery.  The fee can be on a ‘per image’ basis or hourly.  All or part of this fee can be attributed as an Advance, and recoupable by the Licensee from your future Royalties.  That’s an appropriate issue for negotiation.  If you are going to incur significant costs in conjunction with the graphics or commission, by all means, look for a right to recoup such costs from the Licensee.  This is the very least they should pay unless you are guaranteed some minimum for the work involved in preparing imagery for prospective licensing that may not be selected for product use or generate meaningful sales.

Finally, do not fail to make sure that you have Reversion Rights.  Whether there is a set Term that will expire sooner or later and revert rights, or if you have minimum thresholds that must be met for the Licensee to continue to maintain exclusive or non-exclusive rights, you want every License to have an ‘expiration date.’  Get your rights back, and perhaps you can find a better deal with a more successful – and ultimately profitable – Licensee. 

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com
© 2016 mjbogatin

Have a legal question? email it to info@AnnGraphics.com. I will forward it to Bo. It might be a blog post! You can search "Bo's bLAWg" to read more posts. I am looking forward to your comments and thanks for sharing this great information on social media.

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Bo's bLAWg - Indemnification Provisions

 

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

Lisa asks:  Why would a manufacturer to whom I have licensed designs for toys expect me to indemnify it?  Shouldn’t the manufacturer indemnify me?

Thanks for your question, Lisa.  Indemnification is an important legal consideration in every Agreement, and particularly in conjunction with licensing illustrations for use with manufactured goods.  In short, indemnification means that if an “innocent” party to the License is sued by a third party because the other did something wrong, the party who did something wrong should be responsible for any potential liability of the innocent party.  It would be appropriate for each party to a manufactured goods illustration License to indemnify the other in conjunction with their particular contributions to the goods being manufactured.

When you look more closely at your License you will note that the manufacturer has likely asked you to warrant certain things.  Typically, the Illustrator Licensor will be asked to warrant:

1.  That the illustrations you are licensing are yours alone – meaning that there is no one else who will claim a joint copyright interest and claim that the manufacturer must pay them, too;

2.  That the illustrations are original to you – meaning that you have not infringed any copyrights held by someone else;

3.  That you have not violated any other person’s right with respect to your licensing these images – meaning that you have not included any trademark or recognizable face (without a signed Release)  See my February 2016 bLAWg on the Right of Publicity: click here , and,

4.  If the License is exclusive, that you have not otherwise licensed the same illustrations to other manufacturers of competing goods.

If the manufacturer is sued by a third party for a violation of any of these rights, then the manufacturer has a reasonable expectation that the Artist indemnify (be responsible for) the damages for which the manufacturer might be liable for copyright infringement or other warranted use right.

While a comprehensive License will include an Express Indemnification provision, you should know that there is also a legal doctrine called “Equitable Indemnification.”  In short, in the absence of Express Indemnification, most courts will “in fairness” allow an innocent party to invoke indemnification rights anyway.  However, in some states, only Express Indemnification, not Equitable Indemnification, will cover the innocent party’s attorneys’ fees and costs.  Since attorneys’ fees (including mine even though they are so reasonable!) can total even more than actual damages on claims like these, Express Indemnification provisions are favored by manufacturers.

However, I do have pro-active advice to limit the scope of the Artist’s indemnification obligation.  Many of these provisions are drafted so as to make the Artist Licensor responsible for damages and attorneys’ fees and costs arising out of a claim of infringement.  Heck, anyone can claim their illustration has been infringed by you!  However, there are two requirements to prove infringement, both “substantial similarity” and “access” to the copyright holder’s artwork so as to have provided the opportunity for copying.  See Bo’s bLAWg from last June: click here

If your illustration is only substantially similar by coincidence, and there was no access, hence no copying, why should you still have to indemnify the manufacturer?  I don’t think you should have to. As a large corporate entity, the manufacturer is in a much better position to afford to defend a meritless claim than the Artist.

To that end, I recommend looking to edit the standard Express Indemnification provision to make sure that the manufacturer (with its own ample insurance) should be required to defend itself, if not also the Artist, unless there is a “substantiated” breach of warranty on the part of the Artist.  Most manufacturer business reps and/or counsel will recognize the reasonableness of such an edit request.  In addition, I look to limit the attorney’s fees and costs obligation to “reasonable” attorneys’ fees and costs.  It is not only possible that an outside counsel will overcharge for defense services, but that they will assign too many attorneys to a small case.  A judge (or arbitrator) can assess whether or not the fees due are in fact “reasonable” or not.

One issue related to the manufacturer’s handling of unsubstantiated claims is that the manufacturer may try to make the Artist responsible for its insurance deductible, to be paid out of current and future Artist royalties.  That might be a risk that the Artist is willing to take if the manufacturer is not obligated to make any payments on its insurance deductible unless there is a settlement or a Judgment that implicates the Artist.  If your manufacturer offers a compromise on the “claim” indemnification language making you responsible for any part of its deductible, make sure that you have a right to pre-approve unconditionally any settlement into which it might want to enter, and that your share of responsibility for the deductible is reasonably limited.  Some of these policies have deductibles of $50,000 or more!

The flip side to the Indemnification issue is that an Artist can reasonably expect the manufacturer to indemnify them in the event an action (or claim!) is made against the Artist occurring through no fault on the Artist’s part.  Express Indemnification can and often should be reciprocal.  The Artist can be exposed to a legal action on their illustration contribution when the manufacturer requires the Artist to include content it provides in her illustration, like its logo in the packaging that the Artist is illustrating.  If it turns out that the manufacturer’s new logo infringes upon someone else’s trademark the Artist might be sued for trademark infringement along with the manufacturer.  Or, if the toys your illustrations decorate are defectively made and a child ends up getting hurt playing with them, a Plaintiff attorney could name as Defendants both the Artist and the manufacturer!  

While it is not common, it is not unheard of for the Artist to be sued along with the manufacturer.  In which case, you absolutely want to be sure that the manufacturer not only is providing indemnification on any damage claim, but that there is legal defense coverage available to you as the innocent Artist.  Most manufacturers have Product Liability insurance, and will agree to include the Artist as “an Additional Insured” on their policy for these purposes.  Then you should have no worries.  You will have the same coverage the manufacturer has, including legal defense and associated legal defense costs.  However, once again, make sure that the manufacturer is responsible for any deductible that the coverage might otherwise impose on the Artist as an insured under the Policy.

Probably a lot more than you wanted to hear, Lisa, but you asked a good question!

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

© 2015 mjbogatin

Have a legal question? email it to info@AnnGraphics.com. I will forward it to Bo. It might be a blog post! You can search "Bo's bLAWg" to read more posts. I am looking forward to your comments and thanks for sharing this great information on social media.

Bo's bLAWg - Use of Quotes and Song Lyrics

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

Could I be sued for using somebody else's quotes?  What about song lyrics?

I knew I was going to get this question sooner or later.  It is a tough one.

There are at least three legal rights that bear on the question of whether or not an illustrator can make commercial use of an existing quote or song lyric.  These are Copyright, Trademark and the Right if Publicity which I wrote about last month.
http://annietroe.blogspot.com/2016/02/bos-blawg-right-of-publicity.html

With respect to Copyright, let’s first clarify that words, phrases and titles are not by themselves copyrightable.  See: http://www.copyright.gov/circs/circ34.pdf

However, when the words or phrases you want to use are contained in a larger, copyrighted work, then they are indeed protected by copyright.  The same rule applies if the phrase you want to use is a quote, whether from a copyrighted speech or a catchy aphorism used by a writer or one of her characters in the course of dialogue.  Use of the same content in your commercial product without the permission of the copyright holder, whether in a greeting card, or other paper product, is an infringement.  The Copyright Office addresses the same question in one of its own FAQs:   http://www.copyright.gov/help/faq/faq-fairuse.html

“If you use a copyrighted work without authorization, the owner may be entitled to bring an infringement action against you. There are circumstances under the fair use doctrine where a quote or a sample may be used without permission. However, in cases of doubt, the Copyright Office recommends that permission be obtained.”

Then the question is whether or not the Illustrator’s particular use is defensible as a “Fair Use.” See my Fair Use bLAWg from last May:
http://annietroe.blogspot.com/2015/05/bos-blawg-fair-use-of-logos.html

Considering the four part Fair Use test: 
1)  The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2)  The nature of the copyrighted work;
3)  The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4)  The effect of the use upon the potential market for or value of the copyrighted work.

I believe it is reasonably clear that while the substantiality of the amount used may be minimal, (factor 3), the Illustrator’s commercial use and the fact that her use effectively eliminates the copyright holder’s market to license the same quote for similar use would be sufficient to defeat the Fair Use defense. 

When considering whether or not pithy sayings might be protectable on their own, I ran across a case by Ashleigh Brilliant ( http://www.ashleighbrilliant.com/ ) who has successfully defended his copyright of his collection of original sayings.  I can also vouch for the fact that certain quotable essayists and humorists have sent out ‘cease and desist’ letters to some of my clients for their use of quotes, including the Estate of Erma Bombeck.  However, given how broadly her quotes are now disseminated online, I must wonder if they gave up trying to stop commercial use.

As for trademark, if the quote or lyric you want to use is being utilized as a trade or service mark then your use could cause someone to believe that the trademark holder is the source of goods on which you use it.  That is the gravamen of trademark Law – to avoid just such confusion as to origin -- as noted in my May 2015 bLAWg:  http://annietroe.blogspot.com/2015/05/bos-blawg-fair-use-of-logos.html  So, you want to make sure that you are not using a pre-existing catchy saying associated with another company to attract prospective purchasers of your goods.  Many such phrases, such as “Show Me the Money,” “ET Phone Home,” “Got Milk” and “Just Do It,” are trademarked, and cannot be used by you without likely objections, if not claims, by their owners.
Finally, if you are using a quote, and in conjunction with the quote you use the author’s name, that is a use that can easily been seen as a violation of that person’s Right of Publicity, even if it is just being used to identify the source of her quote!  What if you were to use the quote without the author’s name?  Would that diminish sales of your product?  If so, then clearly there is a commercial advantage to using the name.  At the same time, if you go to the author or her agent or publisher for permission to use the quote, it is very likely that the permission will come with the condition that the quote be attributed.  And that is a large part of the reason a royalty payable on your sales will likely be required in exchange. 

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

Bo's bLAWg- The Right of Publicity

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts. www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO!

 

After I’d turned in my bLAWg to Annie in December, I received another client holiday gift that raised legal issues that she had not considered that is topical.  The set of cards I received contains illustrations of a number of celebrities.  Clearly, she had not obtained their permission to feature their likenesses on gift cards.  As long as the cards were being circulated to friends and families as examples of the Artist’s fine skills, there is no legal risk.  However, if the Artist were to sell a single set of these cards, she would be subject to some very expensive legal claims.

The legal interest that underlies this claim is the Right of Publicity.  While it is celebrity images that are most commonly used by illustrators or photographers on cards or on products from digital picture frames to place mats and t-shirts, everyone has an individual Right of Publicity.  In short, it is a personal right to either allow their name and image to be used for commercial purposes – or not.  With respect to celebrities, this right is directly associated with endorsements.  One cannot turn on the television or flip through a magazine without seeing the image of some celebrity touting the benefits of some product.  They get paid big money for these kinds of endorsements.  Whether their image appears on a towel or product packaging, the celebrity has a reasonable right to object unless they have expressly granted this personal right – and so would you or I; although, our damage claim would no doubt be significantly less than that of a celebrity!

(However, writing that reminded me of the Taster’s Choice claim.  In 1986, a one-time model, Russell Christoff, posed for a Nestle photo shoot pursuant to an agreement that paid him for a couple hundred dollars for shoot but promised him $2,000 if his image was actually used to market Nestle’s Canadian division products.  By 2002, Christoff had become a school teacher.  That year, while shopping in a Rite-Aid store in the US, Christoff saw his image on the label of jars of Taster’s Choice Coffee jars.  Christoff had never been paid the $2,000.  Instead of suing for his contract damages, he made a Right of Publicity claim under California law.  With the help of some good lawyering, a jury returned a verdict in favor of Christoff for $15.3 million dollars(!) based on 5% of Nestle’s profits for the six years that Nestle had been using Christoff’s image on the Taster’s Choice label.)

While the Right of Publicity is a matter governed by State law --  which varies from State to State -- because cards and products are typically sold all across the country,  a person whose right of Publicity has been violated can ‘forum shop’ and potentially bring an action against anyone who has profited by the use of their image without their permission.  This means the shop that sells the offending card and the distributor who provided it to the retailer are also liable, albeit they would have a right of indemnification against the Artist who provided them the cards with an express or implied warranty that they had the right to use the image on the card or product.

Christoff used the California Right of Publicity because it is one of the strongest.  This is due to the fact that a lot of celebrities live in California and the State wants to protect their interests.  California’s Right of Publicity is found in Civil Code Section 3344:               http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=03001-04000&file=3344-3346

Under this statute, a person (or company) who knowingly uses the image of a person without their permission is liable to the injured party for his actual damages (like provable endorsement fees otherwise due a celebrity), “and any profits from the unauthorized use that are attributable to the use…” or a minimum of $750.  In addition, the defendant may be subject to a punitive damages, (often based on their total value or assets(!).  And one of the best parts of the statute is that the prevailing party in such an action is entitled to recover their attorney's fees and costs – like in a post registration Copyright infringement action as noted in my June 2015 bLAWg – which means I take these cases on a Contingent Fee basis. Given the risks of a losing case, the defendant will almost always settle rather than risk fees and costs on top of the claimant Plaintiff’s damages.

And don’t think that just because a celebrity is dead that you are safe to use their image.  To the contrary, many States protect the Right of Publicity of the dead!  California Civil Code Section 3344.1 (same link as 3344 above), provides the same rights and remedies to deceased “personalities” as 3344 provides to the living.  All the Estate or heirs of the personality has to do is register the name of the deceased at the California Secretary of State Office.  If you want to find out if a given personality is registered you can find out at this linked website:
http://www.sos.ca.gov/business/sf/sf_siisearch.htm

However, just because you do not find listed at the California Secretary of State the name of the dead celebrity whose image you want to use on a card, does not mean that you can.  Since the right is State to State, there are other States that protect this right for a term of years without any Registry, and others who may well have case law instead of statutes that provide similar rights.  So, what’s my advice?  Don’t use any illustrations or photos of people on any product for sale unless you have obtained a license that warranty that the underlying rights to the image have been obtained for the intended purpose.

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

Bo's bLAWg: What might that ‘infringing' legal language look like?

 

Question: What might that ‘infringing' legal language look like? - Leslie.

This question has a few different answers depending on what aspect of “infringing legal language” it pertains. There are actually two different issues that immediately come to mind.

The first is the Artist’s warranty to the licensee manufacturer or publisher that the licensed illustrations are original and do not infringe upon the rights of any other person or entity. This is a legitimate concern of the Licensee, and they can reasonably expect that the Artist indemnify them and their sub-licensees from any damages that they might incur due to such an infringement. That will usually include responsibility for their attorneys’ fees and costs in defense of any such claim.*

Keep in mind that just because your work might be “substantially similar” to that of another artist, it is not legally infringing unless “access” to the original copyrighted work occurred. Those are the two elements needed to prove any copyright infringement claim. If the plaintiff claiming an infringement of their copyrighted work cannot prove access and substantial similarity, then no infringement can have occurred.

The other “infringer” issue pertains to who has the right to bring an action if the Licensor Artist’s copyright has been infringed by a third party. Usually, this will be in the context of a competitor of the Licensee, but the provision can be drafted so broadly that if the licensing Artist is not careful, her copyright infringement claim can be exercised by the manufacturer or printer whether or not the infringement involves competing goods to theirs.

So, first, the third party infringement rights provision should be edited to limit the Licensee’s rights to bring legal actions to those having to do with infringement in conjunction with competing goods.  Second, the Artist wants to make sure that she has the right to participate fully in the action as a party plaintiff.  Often, the manufacturer’s License template will say that the manufacturer alone can bring an action and it alone obtains the benefits of the action.  This can create a windfall recovery for the manufacturer in which the Artist does not share whatsoever!  If the infringement has resulted in a substantial loss of the licensed manufacturer’s sales, then the Artist will have been deprived of her royalties on such sales.  There is no legitimate basis to deny her right to share in such a recovery.

In fact, even if the infringer has made no profits on its use of the Artist’s copyrighted image, an action for willful infringement can be the basis for a judgment of up to $150,000 in statutory damages, plus reimbursement of the plaintiff’s attorneys’ fees and court and discovery costs.**

Keep in mind, even if the defendant has limited assets of their own, they may well have an insurance policy that provides coverage for negligence like an infringing use of a copyrighted work by a company employee.  If that use was “intentional,” as it typically is, the otherwise negligent act still provides a legal basis to claim statutory damage limits as willful use!

The best provision regarding action on infringements against such third parties allows the Artist to be an active participant if she wants to, and to be a passive participant if she prefers, and to share 50/50 in the net recovery after payment of attorneys’ fees and costs out of any settlement or judgment. In the event of a negotiated settlement, she wants the right to approve the terms of settlement as they directly affect her interests.

Alternatively, if the manufacturer or publisher Licensee elects not to pursue the infringement claim, the provision should include timely notice to the Artist so that she can pursue that claim herself should she want to. She has not only the prospects of obtaining a substantial settlement or judgment for herself, but it is possible if not likely that she will find a copyright litigator who is willing to take the case on a contingent fee basis. If she does not prevail or settle, she will have no attorney’s fees to pay. If/when she does settle or collect a judgment, the attorney is paid out of that judgement, usually 40-50 percent.

If the infringement has been widespread and the Artist’s loss of royalties and/or license fees substantial, including use beyond that licensed to the manufacturer, she might even be able to settle or obtain a judgment in excess of the statutory fees maximum of $150,000 per infringement. She cannot know the value of the claim without some investigation of the scope of infringing activity; an investigation which Licensees often do not bother to even consider.

In summary, make sure you look carefully at any infringing activity that involved your illustrations, and don’t give up those rights to the Licensee without a fight to share in the prospects and benefits.

* You may want to make sure that such indemnity provisions do not include “claims” against the manufacturer or publisher as distinguished from an actual breach of the warranty. Anyone can claim their work has been infringed. However, if there has been no access and the similarity is not the result of copying, then the manufacturer is in a much better position to defend a meritless infringement claim than is the artist. At least that’s my argument in negotiating edits to that provision of the License Agreement.

**Remember, to qualify for statutory damages and prevailing party attorneys’ fees and costs, the Artist must have registered her copyright in the infringed illustration before the infringement occurs, or within three months of its original publication. Otherwise, only the infringer’s profits can be awarded under the US Copyright Act, and fees and costs will be out-of-pocket.

If you have further questions about this that you want to direct to me personally, I can be contacted through my website linked below. 

Disclaimer: The information contained in this website is not intended as legal advice. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com.

You can use the search box at the top of the page to read more Bo's bLAWgs.
Send me your questions for Bo! Thanks, anntroe@cox.net

Bo's bLAWg: Fair Use of Logos

MJ Bogatin (“Bo”) of Bogatin, Corman & Gold, is an Arts and Entertainment Attorney in San Francisco.  He is also Co-President of California Lawyers for the Arts.  www.calawyersforthearts.org  Bo is available to answer some of your questions surrounding the business of Art Licensing. - THANKS BO! 

"Thanks for your bLAWgs distinguishing copyright and trademarks for us.  Tell me, can I use trademarked logos in my illustrations?  Examples:  an illustration of an iPhone with the Apple icon, and illustrations of matchbook covers featuring the trademarks of various restaurants and hotels."

A follow-up question.  Great!

I will address this question in parts.  First, I will consider those trademarks that include original artwork subject to copyright protection.  This would likely include some of your matchbox covers.

As previously mentioned, trademarks may include original artistic designs which are subject to copyright protection.  Those copyrightable elements of a logo cannot be used in any derivative fashion without the permission of the copyright holder unless they are in the public domain (published before 1923), or if your application of the illustration constitutes “Fair Use.”  Fair Use is defined under Section 107 of the Copyright Act.  In short, copyright law contemplates that fair use of a copyrighted work without permission is available for ‘free speech related” purposes such as (1) criticism and comment, (2) parody and satire, (3) scholarship and research, (4) news reporting and (5) teaching.

Whether a given use qualifies involves an assessment of four “Fair Use factors” that the courts must apply to each fact situation to determine whether a particular use of a copyrighted work is or is not fair use. These factors are:

1)  The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2)  The nature of the copyrighted work;
3)  The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4)  The effect of the use upon the potential market for or value of the copyrighted work.

The courts must consider all four factors; no single factor is sufficient to establish Fair Use.  

Note that Fair Use is a defense to a legal action, not a bar that would prevent the claimant from bringing such an action.  However, an infringement lawsuit will often be averted by persuasive argument that a Fair Use defense will be available if the claimant were to file an action in court.

If your use of a copyrighted logo is not for the indicated free speech related purposes, including a broad interpretation of parody and satire, and your use is commercial in nature, it is likely going to require a license to avoid the possibility of a copyright infringement claim.

The second issue pertains to logos subject to the Lanham (Trademark) Act.  

You will recall that logos are a form of trademark. Trademarks identify the source of specific goods and services.  Consumers have the right to know that the goods and services they are purchasing come from the company identified with the logo. Trademark law assures the owner of a given trademark that it will have the exclusive right of use to that mark as against any and all others who might like to use the same or a similar mark in the same class of goods or services and cause public confusion as to the source of the goods or services. 

There is a “Fair Use” corollary that applies to the use of trademarks as well as copyrights.  In legal terminology this is known as “Nominative Use.”  The Nominative Use Doctrine provides that a person may use the trademark of another as a reference to describe the other product, or to compare it to their own. Like Copyright Fair Use, it is only an affirmative defense to a trademark infringement claim, not a bar to bringing a claim.

The nominative use test essentially states that one party may use or refer to the trademark of another if:

1)  The product or service cannot be readily identified without using the trademark (e.g. trademark is descriptive of a person, place, or product attribute).
2)  The user only uses as much of the mark as is necessary for the identification (e.g. the words but not the font or symbol).
3)  The user does nothing to suggest sponsorship or endorsement by the trademark holder. This applies even if the nominative use is commercial, and the same test applies for metatags.

Nominative use does not require that ownership of the trademark be acknowledged, for example by use of a sentence such as
"is a registered trademark of Apple Computer, Inc.". Such statements may, however, be required by the terms of a license agreement between the parties, and they may be prudent (and courteous) as a way of preventing misunderstandings or allegations that your illustration is sponsored by or associated with Apple.

However, your creative use of the logo is not necessarily nominative.  If it transforms the logo in some way that is uniquely artistic, like Warhol’s use of Campbell Soup cans, there is a transformative element involved that by its nature can be seen to distinguish the artistic rendering from the corporate use on goods or in conjunction with services.  Such transformative use is not definitively Fair Use if the public could be confused as to its source.  Indeed, had Campbell Soup wanted to stop Warhol or his Estate from publishing his exacting images of their logos, they probably could have.  Sometimes, the trademark owner may decide that the artwork although infringing, promotes their brand without damaging it.

If your use of the logo is to make fun of the company, the free speech aspect of Fair Use may apply.  At its core, (pun intended), a parody of the Apple logo that makes fun of Apple or one of its products may well be privileged as there is no likelihood of confusion.  Clearly, your use does not use the Apple logo to identify the origin of your artwork, but to make a kind of joke.  Such  “parody” is at its essence, free speech.

Legitimate parody may however ‘cross the line’ and be seen as slander of the trademark owner’s brand.  Even if a trademark infringement claim may be defended, the illustration could be seen as “trade libel,” and generate a defamation claim.  The elements of trade libel are:

1)  The material in question can be shown to be a false statement of fact;
2)  The defendant’s statement caused the plaintiff either financial or reputational harm;
3)  The defendant didn’t sufficiently research if the claim in question was true before publication or broadcast.

So, if your illustration does not alter the logo or add information that suggests the company has done or supported something negative or offensive that it did not do, or you can prove that your use of the logo in this fashion did not cause harm to the business, there’s a good chance you’ll be able to successfully defend against such a claim.

Bottom line, if your use of a logo in an illustration might cause the corporation that holds a trademark and/or copyright interest to object to your use, there is a risk to you involved.  The corporation is likely to have much greater assets than you do.  They may insist you “cease and desist” from your use or it will bring a legal action even though your use is defensible as a matter of law.  Can you afford to defend on principal if you have to?  You may have to, so be careful.  Consult with counsel as needed!

Disclaimer: The information contained in this website is not intended as legal advice or a solicitation of business. Because the law is not static, and one situation may differ from the next, we cannot assume responsibility for any actions taken based on information contained herein. Also, be aware that the law may vary from state. Therefore, this website cannot replace the advice of an experienced attorney. Receipt of this information does not create an attorney-client relationship. MJ Bogatin, Bogatin, Corman & Gold, www.bcgattorneys.com

You can use the search box at the top of the page to read more Bo's bLAWgs.
Send me your questions for Bo! Thanks, anntroe@cox.net