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JIPEL Blog

The JIPEL Blog features articles on new developments and current challenges within the areas of IP and entertainment law, written by students, professors, and legal practitioners. If you would like to discuss writing a guest post, you can get in touch with us via email at online.submissions.jipel@gmail.com.

Upcoming CLE Conference – Trade Secrets: The New Frontier in a Changing IP Landscape

%ecpt_author% | October 29, 2014 9:22 am

On December 3rd, JIPEL contributing author Adam Waks will be part of the faculty for the International Intellectual Property Institute-Bloomberg BNA CLE “Trade Secrets: The New Frontier in a Changing IP Landscape.” The conference will provide an overview of current trade secret law, the proposed Defend Trade Secrets Act of 2014, and strategies for creating policies and procedures that protect trade secrets. Waks will be presenting on trade secrets and employment in the current era, including:

  • Entrance interviews, employment contracts, and acknowledgment forms
  • Employee records and exit interviews
  • The Inevitable Disclosure Doctrine
  • When employees start their own companies

Waks previously discussed these topics for our Spring 2014 issue in “Where the Trade Secret Sits: How the Economic Espionage Act Is Inflaming Tensions in the Employment Relationship, and How Smart Employers and Employees Are Responding.”

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Cutting Costs: Tax Deductions for Artists

%ecpt_author% | October 29, 2014 8:24 am

Under the Internal Revenue Code § 183, individuals or corporations cannot take deductions for activities if “such activity is not engaged in for profit.” The IRS does not want to provide a subsidy for people engaging in hobbies for their own enjoyment; deductions are meant to accurately reflect the costs that individuals and corporations incur in the course of doing business.

But what does it mean to “engage in an activity for profit”? With the possibility of deductions on the line, many people would be tempted to argue that various endeavors are engaged in “for profit.” Should the size of the expected profit matter? Should the fact that expectations of profit are rational matter? The standard outlined in the Internal Revenue Code is “ordinary and necessary” business expenses, which in common English is typically defined as those expenses that are appropriate and helpful in running business. But even this definition is extremely vague.

The Tax Court recently examined the issue where an artist is also and an art professor. Professor Susan Crile is a tenured studio art professor at Hunter College, and her works can be found at the Metropolitan Museum of Art, the Guggenheim Museum, the Phillips Collection and other major art institutions. When Professor Crile filed her taxes she routinely deducted for the costs that went into her art production, even though she only made a profit for two taxable years. Each other year she suffered losses from the costs of creating art.

The IRS argued that because three out of 20 plus years were profitable, and because Professor Crile earned substantial annual income from her professorship, she could not claim to be engaged in art “for a profit” and could not deduct her art expenses. Professor Crile responded that she was an artist long before she became a professor and that art, unlike other occupations, is uniquely prone to the vacillating whims of the market and should be treated differently than other types of business.

To evaluate 183 claims, the IRS typically employs nine factors:

  1. Manner in Which Activity is Conducted

The IRS examines whether the taxpayer keeps accurate records of costs and revenues. The more detailed the record, the more closely the activity resembles a business as opposed to a hobby that might be more loosely structured.

  1. Expertise of Taxpayers and Advisors

The IRS looks at the level of expertise that the taxpayer has in the particular area that the taxpayer is engaged in. Is the taxpayer a beginner to this area or is the taxpayer considered to be expert within this field?

  1. Taxpayer Time and Effort

The IRS evaluates the amount of time and effort that the taxpayer expends on the activity.

  1. Expectation of Appreciation in Value

If the taxpayer does not make a profit in a given year, is there a reasonable expectation that the taxpayer will make a profit in the following years? Is there a market for the work that the taxpayer is engaged in?

  1. Taxpayer’s Success in Other Activities

If the taxpayer is reliant on other areas to finance the taxpayer that a stronger indication that the financially sound activities might be the true “for profit” activities and the unprofitable activities might only be hobbies.

  1. History of Income and Loss

The IRS looks at the patterns for how much revenue and costs the taxpayer incurs in the activity and how these numbers have changed historically.

  1. Amount of Occasional Profits

How many years has the taxpayer actually made a profit while engaged in this activity?

  1. Taxpayer’s Financial Status

This evaluates how dependent the taxpayer is on the financial success of the activity. If the taxpayer is more dependent, that is a strong indicator that the activity is engaged in for profit.

  1. Elements of Personal Pleasure

The IRS analyzes the extent to which the activity contains “large personal elements” to see if it is simply a pleasurable hobby.

The Tax Court concluded that IRS won on criteria 6 and 7, but the remaining criteria were favorable (or at least neutral) towards the taxpayer, and Professor Crile could classify her art as a valid profit-seeking activity and deduct for the valid costs. While the taxpayer will still need to prove that the claimed deductions were appropriately in pursuit of creating art, this case should prove important for future cases. We still may not know to what extent the individual factors need to be satisfied, but it’s clear that favorable tax treatment doesn’t require that artists satisfy every factor.

Amy Rosenthal is a J.D. candidate, ’16, at the NYU School of Law.

 

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JIPEL Symposium

%ecpt_author% | October 27, 2014 6:35 pm

You finally got a gig as a standup comedian and your competitor stole your best joke?

Your favorite chef created a new culinary masterpiece and a week later the restaurant down the street started serving the same thing?

You heard on the news that Google is making millions of dollars off of Android even though it is based on Linux, an operating system notoriously fighting for free software?

You bought a beautiful dress for $500 and find the same dress an hour later for 30 bucks?

Have you ever been in any of the above situations and said to yourself that the law should do something about that? If so, then come hear why lawyers and non-legal folk in the comedy, software, food and fashion industries (dis)agree with you. This event is open to anyone interested in the above industries – no legal experience required!

What? JIPEL’s first annual symposium: “Innovation without Regulation: How Necessary is Intellectual Property Law?”

When? 9AM on November 21

Where? Greenberg Lounge, Vanderbilt Hall, NYU School of Law, 40 Washington Square South, New York, NY 10012

Details to follow at http://jipel.law.nyu.edu/symposium/. Such as:

  1. Lineup of panelists
  2. Topics of discussion
  3. Registration and RSVP
  4. Full event schedule
  5. More exciting reasons to attend the event!

For any questions, please email Symposium Editor Christoffer Stromstedt at christoffer.stromstedt@law.nyu.edu.

This event has been approved for up to 3 CLE credits for both experienced and newly admitted attorneys.

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Start on a Good Foot: The Implications of Grooveshark’s Guilty Verdict

%ecpt_author% | October 27, 2014 6:31 pm

A recent Federal Court ruling has left the online streaming service Grooveshark in critical condition.  On September 29th, 2014, the Southern District of New York, in an opinion delivered by Judge Thomas P. Griesa, found the Florida-based company guilty of copyright infringement, concluding an action brought against it in joint suit by nine of the major record labels.  Damages are estimated to amount to anywhere in between 4 million and 840 million dollars, a payout that would likely not only drain the company of its existing assets but extend to the pockets of chief officers Sam Tarantino and Josh Greenberg.  Grooveshark’s attorneys subsequently stated their client’s respectful disagreement with the Court’s ruling and announced their intent to move forward with an appeal.

Notable in the Court’s decision was that the infringement violation was found to be the result of internal employee uploads of unlicensed material to the main Grooveshark song bank.  Grooveshark is an online streaming service that depends upon user uploads of third party content: at its peak in 2011, Grooveshark boasted a user community of over 35 million members internationally.  The content in question in this dispute amounted to just short of six thousand songs, an insubstantial figure compared alongside the total number of unlicensed recordings available through Grooveshark’s worldwide collective file share.  The Court thus draws a line for third-party file-sharing legality between internally and externally generated content: that that comes from within is prohibited, while that that comes from without is not.  This is consistent with the so-called “safe harbor” provision of the Digital Millenium Copyright Act (DMCA), 17 U.S.C. § 512 (Online Copyright Infringement Liability Limitation Act, or OCILLA), which exempts internet intermediaries from copyright liability for uploads of unlicensed content by third parties.

Grooveshark, along with other notable third-party upload driven giants (e.g., YouTube), has long defended the legality of its services by claiming to operate within the statutory limits of the DMCA.  It seems strange that after winning several high profile litigation battles under this pretense, the company would fall to an obvious mistake outside the scope of DMCA legal loopholes and firmly categorized within illegal territory. Evidence revealed upon discovery indicates that in 2007, Grooveshark co-founder Joshua Greenberg mandated employees, via a company wide email, to upload content from their personal download libraries or risk falling afoul of management.  The effort suggests that in the company’s inception phase, Grooveshark’s founders recognized their inability to create a successful “music locker” out of the content at their current disposal, so they consciously opted to create an audience-worthy system via illegitimate internal uploads.

The Court perhaps seeks to reinforce the delicate balance reflected in the OCILLA and weigh the protective interests of the music industry with the modern day realities of a global digital user community accustomed to the constant availability of free streamed music.  By specifically pinning Grooveshark’s violation on internally uploaded content, the Court reaffirms OCILLA provisions dictating that liability is never lost when the internet intermediary knows of the illegality of its content.  This message will likely discourage the growth of music distribution services through illegitimate means and force fledging companies to either pay directly for content or abandon their efforts entirely (a model adopted to stunning success by Spotify, although much to the dismay of the musical artist community).  At the same time, it perpetuates the existence of online streaming communities that rely on third party uploads and employ only scant safeguards against the distribution of unlicensed materials (copyright owners may request, and site managers must comply with, formal removal of content they contend to be infringing).

In fact, by failing to change the legal paradigm of the DMCA “safe harbor,” the Southern District has seemingly legitimized services that exacerbate the financial circumstances of musical artists, so long as those services pay, however miniscule, for their content.  Perhaps the Court hints at the impossibility of reverting to an old model of monetary compensation for musical recordings. Maybe it sees the options split between growing third party file sharing companies—and likely facilitating the distribution of unlicensed material—or growing new distribution companies that pay for content, though such payments are paltry compared to before.  In the wake of Judge Griesa’s decision, the message is clear: it’s still safe to start a digital music streaming platform. Just make sure you do it within the proper legal loopholes.

Daniel Funt is a J.D. candidate, ’16, at the NYU School of Law.

 

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Linking to the Past: Week of October 13

Cort Welch | October 17, 2014 6:16 pm

WikiLeaks released another draft of the Trans-Pacific Partnership’s intellectual property chapter. As you might have guessed, many are displeased.

Congratulations, European librarians! You can digitize your books without infringing copyrights.

Access to the internet does not imply access to a given copyrighted work.

Google Google: verbification isn’t enough to make a trademark generic.

Be careful when aiming for “green” marks.

Is it a retro sneaker, or is it a Chuck Taylor? And where is fashion to look for IP protection?

SCOTUS refused to clarify whether eBay applies to trademark, and the Federal Circuit has been asked to review its decision that Raging Bull applies to patent.

SCOTUS may actually split on a patent decision. But their unanimity streak was going so well! SCOTUSblog summarized the oral argument, and Patent Docs touched on the amicus briefs.

After 25 years on the USTR’s Special 301 priority watchlist, India still wants nothing to do with the current process.

Zombie Cinderella is different enough from Disney Cinderella to merit a trademark. But what about Vampire, Ghost, and Werewolf Cinderella?

Cort Welch is a J.D. candidate, ’15, at the NYU School of Law

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Publicity Rights in Major College Sports Telecasts: To Whom Do They Belong?

Jakarri Hamlin | October 16, 2014 5:19 pm

“Whether Division I student-athletes hold any ownership rights in their athletic performances does not depend on the scope of broadcasters’ First Amendment rights but, rather, on whether the student-athletes themselves validly transferred their rights of publicity to another party.”

- U.S. District Judge Claudia Wilken, Pre-Trial Ruling

In Marshall v. ESPN, NCAA student-athletes are testing just how much clout Judge Wilkin’s words have. The suit, which is primarily a right of publicity claim aimed at television networks, rests on the premise that current contracts between Division I athletes and the NCAA are unconscionable.

Given the terms and the “sign or sit out” option given by the agreement, it’s possible that the court may side with the plaintiffs on the contract issue. But the convoluted nature of the dispute renders it hard to determine why this suit is different than Keller and O’Bannon, both of which also addressed student-athlete likeness rights. In sum, the type of violation alleged here is different than that addressed in previous suits because it is not dependent on the antitrust determination. Rather, it builds off of the O’Bannon holding that the NCAA may not bar student-athlete revenue, and demands relief from the major networks for profiting off athlete names, images, and likenesses—a right that the broadcasters claim does not belong to the athletes.

Prior to O’Bannon, it was somewhat assumed that the right of publicity for sports broadcasts did not belong to the athletes but rather to the producers, and the NCAA barred the receipt of compensation for the use of player likeness for athletic promotion, rendering the issue moot. However, Judge Wilkin’s comment in O’Bannon challenges this notion and has created a new legal battle with consequences that may stretch beyond NCAA major sports coverage.

As in O’Bannon and Keller, the Marshall plaintiffs allege that the NCAA has “conspired with [the networks] to create an anticompetitive market where students are powerless to realize the commercial value of their names, images, and likeness.” The collusion of the broadcasters and the NCAA locks the revenue for the athletes at zero in a market where athletes sell their services to the broadcasters. However, because this agreement does not affect vertical competition, it is unlikely to succeed. When addressing the same argument in O’Bannon, Judge Wilken determined that “teams of student-athletes would never actually compete against each other as sellers of group licenses even if the challenged NCAA rules no longer existed.” This follows because the publicity rights will be sold in packages only by the participating teams and the buyers will freely compete for those rights no differently than they do now.

It isn’t pragmatic for broadcasting companies to individually contract with players, so the rights would have to be signed over to the school, conferences, or some third party representing the larger group. Given the necessity of packaged deals and the need for on-field competition amongst college teams in Division I athletics, the royalty amount would have to be fixed, ultimately creating the same competition for rights that already exists. In other words, the network agreements, which may otherwise be unlawful, are not anticompetitive because they do not inhibit competition. The Tennessee district court is likely to make the same determination.

The stronger claim in this action, foreseen by critics and broadcasting networks alike, is the right of publicity violation. In order to obtain the rights of the athletes, networks typically purchase licenses to use the intellectual property of the participating schools and conferences as well as the names, images, and likenesses of the participating student–athletes. The rights are given to the colleges by the athletes via Form 08-3a, a contract student-athletes must sign annually in order to compete. Plaintiffs allege that because they have no alternative to signing the contract, and the language is generally ambiguous, the agreement is void, and the use of plaintiffs’ names, images, and likeness by the networks illegal. This is a strong assumption by the plaintiffs, but given the nature of Judge Wilkins quote above, there may be some validity to the claim.

But the merits of the suit lie beyond the contract dispute. Plaintiffs seek to assert a right of publicity claim.[1] Right of publicity has generally been akin to trademark. It relates to the unlawful use of one’s general identity for profit. The most famous and prominent cases typically relate to famous impersonations, such as if an Arnold Schwarzenegger replica pretended to be Arnold in a commercial without his consent. In this example, the commercial infringer would theoretically profit off of Arnold’s publicity, therefore violating the statute.

In Marshall, it is unclear whether the use of college athlete’s publicity is violated when the coverage is of that person. Television networks will likely make two primary arguments: that there is no violation because they do not provide any merchandise, goods, or services, but rather cover the contest; and that the right of publicity belongs to the producers in live sports broadcasts, rather than the athletes.

Both arguments have merit. The use of the publicity is directly related to the promotion of the student-athletes, and there is no misappropriation of the publicity to make a profit. Networks believe that if plaintiffs’ argument is allowed, “referees, coaches, cheerleaders, team mascots, or even fans — will probably demand the same rights as the athletes if it is determined that they owe athletes compensation for coverage of themselves.” Though it is unlikely that the scope of the coverage can cover this far, the networks’ point is strong.

Additionally, as stated in an Amicus Brief during the O’Bannon litigation, networks will argue that “the right of publicity simply does not fit and cannot be logically extended to the circumstance of the broadcast of a sporting event. If each participant in a game with hundreds of ‘performers’ had the exclusive right to license their individual appearance in the game, then by definition there could be no exclusivity in the game as a whole.” This argument is more along the lines that the purchasers of the exclusive rights own all rights to the contest, because such rights do not exist until the broadcast is promulgated. Networks will claim that the contracts that student-athletes sign do not represent rights of publicity for live broadcasts.

It is difficult to separate these arguments from the networks’ likely First Amendment claim, the argument that succeeded when former NFL players brought essentially the same suit against the NFL. In essence, the television networks’ premise is that coverage of noteworthy events, such as sports, does not have an element of individual publicity for the athletes to own. This will be an interesting issue for the court to consider, and if the plaintiffs win on a broad holding, it can have a large impact on the coverage of athletic events.

A secondary question raised by this suit is what position the broadcast networks will take in the litigation, primarily if the court finds that the athletes own their right of publicity. The networks will have to decide whether to stand strong with the NCAA or switch sides and push for player rights.

The former pushes for the implementation of a reformed contract that would legally transfer the rights to the colleges. This would allow the system to remain as is, with the broadcast networks bargaining with the universities on behalf of the student-athletes to create a deal that compensates the athletes.

However, given the NLRB’s recent determination that student-athletes may be recognized as employees rather than amateurs, the latter option may be the best bet for television networks. If players were to unionize, the broadcast networks would strike a deal directly with the union who would likely own the rights of publicity. Although the merits of a union are highly debatable, the determination that the student-athletes are employees combined with intellectual property law makes a union preferable, even if only to retain their rights which would otherwise belong to the college under work for hire. This option would allow the networks to bypass the conferences and colleges, and possibly retain more revenue.

It’s unclear how the issue will ultimately shape up. However, as some have professed, the recent decision in the Northern District of California may signal the beginning of the end for the NCAA.

Jakarri Hamlin is a J.D. candidate, ’16, at the NYU School of Law.

[1] Tenn. Code Ann. § 47-25-1105 states: “Any person who knowingly uses or infringes upon the use of another individual’s name, photograph, or likeness in any medium, in any manner directed to any person other than such individual, as an item of commerce for purposes of advertising products, merchandise, goods, or services, or for purposes of fund raising, solicitation of donations, purchases of products, merchandise, goods, or services, without such individual’s prior consent, or, in the case of a minor, the prior consent of such minor’s parent or legal guardian, or in the case of a deceased individual, the consent of the executor or administrator, heirs, or devisees of such deceased individual, shall be liable to a civil action.”

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A ®ose By Any Other Name

Vincent Cesare | October 16, 2014 4:54 pm

A successful trademark can provide more than just brand recognition or notoriety. In fact, Forbes reports that the 10 most valuable trademarks have a collective worth of over $300 billion. That figure is greater than the GDP of all but the 44 wealthiest countries in the world. Clearly that little ® can mean something, but as renowned economist Christopher Wallace notes, “more money regularly entails more problems.” Even the mere pursuit of the ® can melt the wings off soaring companies. Just ask popular photo-sharing pioneer Twitpic, which is abruptly closing up shop in the wake of Twitter—now with its own photo-sharing process—threatening to ban Twitpic if it to continued pursuing a trademark. Though trademarks chiefly convey pecuniary benefits, they can provide security beyond the financial realm, like when you attempt to prevent a porn company from releasing your alleged sex tape because it uses your trademarked stage name in its title.

But the struggle doesn’t stop once a company secures a trademark. Trademarks occasionally become so intertwined with a specific product that the trademark-protected brand name usurps the generic in everyday parlance. We all know that most people ask for a Band-Aid after suffering a freak Velcro accident, or Google tips on Photoshopping their latest Crockpot dinner before Tweeting it. All of those names are trademarked, but they’ve become so entrenched in our popular lexicon that using their generic names seems awkward and stilted. Who asks for cyanoacrylate adhesive when they just want some Superglue?

Companies experiencing the double-edged sword of such immense success actively—and often, aggressively—advertise in trade publications to stress the importance of not using trademarks to refer to generic products. Trademarks don’t enable their holders to completely dictate the approved usages of their brand names, though. Fair use principles allow journalists to employ trademarked names when referring to the actual trademarked products or companies, an idea accurately called “nominative fair use.” New Kids on the Block spurred the seminal nominative use case when they sued USA Today for running a story about the band including a reader poll. The 9th Circuit determined that journalists can employ a trademarked name referentially when identifying the product or service would prove too difficult in the absence of doing so, but only if the reference doesn’t suggest endorsement and only uses the trademark as necessary. Nominative fair use expanded the classic fair use principle, which prevented companies deriving trademarks from pre-existing words or objects—think Apple, for example—from fully appropriating the use of such terms. Despite classic fair use serving as the foundation for nominative fair use, it still retains its own grey areas, such as when yogurt companies and business ethics consulting companies have trademark clashes centered around the use of the word “how.”

The nominative fair use exception does not cover the apparently reckless brand dilution that blurring the trademarked-generic border entails, however. This means that we live in a world where a journalist might have to warn of the environmental dangers of extruded polystyrene foam, or the health hazards of cooking on high heat with pans coated in polytetrafluoroethylene, rather than potentially facing liability for using the trademarked names nearly everybody associates with these products (Styrofoam and Teflon, respectively). Perhaps this seems fair in usages that suggest a negative characteristic of a product, but trademark holders do not stop there. In one of the trade publication ads discussed above, Rollerblade, Inc. implores journalists to not refer to the generic act of inline skating by the company’s trademarked name. Is it fair to believe that the average consumer will mistakenly believe that any sort of inline skate will produce the same experience as a Rollerblade? Most of us understand that a company must protect the integrity of its brand and guard against its dilution and corruption, but do we really want this to force journalists to use outmoded generic terminology that seems artificial and pedantic? Unless companies complaining of this type of usage can show that it causes some sort of quantifiable damage to trademark value, it seems as though a more common sense approach to nominative fair use should emerge.

Vincent Cesare is a J.D. candidate, ’16, at the NYU School of Law.

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Linking to the Past: Week of September 29

Cort Welch | October 2, 2014 7:34 pm

Fresh off Eliza’s and Prof. Sprigman’s discussion of sampling, LMFAO argues that “Every day I’m shufflin’” constitutes fair use of Rick Ross’ “Every day I’m hustlin’.”

Good luck trademarking McAnything. The TTAB is pretty sure you’ll just be confused for McDonald’s.

UK copyright law finally allows for parody and pastiche of copyrighted material, so long as the judge likes it. (via IPKat)

California state copyright law may give owners general performance rights for pre-1972 songs. It just took lawyers 30 years to notice.

With en banc review off the table, SCOTUS may have a few thoughts on the Federal Circuit’s ruling that patent owners lack standing when co-owners don’t voluntarily join suit.

Sherlock Holmes is both public domain and not public domain. It just depends on which of his traits your version has.

Dennis Crouch discusses Judge Wu’s invalidation of lip-syncing animation technology, one of the first applications of Alice Corp. to non-business-method claims.

Turns out, Lara Croft’s personal brand of archaeology probably isn’t legal. But what about Indiana Jones? (via Law and the Multiverse)

Cort Welch is a J.D. candidate, ’15, at the NYU School of Law

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Uh “Oh”: Jay Z’s Alleged Copyright Infringement and Issues with Sampling Restraint

Eliza Marshall | October 2, 2014 5:11 pm

What does Jay-Z’s “Run this Town” have in common with Eddie Bo’s “Hook and Sling?” Certainly not contemporary popularity, and even listening to them several times doesn’t provide an easy answer. But those with keen ears—or a copyright and a litigious bent—may notice the split-second sample of the word “oh” from the third second of “Hook and Sling” that forms the basis for TufAmerica’s claim of copyright infringement against Jay-Z and his recording affiliates. This is just the latest in a series of infringement claims brought by TufAmerica and others based on an artist’s sampling of earlier works. And the scary thing is: they have a chance at winning.

Granted, it’s unlikely. Courts generally exhibit restraint in upholding infringement claims based on sampling. TufAmerica’s loss on a series of composition and sound recording infringement claims just last year demonstrates this general restrained approach. The court employed a test based on substantial similarity, asking whether the copying “goes to trivial or substantial elements” of the sampled work and considering “the qualitative and quantitative significance of the copied portion in relation to the plaintiff’s work as a whole,” the quantitative analysis of the material being done “in the shadow of [its] qualitative nature.” So while small samples are not conclusively unprotected, copying that is “small or common must be ‘especially unique or qualitatively important.’” The court dismissed TufAmerica’s claim based on a three second drum sequence, but not a two-word utterance of the shouted title that was repeated three times in the song. Under this framework, TufAmerica’s current  “oh” claim is unlikely to succeed.

But this approach is not universal, as exemplified by the Sixth Circuit’s troubling rule that any direct sampling, regardless of its size, constitutes infringement. Understanding the sampling itself as evidence of the sampled portion’s value, that court commanded artists to “[g]et a license or do not sample.” The Sixth Circuit “[does] not see this as stifling creativity in any significant way,” as “the market will control the license price and keep it within bounds.” Many critics, including New York University School of Law’s Professor Christopher Sprigman, suggest otherwise.

First, Professor Sprigman points out the infirmities of the Sixth Circuit decision in terms of statutory interpretation. The court uses Section 114(b) of the Copyright Act as a guide to determine the exclusive rights of a copyright holder under Section 106, and focuses on the insertion of the word “entirely” in Section 114(b)’s statement that holder’s rights “do not extend to the making or duplication of another sound recording that consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate those in the copyrighted sound recording.” Professor Sprigman criticizes this as reading the acknowledged de minimis limits out of the statute to produce a ridiculous result that doesn’t serve the purposes of copyright law.

The Sixth Circuit’s approach also stifles creativity without a corresponding furtherance of the goals of copyright law. As Professor Sprigman points out, broad restraints on sampling will not deter people from investing in the creation of new works. They encourage opportunistic behavior by plaintiffs such as TufAmerica who are in the suing business and want a cut of the profits generated by samples without contributing to the underlying creative efforts. Those later efforts add immense value and often involve speeding a sample up, changing its pitch, or otherwise altering it so as to be unrecognizable from the original work for which such plaintiffs have earned protection.

License requirements provide a windfall to original copyright holders at the expense of all later artists, who must negotiate with owners and deal with litigation, but this is especially true for new entrants without Jay-Z’s deep pockets. And regulating the license market to ensure fair results is expensive and inefficient. Professor Sprigman highlights how systems for monetizing transactions, such as that employed in the context of online music, result in people spending massive amounts of money fighting over prices. Coordinating widespread artistic communities to reach an agreement and establish a schedule of prices is a daunting task.

Moving forward, Professor Sprigman and many others argue for more openness to sampling, and fair use constitutes one promising route. While Professor Sprigman feels it would be a credible defense, Jay-Z’s recent motion to dismiss does not raise a fair use defense. In Campbell v. Acuff-Rose Music, Inc., the Supreme Court of the United States overturned summary judgment in favor of the plaintiff based on the fair use factors, suggesting that fair use in the sampling setting “should be evaluated as it is in all others.”[i] These factors, stemming from Section 107 of the Copyright Act, include the purpose and character of the use, the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and the effect of use upon the potential market or value of the copyrighted work. Professor Sprigman argues that the last prong especially provides a valuable guide and a means of ensuring that regulation of sampling aligns with the purposes of copyright protection. While the fair use defense has not yet been raised and interpreted in the sampling context, many artists such as Girl Talk appear eager to make the argument and optimistic as to the result.[ii] Though the Sixth Circuit dismissed it as an exception that would swallow the rule against infringement in sampling, it may fare better in courts taking a less restrictive approach. But Professor Sprigman points out that the absence of fair use defense arguments may rest in defendants like Jay-Z seeking to win outright on the de minimis analysis. Still, it seems worth a try.

Fair use in sampling makes sense. It presents a promising means of achieving the openness with regard to sampling that Professor Sprigman and others deem vital to the future of hip-hop. It would ensure that courts are prohibiting only what it makes sense to—copying that interferes with or impairs the value of the original artist’s work. After all, that is the purpose of copyright law. It recognizes the importance of allowing valuable creative efforts by later artists, while remaining attentive to the creative incentives promoted by protecting the original artist’s work.

Eliza Marshall is a J.D. candidate, ’16, at the NYU School of Law.


[i] Mark S. Lee, Entertainment and Intellectual Property Law § 7:56 (2014).

[ii] Elina Lae, Mashups – A Protected Form of Appropriation Art or a Blatant Copyright Infringement?, 12 Va. Sports & Ent. L.J. 31, 33 (2012).

 

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You’re Terminated!: Termination and Reversion of Copyright Grants and the Termination Gap Dilemma

Pierre B. Pine | June 15, 2014 9:37 pm

You’re Terminated!: Termination and Reversion of Copyright Grants and the Termination Gap Dilemma.

By Pierre B. Pine*

Introduction

The 1976 Copyright Act (the “Act”) went into effect on January 1, 1978. The Act provided authors (and some heirs, beneficiaries, and representatives) with the right to terminate prior grants of their copyrights under certain conditions and within specific timeframes.[1] Begining, on January 1, 2013, many artists and musicians who transferred their copyright rights after the Act was enacted 35 years ago have finally gained the opportunity to terminate those transfers.

The purpose and rationale underlying the termination provisions is clearly equitable in nature, to allow authors or their heirs a second opportunity to share in the economic success of their works. The House Report accompanying the Act explains that the provisions are “needed because of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited.”[2] Furthermore, the Congress that enacted the Act specifically recognized the necessity of “safeguarding authors against unremunerative transfers”[3] as justification for its providing authors with the opportunity to subsequently terminate prior transfers.

The termination provisions involve very specific and formulaic time frames and notification requirements for two types of grants: (1) those made prior to January 1, 1978 (the effective date of the Act), and (2) those executed on or after such date. An overview of both is detailed below. However, despite what was clearly the best intentions of Congress to provide authors and/or their heirs with a second bite of the proverbial apple, an unfortunate oversight on Congress’s part in drafting the Act has created a dilemma that could prove costly for many authors and heirs looking to exercise their termination rights.
The dilemma involves how the Act’s termination provisions apply, if at all, to what have come to be known as “gap works.” Gap works are works that were transferred and/or assigned by an agreement dated before the effective date of the Act (January 1, 1978) but not actually created until on or after January 1, 1978. This “gap dilemma,” unless clarified by Congress, could adversely affect authors by, among other things, stemming a multitude of litigation, which may defeat the purpose of the Act and deter authors from seeking to enforce their reversion rights by making it cost-prohibitive to do so. more »

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