Understanding Copyrights and Trademarks

trap hippie’s

UNDERSTADING COPYRIGHTS & TRADEMARKS: For Entertainers © 2015

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SPECIAL THANKS: Jabari Graham David Mayer, Esq. Matthew Moses Meredith Ragains, Esq. Julie Kessler Roach, Esq. Georgia Lawyers for the Arts

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I. COPYRIGHTS

II. TRADEMARKS

III. LICENSES

IV. LICENSING AGREEMENTS

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Copyrights What is a Copyright?

What are Copyright laws?

Why should I Copyright my music?

How do I Copyright my music?

What is Copyright Infringement?

Remedies When is Copyright Infringement acceptable?

Can I freely copy music within the Public Domain?

Trademarks What is a Trademark?

What are Trademark laws?

Why should I Trademark my original content?

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How do I Trademark my content?

What is Trademark Infringement?

What should I do if someone is infringing my content?

What should I do if someone accuses me of infringing his or her content?

*The Music Industry

How do I Copyright my Music?

How is Music Distributed?

How is Music Royalties Calculated?

Licenses What is a License?

Scope of Licensing Agreements How will I be compensated for my license?

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What is a Royalty?

What is standard industry Royalty Rates?

How do I collect royalties?

Who should collect my royalties?

Licensing Agreements

How do I sell a license in a copyright or trademark that I own?

How do I purchase a license in a copyright or trademark owned by someone else?

What should I include when drafting a licensing agreement?

How do I modify an existing licensing agreement?

How do I draft an infringement notice?

What should I do if I receive an infringement notice?

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*Publicity Rights

What are Publicity Rights?

Why should I sell my Publicity Rights?

How do I sell my Publicity Rights?

Appendixes

A: Pro Bono Resources B: Notice of Compulsory License C: Synchronization/ Performing/ Master Use and Mechanical License D: Television Film Synchronization License

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IMPORTANT! The materials in this book represent the opinions of the author and may not be applicable to all situations. Many circumstances appear similar but differ in legal significance. In addition by necessity some aspects of this book may be out of date even upon first publication. Accordingly, the author and publisher assume no responsibility for actions taken by readers based upon the advice offered in this book. Each reader should use caution in applying any material contained in this book to his or her specific circumstance and should seek the advice of an appropriate attorney.

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INTRODUCTION Trap Hippie’s Understanding Copyrights and Trademarks: For Entertainers is the first part guide to the legal and financial aspects of the licensing. In reading Trap Hippie’s Understanding Copyrights and Trademarks: For Entertainers you will be able to: • • • • • •

Properly register your copyrights and/or trademarks License your registered copyrights and/or trademarks Register your licenses with publishing entities Understand how licenses generate income on the internet Purchase licenses owned by other entities Sell licenses in copyrights and trademarks that you own

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PART I COPYRIGHTS Copyrights are one of the most unique and intricate areas of the law because technology consistently advances faster than the law evolves. Original copyright law was designed to protect the sale of works of intellectual property in tangible form. Today’s copyright law focuses heavily on works of intellectual property transmitted (i.e. copied) in digital form.

Intellectual property consists of works of authorship, such as musical works, multimedia works, audiovisual works, movies, software, database information and the like.1 Copyright law provides the most important form of intellectual property protection for works transmitted in any form.

1 David

L. Hayes, Esq. Fenwick & West LLP Advanced Copyright Issues on the Internet. February 2014 p. 13.

11 Music licenses convey ownership of intellectual property related to sound recordings.2 Intellectual Property includes the unique fields of patents3, copyrights4, mask works5, trade secrets6, trademarks and unfair competition7, confidential information, and similar works.

These different types of legal protection cover various forms of creativity including inventions, discoveries, and individual expression in books, music, and movies, structural designs, nonpublic information, trade symbols, and product configurations.8 Thankfully there is no need to understand the depths of intellectual property to license your copyrights or trademarks successfully.

What Is a Copyright?

A copyright is a legally protectable property right or interest in an author’s “original work of authorship,” including literary, dramatic, musical, artistic, and certain other intellectual works.1

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Jay Dratler, Jr., University of Akron School of Law. Licensing of Intellectual Property. Law Journal Press, 2003.

(Original published: 1994), §1.01(1) 1-2.

3 A patent denotes a registered work of individually creativity filed with the USPTO. 4 A copyright denotes a registered work of authorship filed with the US Copyright Office under Title 17, US Code, Copyright Act of 1976.

5 “’Mask works’ are a new form of intellectual property in semiconductor chip designs, established by the Semiconductor Chip Protection Act of 1984”, Title III of Pub. L. No. 98-620, 98 Stat. 3335, 3347 (Nov. 8, 1984), codified in Chapter 2 of the Title 17 of the United States Code, 17 U.S.C. §§ 901 – 914; Dratler, Jr., §1.01(1)1-2 n.3.

6 “In the United States, trade secrets are protected under state, not federal law. Over twenty states have adopted variations of the Uniform Trade Secrets Act”, Dratler, Jr., §1.01(1)1-2 n.4.

7 “In the United States 8 Id.

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Six Types of Rights9 The Copyright Act of 1976 generally gives authors the right to: • • •

reproduce the work in copies or phonorecords create derivative works based upon the work distribute copies or phonorecords of the work to the public by sale or other transfer of ownership, or by rental, lease or lending

•

perform the work publicly, in the case of literary, musical, dramatic,

choreographic works, pantomimes, and motion pictures or other audio visual works •

display the work publicly, in the case of literary, musical, dramatic,

•

choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images or other audiovisual work perform the work publicly (in the case of sound recordings) by means of a digital audio

transmission The six types of copyrights gives authors the sole and exclusive right to reproduce the work, create derivative works, publicly distribute the work, publicly display the work, publicly perform the work and the right to transmit access to the work. It is illegal for anyone to violate the rights provided to the owner of a copyright under the Copyright Act. Under the

9 Title

17, US Code, Copyright Act of 1976.

13 Copyright Act if another person or entity wrongfully violates one of your six rights you have the right to seek a judgment against them for their profits or dilution of your profits.

What are Copyright Laws?

The Copyright Act serves only to grant the six exclusive rights to copyright owners. The legislation does not provide for regulation or enforcement of copyright law. The Digital Millennium Copyright Act (DMCA) and the World Intellectual Property Organization (WIPO) treaty are the most important pieces of law regulating the Copyright Act domestically and enforcing the Copyright Act internationally. Often when you receive a copyright infringement notice the violation is from the enforcement of the Copyright Act by the WIPO or DMCA. The DMCA regulates and enforces the copyrights granted to owners of digital media through the Copyright Act. The WIPO treaty secures international standards for the transmission of legally copyrighted works.

WIPO WIPO is a United Nations organization handling international questions of copyrights and trademarks. The WIPO treaties were adopted during the Diplomatic Conference on Certain Copyrights and Neighboring Rights Questions hosted by WIPO in Geneva on December 220, 1996.10 Although three treaties were considered the delegation only adopted two of those treaties’ the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.11 Under the US law the WIPO treaties were not self-executing requiring further legislation to be passed by Congress. Thus, existing US copyright required adaptations to conform to the WIPO treaties.

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“WIPO Delegates Agree on Two Treaties,” 2 BNA’s Electronic Info. Pol’y & L Rep. 22, 22 (1997).

11 Id.

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WIPO Copyright Treaty The WIPO Copyright Treaty implemented several provisions to change existing US Copyright Law. Article 2 codifies the idea/expression dilemma of copyright law, “Copyright protection extends to expressions and not to ideas, procedures, methods of operations or mathematical concepts as such.”12 Article 4 extends copyright protection to computer programs in all forms as literary works.13 Article 7 creating copyright infringement liability for interim transmissions was deleted from the Treaty due to heavy opposition from the telecommunications industry.

Telecommunications companies feared liability would be imposed for the interim copying inherent in all computer networks.

WIPO Performances and Phonograms Treaty The WIPO Performances and Phonograms Treaty expanded existing US public performance rights granted under the Copyright Act. Article 7 give performers the exclusive right of “authorizing the direct or indirect reproduction of their performances fixed in phonograms.”14 The Agreed Statement15 of the WIPO Performances and Phonograms Treaty fully extends performance rights to the digital environment: The reproduction right, as set out in Articles 7 and 11, and the exceptions permitted thereunder through Article 16, fully apply in the digital environment, in particular to the use of performances and phonograms in the digital form. It

12 David

L. Hayes, Esq. Fenwick & West LLP Advanced Copyright Issues on the Internet. February 2014 p.24 n. 52.

Id. 14 Hayes, at 27.

15 Id. 13

15 is understood that the storage of a protected performance or phonogram in digital form in an electronic.

Similar to Article 7, Article 11 gives producers of phonograms, “the exclusive right of authorizing the direct or indirect reproduction of their phonograms, in any manner or form.”16 The most important contributions of the WIPO Performances and Phonograms Treaty are the definitions of phonogram and fixation.

Phonogram: “any fixation of the sounds of a performance or of other sounds other than incorporated in a cinematographic or other audiovisual work.”

Fixation: “the embodiment of sounds or the representations thereof, from which they can be perceived, reproduced or communicated through a device.”

The definitions of phonogram and fixation are imperative to understanding international copyright licenses especially those authorized in boilerplate17 licensing agreements. With the infinite stretch of the Internet internationally copyright licenses for file sharing platforms like Bandcamp, Soundcloud, Vimeo, and Youtube are written in WIPO language. Compliance with the WIPO is essential for anyone operating on the Internet.

DMCA President Clinton signed the Digital Millennium Copyright Act into law on October 28, 1998, effectively authorizing the WIPO Copyright and Performances and Phonograms Treaties. The Clinton Administration took the view that most of the enhanced copyright protections set

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Hayes, at 28. is a legal contract term referencing standard form contracts requiring less than the four dickered for contract formation. Boilerplate Licensing Agreements are featured in the Deluxe Edition of this book.

17 Boilerplate

16 forth in the treaties were already available under US law. The bill contains contain nothing addressing the reproduction right or how the right relates to the digital environment.18 The European Copyright Directive The European Copyright Directive provides for four copyrights with respect to the reproduction, distribution, and presentation of works online: • • • •

reproduction right communication to the public right distribution right protection against the circumvention or abuse of electronic management and protection systems

With respect to the reproduction right the European Copyright Directive adopts the WIPO, specifically Article 2 requires that member states “provide the exclusive right to authorize or prohibit direct or indirect, temporary or permanent reproduction by any means and in any form” of copyrighted works.19 The European Copyright Directive like US law adopts the WIPO with an exception for the right of reproduction. The European Copyright Directive adopts the approach that “affords the right of reproduction a very broad inherent scope but provides an explicit and automatic exemption for copies that are made incidental to the use.”20 Article 3 provides further exceptions for the reproduction right and the right of communication, these exceptions largely cover freedom of the press and freedom of speech.21 Although US law and the European Copyright Directive both adopt the WIPO the European Copyright Directive

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Hayes, at 64.

European Copyright Directive, Commentary to Art. 2., ¶2.

20 European Copyright Directive, Art. 5(1).

21 European Copyright Directive, Art. 3.

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17 provides stronger guidance for the reproduction right. Remember, the WIPO exclusively grants the right of reproduction to producers and the right of public performance to performers.

Why should I Copyright my original work?

Copyrights protect your work from copyright infringement by third parties and or parties involved in the origination of your music. A registered copyright is an ownership right in the created entity. Ownerships rights allow authors to seek remedies against copyright infringers.

The Copyright Act is a statute that authorizes your rights in order to protect your work from infringers. The US Copyright Office regulates and governs copyrights.

How do I Copyright my work?

Copyright registration is a legal formality insuring a public record of the basic facts pertaining to a copyright.22 The formality of copyright registration provides owners with several advantages: • • •

registration establishes a public record of the copyright claim registration is necessary before an infringement suit can be filed registration within three months grants owners the right to statutory damages and attorney’s fees

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Id. at 7.

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registration within five years of publication provides prima facie evidence of the facts stated in the certificate registration allows the owners to register with US Customs for protection against the importation of infringing copies

A valid Copyright registration requires three essential elements: • • •

completed application form nonrefundable filing fee nonreturnable deposit that is a copy of the works being registered with the Copyright office

Copyright registration is not needed for copyright protection. Copyright protection exists from the moment a work of authorship is created in a fixed form. The copyright immediately becomes the property of the author who created the work. There are two exceptions to this rule within copyright law: Works-for-hire: A work prepared by an employee in his scope of employment is the property of the employer; or a work specially commissioned for use when the parties expressly agree in a written statement that the work should be considered a work for made for hire.

Joint Copyrights23: The authors of a joint work are co-owners of a copyright unless there is an agreement made to the contrary.

23 Id

at 2., “Copyright in each separate contribution to a periodical or other collective work is distinct from copyright in the collective work as a whole and vests initially with the author of the contribution.”

19 Works made for hire and joint copyrights immediately belong to the individuals who commissioned the work or the joint owners.

Requirement for Notice Most likely you have seen the © Copyright symbol on some type of literary work, recording, or dramatic work but surprisingly within music the © symbol not appropriate for sound recordings. Original sound recordings embodied in phonorecords should contain ℗ symbol, the year of first publication, and the name of the owner of copyright in the sound recording, or an abbreviation by which the name can be recognized, or a generally known alternative designation of the owner.24 The © symbol protects copies of the phonorecords but not the original underlying literary, musical, or dramatic work that is recorded. Copyright notice is not required under US law25 but it remains beneficial to copyright owners. Notice informs members of the public that the work is protected by copyright and negates any claims of innocent infringement.

What is Copyright Infringement?

Copyright infringement occurs when anyone other than the author violates the exclusive rights granted to the author under the Copyright Act of 1986. Copyright infringement may involve the following actions:

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“If the producer of the sound recording is named on the phonorecord label or container and if no other name appears in conjunction with the notice, the producer’s name shall be considered a part of the notice.”

Example: ℗ 2011 A.B.C. Records Inc., Id at 5.

25 The US abolished the Copyright notice requirement in 1978 to adhere to the Berne Convention, effective March 1, 1989.

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• • • •

Physically reproducing a copyrighted work (CD burning or photocopying).

Distributing an unauthorized reproduction of a copyrighted work (selling bootlegged CDs, i.e. providing links or access to unauthorized reproductions via the internet or through a digital media platform) Creation of any derivative works unauthorized by the copyright owners (i.e. Greatest hits compilations) Unauthorized performance of copyrighted works publicly Unauthorized display of the copyrighted works publicly Unauthorized transmission of the works by means of digital audio transmission

What is Copyright Infringement in Music?

Although there are six general copyrights, copyrights within music operate in two separate spectrums. The first addresses copyrights of the sound recording embodied in a phonorecord. To prove copyright infringement of a sound recording to must prove (1) there was actual copying; direct or access.26 Access requires the copyright owner prove the infringer had the opportunity to hear the copyrighted material before recording their song. Copyright law is designed to protect the orginality embodied in sound recordings but is limited to a certain number of notes, chords, and pleasing combinations of notes and chords.27 Unprotected within music copyright law are key28, meter29, tempo30, and genre31 however as few as three

The standard for access is a substantial similarity in protectable expression. Music Copyright in the 21st Century, Kilpatrick Townsend.

27 “It must be remembered that, while there are an enormous number of possible permutations of the musical notes of the scale, only a few are pleasing; and much fewer still suit the infantile demands of the popular ear.

Recurrence is not therefore an inevitable badge of plagiarism.” Darrell v. Joe Morris Music Corp., 113 F.2d 80 (2d Cir. 1940).

28 “The key of A major, a certain tempo, a "I-IV" chord progression, a typical guitar rhythm, certain chords in "root" position, an acoustic guitar introduction, and the “adult contemporary" style”. Tisi v. Patrick, 97 F. Supp. 2d 539 (S.D.N.Y. 2000).

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21 musical notes may be protected.32 The other spectrum of copyright law addresses infringement (unauthorized copies) of phonorecords. Now that you have an understanding of copyright infringement in music you will be able to navigate this book accordingly. This book focuses heavily on the second spectrum of copyright infringement in music.

What are my remedies for copyright infringement?

Remedies for copyright infringement are granted under sections 106 through 122 of the Copyright Act to the author as provided in section 106A(a), or against a person or entity whom imports copies of phonorecords into the US in violation of section 602.33 The Copyright Act provides for the following remedies34 against infringers of copyrights:

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Injunctions: Courts having jurisdiction may authorize or grant temporary and final injunctions to restrain copyright infringement.

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“A two-step, the general theme of a first person love song (in lyrics), the chord progression and rhythmic feel used in thousands of other songs, a descending melodic line in the hook, a mood shared by many other songs, and the verse-chorus-verse-chorus form.” McRae v. Smith, 968 F. Supp. 559 (D. Colo. 1997).

30 “A descending scale step motive in the verse, certain structural patterns, a harmonic progression, and a recurring eighth note rhythm.” Intersong-USA v. CBS, Inc., 757 F. Supp. 274 (S.D.N.Y. 1991).

31 certain melodic chord progressions, basic song structure, and bass lines. Moore v. Columbia Pictures Industries, Inc., 972 F.2d 939 (8th Cir. 1992).

32 Santrayll v. Burrell, 1996 WL 134803 (S.D.N.Y. 1996); Levine v. McDonald's Corp., 735 F. Supp. 92 (S.D.N.Y. 1990).

33 US Copyright Act, 106A(a).

34 US Copyright Act, §502 - 506.

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Impounding and dispositions of infringement articles: Courts having jurisdiction may authorize the restraint and disposition of any copies, phono-records, plates, molds, masters tapes, films, and other articles infringing copyrights. Through final judgment or decree courts may order the destruction or reasonable disposition of all copies or phonorecords used in violation of the copyright owner’s exclusive rights.

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Forfeit of profits and damages35: Infringers are liable for the copyright owner’s actual damages and any additional profits.

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Cost and attorney’s fees: The court at its discretion may allow the recovery of full costs by or against any party other than the US or an officer thereof.

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Criminal offenses: Any person who willfully infringes a copyright shall be punished under section 2319 of title 18.36

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Id. §504(b) Actual Damages and Profits: Copyright owner is required to prevent proof of the infringer’s gross revenue, and the infringer is required to prove his deductible expenses and the elements of profit attributable to factors other than the copyrighted work; §504(c) Statutory Damages: A copyright owner may elect at any time before final judgment is rendered to recover statutory damages instead of actual damages and profits; Note the court may find damages per each act and/or download. Playboy Enterprises, Inc. v. Sanfilippo, 1998 U.S. Dist.

LEXIS 5125 (S.D. Cal. 1998).

36 §506(a)(1)(A) for the purposes of commercial advantage or private financial gain (B) by the reproduction or distribution, including electronic means, of 1 or more copies or phonorecords of 1 or more copyrighted works having a total retail value of more than $1,000; or (C) by the distribution of a work being prepared for commercial distribution by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution.

23 The court will permit remedies whenever it is found appropriate under the law. The court makes a distinction under the law for copyright infringement by means of indirect or volitional actions on behalf of the infringer.

When is Copyright Infringement acceptable?

The court has made several distinctions over the years between direct and indirect infringement, volitional acts and non-volitional acts, and active versus passive infringement. In recent history the court has refused to impose direct liability for online service providers (OSPs) who had no knowledge of infringement.37 The court refused to impose direct liability on a bulletin board service (BBS) where the owner was more appropriately engaging in vicarious liability.38 The court refused to hold a BBS operator liable for direct infringement of the right of reproduction where there was no evidence to support a claim of direct infringement on behalf of the operator.39 Note that owners, operators, and subscribers, and downloaders of known infringement websites may all be liable for copyright infringement.

Unless you are an online service provider like Comcast, a bulletin board service like Napster this information is probably irrelevant to you.

37 Religious Technoligy Center v. Netcom On-Line Communication Services., 907 F. Supp. 1361, 1367 & n.10 (N.D. Cal. 1995).

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Sega Enterprises Ltd. v. MAPHIA, 948 F. Supp. 923, 932 (N. D. Cal. 1996).

Sega Enterprises Ltd v. Sabella, 1997 Copyr. Law. Dec. ¶27, 648 (N.D. Cal. Dec. 18, 1996). This case established the standard for contributory negligence. The court cited a Ninth Ciruit holding “providing the site and facilities for known infringing activity is sufficient to establish contributory negligence.” Fonovisia, Inc. v.

Cherry Auction, Inc., 76 F. 3d 259, 264 (9th Cir. 1996).

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24 The doctrine of Fair Use applies to direct acts of copyright infringement and generally excludes the aforementioned acts. Fair Use defense evolves from rights granted to everyone (not just US citizens) under the First Amendment of the US Constitution regardless of ownership in original works of authorship.40 Fair Use is an appropriate First Amendment defense to copyright infringement. Fair Use balances the infringers right of Freedom of Speech by examining four factors:

Amount and Substantiality of the Work

Effect of the Work on the Potential Market

Purpose and Character of the Use

Nature of the Work

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The First Amendment grants everyone the right to express himself freely. The Free Speech clause is authorized within the language of the first amendment, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; . . .”. US Constitution, Amend I.

25 The purpose and character of the use can be established by determining if the use was for profit or commercial gain, if such use was transformative, if the right to license was infringed.

The more creative the right the more likely the use was in the infringers favor leaning towards fair use.41 Whether a work is transformative is highly indicative of the nature of the work.

Transformation is a factual standard supported by evidence of the work’s profitability out side of the original’s artists’ market place for business.42 The amount and substantiality of the work is determined by the amount of the original work being used in the new work derived from the original work. If the infringer’s work usurps the marketplace for business the evidence trends towards the copyright owner’s favor usually supporting the forfeit of the infringer’s profits.

Can I freely copy music within the Public Domain?

Often you may hear that public domain works are free. The simple answer is they are NOT. Public domain works includes any works commissioned on behalf of the government.

Although the actual work, for example a photo of the President and a Kennedy Honors award winner is within the public domain both the artist and the President maintain the rights to the use of their image and any trademarked or copyrighted image within the photo, film, song, artwork, etc.

Public Domain music is the opposite of a copyright because it fails to grant the owner any protection of the six copyrights. “Happy Birthday To You, Happy Birthday To You,” Although

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UMG Recordings Inc. v. MP3.com Inc., 92 F Supp. 2d 349, 352 (S.D.N.Y. 2000).

Appropriation art is another form of fair use and is available to artists who significantly manipulate another artists’ work up to the point of not resemblance of the original to create a new work.

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26 all music is copyrighted some music exists outside of copyright law. This type of music is authorized under the public domain doctrine. A copyright is granted for a limited number of years, thus once it is published a work does not stay protected permanently. Most music published over seventy-five years ago is currently within the public domain. The majority of works in the public domain are categorized by the expiration of the limited copyright protection or in general anything written on behalf of the United States Government is within the public domain.43

PART II TRADEMARKS

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“What Is Public Domain?” Public Domain Information Project, accessed November 13, 2014. http://www.pdinfo.com/pd-info-faq.php

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What is a Trademark?

All of the above images have one thing in common, not only do they represent some of the biggest brands in the US but they are all registered trademark images. These images include words and symbols to represent a known brand or company. Trademarks are the legally recognized distinctions for the purpose of brand recognition and quality. A trademark or service mark distinguishes your brands quality for that of other similar or competitive brands.

Trademarks may be comprised of words, symbols, phrases or designs or any combination thereof that identifies a source of goods from one party from that of another party.44 A service mark is similar to a trademark except it identifies the source of the service rather than goods. A Trademark is different from a copyright in that it protects marks associated with goods or services. Copyrights as we learned in Part I protect tangible forms of media and work product. As a musician you would trademark your logo or name, Roca Wear is an example of a trademark of rapper Sean Carter’s clothing line where as Sean Carter’s masters for the sound recordings embodied in American Gangster are copyrighted. Trademark law ensures the proper use of trademarks throughout the US and in cases of piracy internationally.

What are Trademark laws?

Throughout the United States state and federal law govern Trademarks. Trademark laws are authorized through The Lanham Act.45 The Lanham Act is named for representative Fritz G. Lanham who served under President Harry Truman.46 The act prohibits trademark

44

USPTO, Basic Facts About Trademarks, 1. Department of Commerce accessed www.uspto.gov December 1, 2014 15 U.S.C. § 1051.

46 Lanham Act, § 46.

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29 infringement, trademark dilution, and false advertising among other activities. Since being signed into law the Act has be modified several times for advancements in technology.

Trademark Counterfeiting Act of 1984 The Trademark Counterfeiting Act of 1984 makes it illegal for any unauthorized use of a counterfeit trademark.47 Anti-cyber-squatting Act48 Cyber-squatting refers to a very specific action of registering domain names in bad faith.

Non-Federal Trademark Registration

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15 U.S.C. § 470 – 514.

Under section 43(d) of the Lanham Act authorizes a cause of action against anyone who, with a bad faith intent to profit from the goodwill of another's trademark, registers, traffics in, or uses a domain name that is identical to, or confusingly similar to a distinctive mark, or dilutive of a famous mark, without regard to the goods or services of the parties. The court will consider the following factors in determining whether a domain was registered in bad faith: if the registrant has any other intellectual property rights in the name; if it is the registrant’s legal name; the registrant has a prior use history of the name related to an offering of goods or services; intent to divert to a site could harm the trademark owner’s goodwill; any offer to sell the domain name without having an intent to use the name in connection with an offering of goods or services; intentional misleading contact information; and warehousing of multiple domain names known to be identical or confusingly similar. The court will also consider the distinction of the mark or to any extent to which the mark may be famous. If the court determines the mark was used reasonably on the basis of fair use the court shall not find bad faith. Anti Cybersquatting Piracy Act (ACPA), 15 U.S.C.S. 1125(d). Accessed November 15, 2013 http://cyber.law.harvard.edu/property00/domain/legislation.html 48

30 Both federal and state laws govern trademark registration. Regional or local trademarks maybe protected by state law. The secretary of state office for your state law usually governs and regulates state trademark registration. A state based lawsuit for trademark infringement will be limited to common law remedies thus federal trademark registration provides the most extensive protection for trademarks.

Why should I Trademark my original content?

A registered trademark gives owners certain legal benefits protections: • • •

• • •

Public notice of your claim of ownership in the mark; Listing on the USPTO’s online database; A legal presumption of your ownership in the mark and your exclusive right to sell goods or services in connection with the mark and your exclusive right to license the mark for the purpose of selling goods or services; US Customs and Border Protection Enforcement; The right to use the Federally registered symbol ®49; The use of your US registration to obtain foreign registration.

49

If your mark is registered it is best to use the ® symbol; If your mark is not yet registered it is best to use TM for goods and SM for services to indicate to others that you are using the mark as a trademark or service-mark regardless of USPTO registration.

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How do I Trademark my content?

The first step in trademarking your original content is designing your mark. The actual design process related to your mark may be the hardest step in completing your federal trademark registration. The USPTO office will examine the design of your mark based on the likely hood of confusion with other marks, similarity with other marks, relatedness of goods and services, and the strength of the mark.

Two identical marks may coexist so long as the goods and services are unrelated.

Your mark may be more likely to cause confusion if it is similar

to a famous mark regardless of the type of goods or services.

Whenever marks sound alike, are visually similar, have the same meaning (even if in translation), and/or create the same general commercial impression in the

consuming public’s mind, the marks may be considered confusingly similar.

When a consumer is likely to assume that goods or services source come from the same the USPTO will deny your

trademark application based on the relatedness of the mark.

Marks fall into four categories; fanciful or arbitrary, suggestive,

descriptive or generic.

Fanciful are and arbitrary marks

inherently distinctive and thus stronger marks more likely to get registered.

32 Registration & Application Process • • • • • • •

Application Name and Address for Correspondence Depiction of the Mark Application Filing Fee Basis for Filing Specimen for Use Signature

Once your application is properly filed it will be assigned to a reviewing attorney. The examining attorney will review your application by examining the written application, the specimen, and the drawing to ensure that it satisfies all of the federal legal requirements.

After several months the examining attorney will issue a letter detailing approval, denial, or any further requirements needed for trademark approval. If you receive an office action from the USPTO you must respond with in six months or risk expiration of your application. If there are no refusals or further obligations and/or objections the examining attorney will approve your application and notify you of the status of your trademark. Once your trademark is properly registered it is imperative that you maintain your trademark by filing your maintenance documents timely. Failure to make your filings will result in cancellation and or expiration of the mark. To begin your trademark application please contact the USPTO, www.uspto.gov.

What is Trademark Infringement?

Trademark Infringement refers to another person or entity using your mark in connection with the sell of goods or services without your permission. The use of any mark in connection with

33 Â Â the sell of goods or services that is likely to cause confusion among consumers with a registered mark is the general basis for copyright infringement.

Trademark Dilution Owners of trademarks may also bring actions for trademark dilution. Trademark dilution may be brought when a registered trademark owner believes use of another mark contributes to blurring or tarnishment of his mark diluting the quality of the mark. Under federal law a claim for dilution may be brought only if the mark is considered famous.

What should I do if someone else is infringing my trademark?

If you find someone is using a similar mark that is likely to confuse the consumer of the source or quality of the related goods and/or services you immediately begin documenting their usage including promotional and sells materials. Once you have well documented information you should contact your local volunteer lawyers organization. These types of organizations will assist you with locating a pro bono or paid attorney.

Remedies Trademark owners who are successful in their prosecution of trademark infringement may be awarded an injunction against further infringement or dilution of their mark. Trademark owners may also recover monetary damages, attorney fees and court costs. Damages may be

34 trebled upon any showing of bad faith. Damages are also available in trademark dilution suits if the defendant willfully profited from the plaintiff’s goodwill in using the mark.50

What should I do if someone accuses me of infringing his or her trademark?

If another person or entity accuses you of infringing their registered trademark you should immediately contact your local volunteer lawyers organization. In the appendix of this guide you will find a list of volunteer lawyer organizations handling intellectual property issues per state. If you receive a cease and desist letter and believe your use may be unlawful you should immediately stop using the mark. Although volunteer lawyer organizations are well equipped to handle your intellectual property related issue you may also want to contact your State’s Bar Association for intellectual property attorney referrals.

*The Music Industry How Do I Copyright My Music?

50

15 U.S.C. §§ 1116(a), 1117(a), and 1125(c).

35

The music copyrighting process is significantly similar to filing a traditional copyright. One may copyright individual lyrics, sheet music, and sound recordings. Sound recordings are essentially the music embodied in a master copy of any music compilation from which all other copies are made and distributed. Within music copyright there are three significant rights of the six copyrights discussed in Part I of this guide: • • •

Right of Public Performance; Right of Reproduction; Right of Transmission.

These copyrights allow for the infinite and inevitable transmission of music across the Internet.

The Internet is a very vast and infinite platform for the transmission of digital music. There are five mediums in which music is copied on the Internet: • • • • •

Cellphone (Android, iPhone, Windows); Laptop; Cloud; Server (includes Desktops); Tablets.

What is a Sound Recording?

The US Copyright Office defines copyrights of music as copyrights of sound recordings: Sound recording: Sound recordings are defined in the law as “works that result from the fixation of a series of musical, spoken, or other sounds, but not

36 including the sounds accompanying a motion picture or other audiovisual work.” Common examples include recordings of music, drama, or lectures. A sound recording is not the same as a phono-record. A phono-record is the physical object in which works of authorship are embodied. The word “phonorecord” includes cassette tapes, CDs, and vinyl disks as well as other formats.51 Under US Copyright law a sound recording may be copyrighted separately from that of a phono-record. Within music copyrights phono-records are equivalent to Masters. Ownership of your phono-records prevents anyone (labels, management, etc.) from releasing derivative works at a later date and time.

What are Music Copyrights?

51

Copyright Basics, US Copyright Office May 2012. Circular 1 p. 1.

37

Artist covers Beyonce's Irreplaceable.

Artist sues the concert attendee for an unathorized recording of her performance.

Concert attendee uploads Artist performance to Youtube.

Universal Music Group sues Artist for all of her tour proceeds following the video's upload.

The video goes viral making April an instant celebrity.

Youtube removes video at the request of Universal Music Group.

38

In the above example there are several copyrights at issue: the right of public performance; the right of reproduction; and the right of transmission. The right of public performance grants musicians the exclusive right to perform their original work. The right of reproduction grants producers the exclusive right to reproduce their original work. The right of transmission grants musicians (i.e. owners) the right to transmit their work over various mediums. The right of public display pertains to tangible art works more than music. The right of public distribution is important to music but refers to tangible copies and with the proliferation of digital transmissions the right of transmission offers more appropriate remedies for musicians selling and distributing their music over the Internet. The right to create derivative works is essential to music but is less likely to be infringed among the six rights granted by the Copyright Act because of the nature of authenticity associated with derivative works.

Within music the right of performance, transmission and reproduction are the most infringed.

In the above example Artist infringes upon Beyonce’s right of performance and the songwriter’s right of performance where as the concert attendee infringes upon Artist’s exclusive right to perform.52 Note that Beyonce’s and the songwriter’s rights are enforced by Universal Music Group. The Copyright Act grants UMG (the owners of the copyright) and Artist exclusive remedies whenever their copyrights are infringed. Another way for Artist to avoid infringing UMG’s copyrights is to obtain a compulsory license from the performing rights organization where Beyonce’s music is registered.53

52

Performing Rights Organizations do not collect or enforce royalties owed through copyright infringement.

This responsibility is usually left to owners (self published musicians or other owners of original works of authorship). This topic is discussed further in Chapters III; IV of this book.

53 Performing Rights Organizations collect royalties from licenses they manage and distribute of behalf of member artists. These organizations include SESAC, BMI, ASCAP, TuneCore, and Sound Exchange.

39 What are Performing Rights Organizations?

Performing rights organizations collect royalties on behalf of member singer and songwriters.

What is a Royalty?

Royalties are payments collected by performing rights organizations on behalf of publishers (ie. copyright owners) and distributed to owners and/or licensees annually.54 The Royalty Rate Board sets royalty rates annually.55

How Is Music Distributed?

Traditionally an artist signs a recording contract with a record label. A recording contract is an employment agreement between the singer/songwriter/producer with the record label. Works produced under an employment agreement are considered works for hire under copyright law. (Note works for hire are owned by the record label or publishing company and not by the artist). The record label has a presumption of ownership in works produced during the duration of the contract however record labels and recording artists may negotiate all terms including royalty rates within the employment agreement.

54

Royalties may be distributed annually or quarterly depending on the performance rights organization and type of royalty being collected. (Passman citation) 55 Copyright Royalty Board is a division of the US Copyright Office. The organization oversees copyright laws statutory licenses, adjusts and sets royalty rates, adjusts terms for statutory licenses determining the distribution of royalties from the statutory license royalty pools administered by the Library of Congress. For more information of the Copyright Royalty Board please contact http://www.loc.gov

40 Once an artist is under an employment contract with a record label he is poised with the responsibility of turning in his or her phono-records to the record label. The record company then takes these phono-records (i.e. Masters)56 and licenses them to a distributor for copying and distribution. In some cases the record label copies and distributes the phono-records themselves.

Although there are numerous record labels from small independents to music industry giants most labels have distribution deals through other labels or publishing companies associated with one of the three major music labels: Sony/ATV, UMG, and Warner Brothers.

56

“A master is the original tap recording made in the studio because it is the controlling entity from which all copies are made.” Passman, David All You Need To Know About the Music Business, p. 87 (2000 Revised Edition for the 21st Century).

41

Sony/ATV, Universal Music Group, Warner Brothers Music Group

Majo Record Labels

Mini Major Record Labels 44

Major Distributed Independent Record Labels43

Columbia, Def Jam, Epic, Jive, J, Warner Bros, Elektra, and Atlantic Capitol and Virgin

Parkwood Entertainment, Grand Hustle, and CTE World

Maybach Music Group, Bad Boy Entertainment, DTP Records, and Zone 4 Records

Universal, Interscope, A & M, Geffen, MCA, Island-­‐ Def Jam, and Motown

Ear Drumma, Cash Money Records, Def Jam, Def Jam South, and Island Def Jam

5758

57 “A major distributed independent is an independent entity that has little to no staff that contracts with a mini major to perform all the functions of a record label except recording the records.” Id. at 85.

58

“A mini-major is a fully staffed company with everything except the ability to distribute records to the stores.

All mini-majors are distributed by majors and in most cases are co-owned by majors.” Id. at 83.

42 Although most record labels are distributed by a mid-major or major some major distributed independents and even mid-majors out source there distribution to separate independent distributors. There are still only five major music distributors:

Five Major Distributors True Independents45

BMG, CEMA, Sony, Universal, and WEA

Independent Record Labels

Independent Distributors

Independent Distributors

Mini Majors

Caroline, RED, Fontana, and ADA

When music is distributed it is distributed through a license agreement between the record label (licensee) and distribution company (licensor). Licensees and/or owners of copyrights distribute Records. Licensees are individuals who sign a license agreement with a record company, the record company allows the licensee under the license agreement the exclusive right to copy and distribute the master recordings. Within music there are five major distributors along with independent distributors. The current structure of the music industry encourages independent labels to sign distribution deals with mini majors and major record labels however a distribution deal is becoming less and less of a necessity with the proliferation of streaming and other forms of digital transmission of music. Over the last ten years the Internet has made it increasingly easier for self-published artist to distribute their music internationally. (Hint: Here is where the WIPO becomes important!).

43

Self-­‐published and Self-­‐ distributed artists (Instant uploading across all platforms)

Soundcloud, Itunes, Bandcamp, Audiomack, LiveMixtapes, DatPiff, and Google Play Music (Internet Distribution Platforms)

Consumer Purchases (Instant downloads)

Artist Income (Royalties and/or Direct Payments)

Internet platforms allow for instantaneous distribution of music across a variety of platforms directly distributing music from self-published and self distributed artists to the consumer. The current basic royalty structure for artists supports traditional tangible mediums of distribution more than that which occurs across digital media platforms.

How is Music Royalties Calculated?

44 It is important to understand the basics of royalty structure within record labels as a foundation for calculating self-published streaming royalties. Traditional record labels calculate artist royalties as a percentage of the record’s suggested retail list price (SRLP).59 For example an artist usually receives percentage points per album less the price of packaging.

SRLP Less: Packaging

$11.99 - 3.99

Royalty Base

$8.99

In the above example the artists royalty base is 10% (Ten points) of $8.99 (89.9¢) per album sold. Record companies use numerous calculations to reduce an artist’s royalty base. For the following examples remember that the royalty base is $8.99.

Not ever unit shipped is considered a royalty-bearing unit. Record labels reduce the units shipped by free goods (i.e. promotional albums shipped to radio stations, record stores, etc.).60 (Note in the context of streaming calculations, record labels will reduce the number streams by promotional units associated with for example iTunes First Listens and Spotify).

Units shipped Less: free goods

250,000 - 50,000

Royalty-bearing units Times: Royalty

200,000 × 89.9¢

Amount payable

$179,800

59 60

Passman, at 90.

Passman, at 94.

45

Note that the amount payable is reduced from 10% to 8.75% of the $8.99 royalty base set by the $11.99 SRLP. Thus, whenever you purchase an album at a discounted rate it is at the expense of someone else (the artist, publisher, songwriter, record company, unions, etc).

Next, your royalty base is reduced by the return privilege requiring reserves.61 Most record labels hold up to 35% of your royalties in reserve assuming a percentage of the records ship will be returned. In the context of streaming return privileges should under most circumstances be irrelevant. Thank goodness for the instantaneous design of streaming downloads!

Units 200,000 (80% of 250,000) Artist Royalty × 89.9¢ Total Less: 35% reserve

$179,800 - 62, 930

Amount Payable

$116, 870

Now you have it, you understand basic royalty structure!

Advances and Recoupments It is safe to assume that digital media structure has significantly reduced the amount of distribution related reductions taken from artist royalties the structure of advances and recoupments remains stagnant within the music industry. Record labels pay an advance (sum

61

Records are sold at a 100% return privilege for any records not sold. Passman, at 95.

46 of money) to an artist but retain the artist’s royalties until the sum is recouped. The process of retaining an artist’s royalties is referred to as recoupment.62 Advance Earned Royalties Deficit

$200,000 $140,000

-$60,000

Along with your advance the record label may recoup other payments made your behalf. For example your recording costs, production costs, and touring costs are recoupable (Note do your best to keep these costs significantly low). Many artist make the mistake of assuming an advance is artist income an advance is a production loan with the record label assuming a high risk of loss. Advances are nonreturnable loans and for taxable purposes grants thus when an artist receives an advance it is taxable income.63 When considering a record deal your advance and royalties are set by your musical clout.64 Record labels divide artists into four different categories for advancement and royalty calculations: •

New artist signing to Independent company: Typically new artist receive 9% to 13% of SRLP however negotiations can provide for any percentage of the label’s royalty instead of a set rate.

62

An advance is recoupable from royalties. The amount of un-recouped advance is called a deficit or red position. Passman, at 100.

63 Passman, at 102.

64 Today your social media fan base determines your musical clout. Record labels constantly watch artist social media for social interactions including Facebook likes, Youtube views, and Twitter re-tweets, etc. by fans of your music. Most artists have significant social media interactions before record labels consider signing them to a record deal.

47 • • •

New artist signing to major or mini major: Typically 12% to 14% of SRLP. Midlevel: Typically 15% to 16%.

Superstar: Typically 18% to 20% or more of SRLP.

Note royalty rates for singles are set at a lower royalty rate because in theory record labels make much less distributing singles than complete albums.65 - Escalations Within a recording contract it is standard for royalty rates to escalate based on the sales of records: 500K to 1M .5 – 1% 1.5M to 2M .5 – 1% In most cases escalations will top out at around the 14-15% range for new artists (10 -13%) if you are signed to independent label, 17% for midlevel, and 19% to 20% for superstars.66 Note escalations are based on royalty bearing units and only apply on an album to album basis.67 Negotiated Advances New Artist Signing to Independent Company: 5K to 125K New Artist Signing to Major or Mini-major: 175K to 300K Midlevel: 300K to 600K

65

Passman, at 108.

Id. at 109.

67 Escalations are limited to sales in the US but as your bargaining power increases your ability to negotiate escalations in major territories improves. Escalations only apply to full-priced retail sales through normal retail channels. Passman, at 110.

66

48 Superstar: 1.5M and up Advances are important for one reason, before you receive any royalty payments your advance must be recouped. It is essential to budget your album’s production well into the future to insure your advance payment will sustain all your expenses until your advance is recouped from your royalties.68 If you are a true independent artist not subject to an advance your royalty payments are your sole responsibility. Note royalty payments accrue from licensing agreements thus unlike artists signed to a record label an independent artist is charged with structuring his or her own licensing agreements.

Royalty Rates: BMI/ASCAP Case Study69 Case Overview: In this case the court determines the fair market value of copyrighted music pursuant to a consent decree. In 1941 the US brought an antitrust lawsuit against American Society of Composers, Authors, and Publishers (ASCAP). The case resulted in today’s consent decree70 that provides certain protections for prospective music licenses. In 1966 the US entered into a similar decree with Broadcast Music, Inc (BMI). In these parallel cases, both BMI and ASCAP petitioned the court to set a reasonable royalty rate after they were unable to agree on licensing fees with DMX, Inc. In both cases the court adopted DMX’s proposals. BMI and ASCAP appealed, the US Second Circuit Court of Appeals affirmed the Southern District of New York’s decisions.

68

Once your advance is recouped you will begin receiving royalty payments. Payments occur annually or quarterly. Passman, at 257.

69 Broadcast Music, INC. v. DMX INC., 683 F.3d. 32, 2012-1 P 77, 932, 2012 Copr.L.Dec. P. 30, 271, 103 U.S.P.Q. 2d 1200 (S.D.N.Y.) (C.A.2 N.Y. 2012); Battersby and Grimes, at 358 – 373.

70 In August 2014 the US DOJ held a public hearing on the renewal of the 1941 consent decrees. (citation needed).

49 Case Facts: ASCAP and BMI are “performing rights organizations” (PROs).71 Each organization represents hundreds of thousands of songwriters, composers, and publishers who hold copyrights in millions of musical works. PROs negotiate, implement, and enforce agreements with licensees that grant the right to perform their member’s copyrighted songs. They collect license fees and distribute royalties to the copyright holders. Traditionally ASCAP and BMI offered “blanket licenses”72 however in 1941 and 1964 the US government alleged, “that ASCAP and BMI’s blanket licenses, the only type of license offered when the suits were brought, constituted an illegal restraint of trade, and that arbitrary prices were being charged as a result of an illegal copyright pool. In 2001 ASCAP and BMI agreed to a new consent decree, the Second Amendment Final Judgment (the “AFJ2”); the AFJ2 provides for four types of licenses.73 Four Types of Licenses • • •

Blanket License74 Per-program License75 Per-segment License76

BMI v. CBS, 441 U.S. 1, 4-5, 99 S.Ct. 1551, 60 L.Ed.2d 1 (1979).

“Blanket License” means a non-exclusive license that authorizes a music user to perform ASCAP music, the fee for which does not vary depending on the extent to which the music user in fact performs ASCAP music.

AFJ2, §§ II(E), (J), (K), (S); Battersby and Grimes, at 359 n.3.

73 United States v ASCAP, No. 41-1395, 2001 WL 1589999, 2001-02 Trade Cas. (CCH) ¶ 73,474 (S.D.N.Y. June 11, 2001); Battersby and Grimes, at 359. The AFJ2 defines four licenses, per-program licenses, per-segment licenses, and through-to-the-audience licenses. Battersby and Grimes, at 359 n.3.

74 A non-exclusive license that authorizes a music user to perform ASCAP music, the fee for which does not vary depending on the extent to which the music user in fact performs ASCAP music. AFJ2 § II (E).

75 A non-exclusive license that authorizes a broadcaster to perform ASCAP music in all of the broadcaster’s programs, the fee for which varies depending upon which programs contain ASCAP music not otherwise licensed for public performance. AFJ2 § II(J).

71

72

50 •

Through-to-the-Audience License77

Both the BMI and ASCAP consent decrees include the “rate court” provisions, under this provision the United States District Court for the Southern District of New York has jurisdiction to determine a reasonable license fee when the parties to a licensing transaction are unable to reach agreement.78

Independent songwriter and singer Rihanna registers her copyrighted works with a PRO.

• BMI • ASCAP • SESAC

BMI/ ASCAP license thousands of songs to a commercial music service provider including Rihanna's music.

• Music Choice • Muzak • PlayNetwork • TrueSonic • Pandora • Spotify

While on vacation Rihanna hears her song in the hotel elevator. Later she receives a royalty payment from the PRO.

• Restaraunts • Hotesls • Shopping Centers • Retail Stores • Arenas

76

A non-exclusive license that authorizes a music user to perform any or all works in the ASCAP repertory in all segments of the music user’s activities in a single industry, the fee for which varies depending upon which segments contain ASCAP music not otherwise licensed for public performance. AFJ2 § II(K).

77 A license that authorizes the simultaneous or so-called ‘delayed’ performances of ASCAP music that are contained in content transmitted or delivered by a music user to another music user with whom the license has an economic relationship relating to the content. AFJ2 § II(S).

78 Battersby and Grimes, at 360; AFJ2 § IX(A); BMI Decree § XIV(A).

51 DMX is a leading commercial music service provider. DMX supplies BG/FG79 music to thousands of public venues (i.e. restaurants, shopping centers, hotels, retail stores, and other similar public venues). DMX does not offer particular songs. Typically DMX offers approximately 150,000 songs owned and controlled by more than 14,000 different publishers.

DMX provides music programming to its customers through off-premise80 and on-premise81 delivery. DMX’s off premise data reflects the frequency to which particular works are performed while DMX’s on premise data identifies which works were distributed.

DMX Institutes Direct Licenses In 2006 DMX began direct licensing campaigns with music publishers and composers primarily to reduce the cost of business associated with ASCAP and BMI’s blanket licenses. By 2010 DMX signed 850 direct licenses covering over 7000 separate music catalogs and hundred of thousands of songs.

DMX Compensation Structure DMX’s direct licenses provide each publisher with a pro rata share of an annual $25 per location royalty pool. This amount represents all annual royalty payments attributable to each

79

Under the AFJ2, BG/FG is defined as: a service “that transmits performances of music to subscribers and that furnishes to those subscribers to make the transmitted performances on their premises. A BG/FG music service does not include radio or television stations or networks, cable television networks or systems, persons that transmit renditions of music to private homes, apartments, or hotel or motel guest rooms, or persons that transmit renditions of music to subscribers that charge admissions.” AFJ2, § II(D); Battersby and Grimes, at 360 n.4.

80 Off-premise delivery involves the transmission of music to customers via direct broadcast satellite signals to the establishment’s sound system. Battersby and Grimes, at 360.

81 On-premise delivery involves the on-site transmission of music to customers through a proprietary DMX device that is installed at the customer location. Id.

52 physical location where a DMX program is performed. Each publisher’s pro rata share is calculated from its percentage of plays on DMX’s off-premise channels as proxy for plays across DMX’s entire service. DMX’s license also includes a “most-favored nations clause” that ensures that each publisher’s royalties are calculated using the same pro rata allocation methodology. (Note DMX’s pro rata compensation provision is not a royalty advance).

In 2007 DMX obtained a direct license from one of the four major music publishers, Sony/ATV Music Publishing.

Sony/ATV

Warner-­‐ Chappell Music Publishing

Four Major Music Publishers

EMI Music Publishing

Universal Music Publsihing Group

DMX made substantial efforts to attract Sony/ATV by offering a royalty advance of $2.4 million and an administrative payment of $300,000.

53

DMX Fee Structure82 DMX contends that ASCAP’s agreements with other BG/FG providers did not reflect a competitive market. DMX provided a three-tier fee: 1. a “floor fee” reflecting the minimum amount that DMX would be obligated to pay ASCAP even if all of the ASCAP-affiliated music that DMX performed was directly licensed; 2. an “unbundled music fee,” or the “pure” value of the performance rights for ASCAP music performed by DMX 3. the share of all DMX performances of ASCAP affiliated music licensed to DMX solely by ASCAP DMX provided the following rate formula: the sum of the floor fee plus the unbundled music fee multiplied by the share licensed via ASCAP. Essentially DMX calculated the unbundled music fee by reducing the annual royalty rate from $25 per location royalty pool to account for the direct licenses of mechanical and public performance rights. DMX further reduced the resulting $22.50 by ASCAP’s 48% share of total performances on the DMX network.

In December 2010 the rate court rejected ASCAP’s first proposal because it found that the Muzak Agreement was “not a reliable benchmark.” The rate court then adopted DMX’s proposal. The court set a total fee of $13.74 including a $3 floor fee, a $blanket fee of $13.74, and an unbundled music fee of $10.74. The resulting per location fee was set at $13.74 minus the product of $10.74 and a direct license ratio of 48 percent. The direct license ratio was set at the total number of ASCAP works transmitted by DMX’s off premise service for which DMX

82

Battersby and Grimes, at 364, 366.

54 has a direct license with at least one publisher of the work (prorated to reflect ASCAP’s ownership share) divided by the total number of ASCAP works transmitted by DMX’s off premise service.

On appeal ASCAP argued that the rate court set an unreasonable fee. ASCAP argued that direct licenses should not be factored into the its licensing rate structure and should at the most be only marginally incorporated. ASCAP argued that the rate court erred in using DMX’s agreements with publishers as an appropriate benchmark. ASCAP argued that their agreements with DMX competitors should have been adopted as benchmark because they were more accurate valuations of their services’ and more indicative of a competitive market.

In July 2010 the rate court rejected the BMI-Muzak Agreement as a benchmark for the value of DMX’s AFBL.83 The court adopted DMX’s proposal and entered judgment setting a final annual per-location blanket fee of $18.91, an annual per location floor fee of $8.66, and a direct licensing ratio to be calculated using DMX’s off-premise performances as a proxy for all of its performances.

Analysis: Under the authorized consent decrees the Southern District of New York court examines four factors to establish a benchmark for a “reasonable royalty rate”: • • • •

comparable rights; similar parties; similar economic circumstances; and whether the rate would be set in a sufficiently competitive market.

83

BMI, 726 F.Supp.2d at 359; Battersby and Grimes, at 366.

55 Note the reasonable royalty rate establishes the basis of the royalty rate owners (i.e. artists, independents, and record labels) receive in royalty payments.

AFJ2 The court rejects ASCAP notion that the AFJ2 prohibits a rate structure with an adjustable carve-out. The relied on a previous decision, “There, we explained that a request for a blanket license subject to a carve out constitutes ‘a request not for a new type of license, but for a blanket license with a different fee basis, over which the district court has rate-setting authority and which the [PRO] must offer.’”84 The Rates Consent decrees operate under a theory of compulsory licenses thus PROs are required to “grant to any music user making a written request therefor a non-exclusive license to perform all of the works in the [PROs] repertory.”85 The district court reviews rates for reasonableness noting that “fundamental to the concept of ‘reasonableness’ is a determination of what an applicant would pay in a competitive market, taking into account the fact that the PRO, as a monopolist, exercises disproportionate power over the market for music rights.”86 The court reviews for clear error the finding of facts related to the benchmark agreements, the court must consider whether another agreement dealt with a comparable right, involved similar parties in a similar economic circumstance, and whether it arose in a sufficiently competitive

84

AEI, 275 F. 3d. at 171, 175-77; see also United States v. ASCAP, 309 F. Supp. 2d 566, 581 ( S.D.N.Y. 2004)(concluding that the “present AFJ2 may be construed to permit the issuance of a blanket license with a fee structure that reflects direct licensing arrangements); Battersby and Grimes, at 367.

85 AFJ2, § VI; see BMI Decree, § IV(A).

86 United States v. ASCAP, 627 F.3d 64, 76 (2d Cir 2010)(“Real Networks”(quoting United States v. BMI, 426 F.3d 91, 96 (2d Cir. 2005)(“Music Choice”); Battersby and Grimes, at 369.

56 market.87 Neither ASCAP or BMI proposals accounted for DMX’s growing direct licensing program nor did their proposals reflect a sufficiently competitive market. Thus on appeal the court found no legal error contributed to the district court’s findings.

Both the ASCAP and BMI rate courts set comparable rates for DMX’s direct licensing rates while providing an additional floor fee that guaranteed some compensation to ASCAP and BMI regardless of the extent to which DMX used their repertory.88 The rates courts found that the use of DMX direct license as benchmarks were reasonable for the following reasons: • •

•

The rates reasonably compensated ASCAP and BMI for their services; The annual per location royalty pool was not an unreasonable benchmark for DMX’s per location licensing fees with ASCAP and BMI because it reflected a competitive market; and Direct licenses and their incorporation into licensing fee structures foster fair pricing of the AFJ2 and the BMI decree.

Conclusion: The AFJ2 permits blanket licenses subject to carve-outs to account for direct licensing. The district court, in both cases, had the authority to set an appropriate rate.

ASCAP and BMI did not sustain their burden of proving that their proposals were reasonable.

On appeal the district court reviewed the rate courts decision for error, finding none, the court sustained the district court’s decision. “The ability of users of music rights to avail themselves of a reasonable rate through the rate court mechanism when ASCAP and BMI’s market power might otherwise subject them to unreasonably high fees and ‘would have little meaning if that court were obliged to set a reasonable fee solely or even primarily on the basis of the fees a PRO successfully obtained from other users.” Essentially the courts decision in this case creates an obligatory rate court determination for all blanket license

87 88

See Music Choice, 426 F.3d at 95; Id. Battersby and Grimes, at 371.

57 carve-outs that account for direct licensing. (Note the structure and percentage of shares would be considered individually in a competitive market place.).

What are Performance Rights Royalties?

As you know BMI, ASCAP, and SESAC are the three largest Performing Rights Organizations (PROs). PROs collect monies and distribute royalties accordingly. Of the six copyrights granted under the Copyright Act of 1976 the right of public performance is the only right managed and administered by PROs. Performing rights or public performance rights require the copyright owners permission through a license to play the work on the radio, on television, in commercials, on the Internet, and in public venues. (Note whenever your song is performed there is a royalty being calculated and collected by the PRO).

Songwriter Performance Rights PROs pay songwriters directly for royalties that do not make an accounting to publishers on behalf of songwriters.89 Most PROs will not honor an assignment of songwriter’s rights because they are so protective of the songwriter being paid directly. In most cases the PRO will continue to pay the songwriter regardless of an assignment however there is exception for assignments of performance royalties to a publisher who has paid the writer an advance, and for assignments securing a bank loan, but these assignments are generally limited to the amount of the loan).

What are Foreign Performance Royalties?

Foreign Performance Rights are generally referred to as neighboring rights. As you know whenever a song is reproduced or distributed the songwriter and not the actual performer

89

Passman, at 259.

58 receives a mechanical royalty. It is also true that whenever a song is used in a movie, TV, film, or advertisement, the songwriter and not the performer is paid a mechanical royalty for the synchronization, reproduction and distribution however the performer may receive some royalty percentage whenever the master recording is used by only if the performer owns the master recording and/or is recouped along with the label who owns the master recording.

Also whenever a song is played on terrestrial (traditional) radio it is the songwriter not the performer who receives a payment of public performance royalties.

The Rome Convention Neighboring rights90 compensate the master holder and performer whenever music is performed publicly. The Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations of 1961 (“The Rome Convention”) authorizes signatories91 to enforce performers neighboring rights. Note only performers who are permanent residents of one of these countries pay enforce neighboring rights unless the recording was made in one of the countries that signed the Rome Convention. Neighboring rights are a very limited income stream for performers and master holders.

90

“Neighboring rights are not conferred by existing copyright law but “neighbor” those that are: a copyright is conferred in the public performance of a song and while is not conferred for the sound recording, because it neighbors the copyright in composition, most foreign countries treat it as essentially having the same qualities as the copyright in composition.”, George Howard, Neighboring Rights: What They Are & Why They Matter. July 19, 2012 accessed August 16, 2014. http://www.tunecore.com/blog/2012/7/neighboring-rights-what-they-are-whythey-matter 91 Argentina, Australia, Austria, Barbados, Brazil, Canada, Chile, Columbia, Denmark, Dominican Republic, Ecuador, El Salvador, Fiji, Finland, France, Germany, Great Britain, Italy, Jamaica, Japan, Mexico, Netherlands, Nigeria, Norway, Panama, Spain, Sweden Switzerland, United Kingdom, Uruguay.” Id.

59

When a US Permanent Resident song is played on US terrestrial radio the US performer does not receive neighboring rights.

When a US permanent resident song is played on International terrestrial radio the US performer does not receive neighboring rights.

When a foreign Permanent resident song is played on International terrestrial radio the foreign peformer receives neighoring rights.

When a US permanent resident records a song in a foreign county and it is played on international radio the US perfomer receives neighboring rights

Along with neighboring rights publishers often collect songwriter and performance royalties through local sub-publishers. Most foreign territories have some sort of performance rights society that in turn pay the publisher’s share of performance monies to local sub-publishers.

The foreign performing rights societies pay the writer’s share to US performing rights organizations. It is also customary for the local publisher to pay the US publisher an advance against their ultimate earnings. Note sub-publisher royalty advances are highly affected by current currency exchange rates.

What Are Mechanical Royalties?

60

Previously we learned consent decrees provide for compulsory licenses. The term compulsory license92 is a term of art referring to six different mediums in which you may license your work.

• • • • • •

Cable Television Broadcast (rebroadcast) Public Broadcasting System Jukeboxes Digital performance of records Digital distribution of records Phono-records of non-dramatic musical compositions

A mechanical right or mechanical license refers to the exclusive rights to reproduce copyrightable musical works embodied in phono-records and to distribute them to the public.93 In 1909 to avoid a potential monopoly Congress developed compulsory licenses. A compulsory license provides that if a copyright owner permits the use of the copyrighted composition for mechanical reproduction then all others might reproduce the music on payment by the manufacturer to the copyright proprietor of a royalty set at 2¢.94 Under the 1976 Copyright Act compulsory mechanical licenses apply solely to audio recordings primarily intended to be distributed to the public for private use. The Harry Fox Agency collects and distributes the majority of royalties for mechanical licenses in the US. Foreign Mechanical Royalties

92

Passman, at 210.

Krasilovsky and Shemel, at 232.

94 Id. 93

61 In Europe mechanical rights associations operate vastly different than the Harry Fox Agency.

European mechanical rights are usually offered on a blanket license scale. The BIEM (Bureau International des Societes Gerant les Droits d’Enregistrement et de Reproduction Mecanique) negotiates the general licensing system, the mechanics of licensing, the rate, and principle of minimum royalty where as mechanical rights associations negotiate the amount of deductions from the standard rates and minimum royalties. Most foreign publishers directly accept representation from US publishers and act as their representative without the interjection of a foreign local sub-publisher. Note sub-publishers take a percentage of profits but do little to no work securing the royalty payments.

PART III

LICENSES

62 Â Â

What is a License?

Licenses are legally binding contractual agreements enforcing the rights of one person and/or entity to lease, rent, or own the intellectual property belonging to another individual and/or entity. Generally mechanical and synchronization licenses grant rights in intellectual property without transferring a right of ownership only a limited right to usage. As an owner of a copyright you maintain the six exclusive licenses in your original work of authorship thus you may grant any of these rights to another individual and/or entity.

Scope of Licensing Agreements Contract terms within licensing agreements determine the duration and usage of the license.

Licenses cover all six copyrights along all digital mediums of transmission and any tangible mediums distribution. As the owner of the copyright it is your responsibility to negotiate the licensing terms in your favor. Sample licensing agreements can be found in the Appendix section of this guide.

How will I be compensated for my license?

Licensing compensation is a unique area of any industry because agreements can be structured in pretty much any way you could imagine. Attorneys typically draft licensing

63 agreements depending on the artists’ specific needs. The following are common forms of licensing compensation95: • • • • • • • •

A one time lump sum payment to the licensor A set annual fee with no royalty An ongoing royalty based solely on a percentage of licensee’s sales of the licensed product with no advance or guaranteed minimum royalty payment An ongoing royalty in a fixed amount based on each licensed product sold with no advance or guaranteed minimum royalty payment An ongoing royalty based on a percentage of licensee’s sales of the licensed products with either or both an advance against royalties and an annual minimum royalty An ongoing royalty based on the number of “hits” that occur on a web site featuring the licensed intellectual property A royalty paid based on the media buys made by the licensee in advertising and promoting its services using the licensed property Any combination of the above

The royalty, i.e. a percentage of the licensee’s sales, is the most common form of compensation charged by licensors.96 The actual royalty rate paid should reflect the number of licensed products sold as well as the selling price of those products. Accordingly whenever the licensee’s sales fall below original expectations the amount of royalty owed to the licensor would decrease proportionately with the decreased sales. In cases where the licensee is required to lower the selling price of the licensed product due to decreased demand or increased competition, the royalty owed by the licensee would be justifiably reduced. The

95

Battersby, Gregory J. and Grimes, Charles W. Licensing Royalty Rates, 2013 ed. Wolters Kluwer Law & Business., §1.01 p. 2.

96 Id. at §1.01 Introduction p.3.

64 royalty is the most equitable form of compensation to recover payments owed by the licensor to the licensee.97 Licensing Valuation The market approach to licensing valuation examines the active public market along with an abundance of comparable properties. It also takes into account how others have valued their properties and then compares those values to a particular property in question. The market approach considers the strength of the property in a particular industry; whether the property is dominant in its industry; and the commercial history of the property. Within music the market is approach is most commonly used to calculate royalty rates.

The other approach to licensing ignores the cost of creating and developing the property but instead focuses on the income producing quality of the property. The income approach considers the amount of income that can be generated by the property; the duration of the projected income stream; and the risk associated with the realization of the forecasted income. This approach has little justification within the music industry because the amount of risk associated with the intellectual property achieving perspective earnings would simply be too great.98 In general licensors provide for different royalty rates depending upon the manner in which a licensed product is being sold and whether it will include multiple licenses: •

Domestic Royalty Rate99

97

Id. Battersby and Grimes, at §1.02(A)(2).

99 The domestic royalty rate is the most common royalty rate. It applies to goods sold through conventional standards. Battersby and Grimes, at §1.03(c)(1).

98

65 • • • • •

FOB “free on board” Royalty Rate100 Royalty Rate on Direct Sales101 Royalty Rate for Services102 Sublicensing Royalty103 Split Royalty Rate104

Licensing Compensation Provisions Within any license agreement there are specific provisions that define terms related to compensation, accounting, and auditing. At the very least the following terms should be defined: • • • • •

Royalty Rate Definition of Sales Advances Minimum Royalties Sublicensing

100

The “free on board” royalty rate rarely applies within music because it discounts the costs of goods for retailers resulting in an overall decrease of the licensor’s royalty percentage. The FOB royalty rate is usually twelve to fourteen percent. Id. at §1.03(c)(2).

101 Royalty rates on domestic sales apply to licensed products sold through non-traditional means. In this case the licensing community accounts for a separate direct royalty rate. Battersby and Grimes, at §1.03(c)(3).

102 It is frequently difficult to calculate the basis for a reasonable royalty when it comes to “spokesmanship”.

Often the royalty for this type of license is determined by the popularity of the celebrity and frequency of the advertisements. Royalty rates usually rage from two to fifteen percent. Id. at §1.03(c)(4).

103 Music licensing agreements do not permit licensee’s to engage in any sublicensing arrangements.

104 The split royalty rate is inherent in most music albums and compilations. In some cases the property owner with the least leverage will reduce his royalty rate to insure the production of the product is economically viable in the marketplace. Battersby and Grimes, at §1.03(c)(6).

66 The royalty rate provision clearly defines what the royalty rate will be charged by the licensor for the licensee’s use of the licensed property. Licensors often embed the royalty rate into the body for the agreement while others may attach the royalty rate in the rider attached to the agreement.105 Within music like all other industries the definition of sales serves to define the royalty base on which the royalty is calculated. Licensing agreements define “net sales” less the licensor’s deductions, credits, allowances, and returns.106

105

Id. at §1.04(A)(1).

Note we discussed the concept of royalty rate reductions in the previous section; Battersby and Grimes, §1.04(A)(2).

106

67

Record Label hires artist to create album (Work for Hire).

Licensor distributes reduced royalty amounts to employee via a pre negotiated percentage.

Record label (Licensor) pays Artist (employee) an advance on earned royalty rate.

Pros and Publishing societies (Licensee) collect roylaty payments and distribute payment to Licensor.

Licensor reduces employee's earned royalty rate less deductions, credits, allowances, and returns.

Licensor recoups advance payment from reduced royalty rate.

68

Licensor (artists) records and writes record album.

Third party pays Licensee earned royalty rate.

Licenosor grants Third party (PRO) the right to collect earned royalty rate attributed to Licensee's net sales.

Licensor distributes album through Internet streaming Platforms (Licensee).

Licensee collects net sales through various mediums and methods.

The above diagrams demonstrate important difference between a License Agreement and a Work-for-Hire License Agreement.

Advances on Licensing Agreements Advances on licensing agreements are not unique to the music industry but are common practice throughout many industries. An advance is any payment made by the licensee upon

69 the license agreement to the licensor. An advance is treated as an advance against the earned royalty thus the licensee credits the advance against its royalty obligation.107 The minimum royalty is a protection provision that protects the licensor from underperforming or non-performing licenses. A guaranteed minimum royalty and a non-guaranteed minimum royalty are essentially the two types of minimum royalties. A guaranteed minimum royalty obligation means that regardless of sales, the licensee guarantees that the licensor will receive a certain minimum royalty even if the licensee must supplement the earned royalty payments to achieve the minimum amount.108 Sublicensing Sublicensing is a concept that provides the licensee with the ability to relicense the product to a third party but also allows the licensor to receive a royalty rate for sublicenses.109 Most music industry agreements prohibit the grant of sublicenses unless the licensor has the right to approve all sublicenses, which is extremely rare. Licensing agreements include other standard provisions related to accounting and auditing: • • • • • • • •

Payments, Royalty Periods, and Reporting Time of Sale and Related Company Sales Provisions Estoppel and Acceleration Provisions Interest Provisions for Late Payments Survival Provisions Payment Terms for Foreign Payments Audit Provisions Record Retention Provisions

107

Id. at §1.04(A)(3).

Battersby and Grimes, §1.04(A)(4) 109 Id. at §1.04(A)(5) 108

70

These provisions are important to licenses but exceed the scope needed for a standard independent music licensing agreement however all licensing agreements should clearly and unambiguously provide for how and when the licensee should report sales and pay royalties.

Note the music licensing industry operates on a largely quarterly basis but the music publishing industry operates on a semi-annual basis.110

What is a Royalty?

Although at this point you should be very familiar with royalties we will review the concept. A royalty is a standard percentage rate of profits related to an employment contract and license agreement. Often royalties are pre-negotiated based the rates set by the Royalty Rate Board.

What is standard industry Royalty Rates?

If you need more information regarding the standard royalty rates pertaining to your industry please contact the US Copyright Office Royalty Rate Board, http://www.loc.gov.

How do I collect royalties?

Thus far in this guide we have discussed three types of royalties: performance rights royalties; mechanical license royalties; and synchronization license royalties. Performing rights royalties

110

Battersby and Grimes, §1.04(B)(1).

71 are not attributed to a license but are mandated through the nature of owning a copyright however artist must register with a performing rights society to collect performing rights royalties. Mechanical rights and synchronization rights also arise from the nature of owning a copyright but they may be licensed at the owner’s discretion or by mandate via a compulsory license. The easiest way to collect royalties is to register with a royalty collection society (Note this typically applies to music). All other royalties related to other types of art can be negotiated at the copyright or trademark owner’s request subject to standard royalty rates (Note standard royalty rates may vary based on the entertainers popularity and expertise in a certain field or industry).

Who should collect my royalties?

Performing rights and mechanical rights societies, and streaming rights societies collect royalties on behalf of publishers. Publishers then distribute these royalties directly to entertainers. If you are considering registering with a rights society you should contact the following (Note each society calculates, divides and distributes royalties differently thus it is best to review all organizations policies to find the best one for you and your works of authorship):

BMI ASCAP SESAC Tune Core

72

Sound Exchange111 The Harry Fox Agency

PART IV LICENSING AGREEMENTS

111

The Sound Exchange focuses solely on digital royalties from streaming platforms like Pandora, SiriusXM, and other webcasters. For more information visit http://www.soundexchange.com; Digital streaming royalties are authorized through the Digital Performance Right and Sound Recordings Act of 1995. 117 U.S.C § 114.

73

Licensing agreements allow copyright owners to leverage their resources by broadening their geographic reach and product markets. Along with these advantages licensing agreements give copyright owners the ability to obtain early entry into the marketplace, increase market penetration through complementary products, and control exploitation of the original work of authorship.

How do I sell a license in a copyright or trademark that I own?

In 1985 Michael Jackson acquired Sony/ATV’s Beatles catalog with an initial payment of $47112 million dollars then successfully leased them to EMI for an undisclosed amount. Today buying and selling copyrights is a billion dollar business. Recent advances in technology have created new opportunity for individuals to take advantage of licensing opportunities regardless of the size of their catalog. There is no wrong or right way to sell a license. The essential part of your licensing negotiations and agreement is ensuring that you have a protectable copyright and/or registered trademark in the work you are interested in selling. Once you own your mark you should consult your local volunteer lawyer organization for assistance with drafting and negotiating your license agreement. If you feel comfortable negotiating and drafting a licensing agreement on your own here is a list of resources you may want to consider: Donald S. Passman, All About The Music Business

112

Current value: $103, 870, 000 based on US inflation. CPI Inflation Calculator accessed October 5, 2014 data.bls.gov

74 Â Â M. William Krasilovsky and Sidney Shemel with contributors by Matthew J. Fortnow and Glenn Delgado, This Business of Music: A Practical Guide to the Music Industry for Publishers, Writers, Record Companies, Producers, Artists, Agents USPTO, Basic Facts PDF US Copyright Office, Copyright Basics Circular Graphic Arts Guild, Copyright Basics and Common Misconceptions Debunked www.graphicartistsguild.com Arthur R. Miller and Michael H. Davis, Intellectual Property 2nd Ed. Patents, Trademarks, and Copyright (In A Nut Shell) Gregory J. Battersby and Charles W. Grimes, Licensing Royalty Rates, 2015 Edition Graphic Arts Guild, Contractors, Copyrights & Licensing www.graphicartistsguild.com Georgia Film, Video, & Digital Entertainment Sourcebook 2014 www.georgia.org/entertainementindustry Mark Litwak, Contracts for Film & the Television Industry 3rd Ed.

75

How do I purchase a license in a copyright or trademark owned by someone else?

Once you have comfortably negotiated and drafted your own license agreement you are well equipped to begin negotiating with others to purchase in whole or in part interests113 in existing licensing agreements. Thus the heading of this section is misleading, very rarely will you have the ability or income to purchase a license but you will be able to purchase the licensor’s whole or in part interest in any royalty percentage pertaining to a previously negotiated license. For more information regarding buying and selling royalties please visit www.royaltyexchange.com (Note in order to successfully buy and sell copyrights you should have advanced knowledge of licensing agreements and experience in licensing valuation114).

What should I include when drafting a licensing agreement?

113

Licenses often trade similarly to stocks. Copyright owners will sell a small portion or only part of a license that they own. The Royalty Exchange is the most well known marketplace to buy and sell royalties. For more information visit http://www.royaltyexchange.com.

114 Licensing valuation refers to evaluating licenses for their worth. Economists typically use two types of approaches the Markey Approach and the Income Approach. Certain approaches are more suitable than others depending on the type or intellectual property involved. The Market Approach requires an active public market and an abundance of comparable properties. The Income Approach disregards the construction and cost of creating the property and instead focuses on the income producing capability of the intellectual property. For more information of Licensing Valuation please refer to Licensing Royalty Rates, 2015 Ed; See §1.02 Common Methods of Valuing Intellectual Property for Merchandising.

76

After reviewing the aforementioned resources carefully you are now ready to begin drafting your first licensing agreement. Licensing agreements are typical contracts and thus it is essential to include all basic contract elements in your terms however there are six essential clauses defining a legally sufficient115 licensing agreement:

• • • • • •

Compensation Clause Location Clause Modification Clause Adjudication Clause Exclusivity Clause Termination Clause

Compensation clauses within licensing agreements generally address when, how, and why you will be paid; Location clauses refer to the territory and time frame (quarterly, monthly, etc.) in which you are to be paid; Modification clauses determine how your licensing agreement terms can be modified and adjusted for advances in technology, marketing, and/or distribution methods; Adjudication clauses determine in what forum any potential litigation will be addressed (Note some states and territories have vastly different laws

115

Legally sufficient is a concept separate from that of legally valid. A contract is legally valid when it contains terms denoting adequate consideration (bargain for exchange between parties); quantity; price (in the context of licensing agreement this usually refers to the negotiated royalty rate); duration (A license usually sets a fixed term for the license and the conditions under which the license may be renewed for an additional period of time or terminated for breach of the license conditions; and place of delivery (if necessary).

77 addressing contract disputes); Exclusivity clauses state if the license is a sole license or licensed non-exclusively where the licensor retains rights to use the trademark itself, to license it to others, or both; Termination clauses set a fixed term for the duration of the license and state under which conditions the license may be renewed or terminated for breach of the license conditions.

When drafting or reviewing potential licensing agreements you should closely examine any clause discussing these four essential areas of a licensing agreement; compensation, location, modification, and adjudication. In some cases currency is a term to be negotiated, standard independent artist licensing agreements limit compensation to the currency of the territory where artist or performer is a permanent resident or the currency of the territory where the album is distributed.116 Please review the Appendix section of this guide for sample licensing agreements.

How do I modify an existing licensing agreement?

Any modification of the contract terms in your licensing agreement should be taken very seriously. Do NOT attempt to modify an existing licensing agreement without the consent or knowledge of the other party. Oral modifications between parties to an existing licensing agreement will be per se null and void. If you are interested in modifying the terms of an existing licensing agreement please contact your local Volunteer Lawyers Organization for a consultation. In the Appendix of this guide you will a list of all Volunteer Lawyers Organization by state who handle Intellectual Property related legal issues.

116

Passman, at 250 -252.

78

How do I draft an infringement notice?

An infringement notice is a standard form cease and desist letter regarding the infringement of intellectual property. Drafting an infringement notice is a fairly simple legal document. If you are the beneficial owner of an exclusive right you have the right to issue and infringement notice to the known infringer our source providing access to the infringing content.

What Should I Include in my Infringement Notice?

The following sample copyright infringement notice contains the basic parts of an infringement notice.

Dear (Infringer),

Salutation

Our automatic content protection system has detected that your sound “Rubber Duckie (Wub Machine Remix)” may contain the following copyright content: “Get Some Fruit (Wubstep Dubstep Remix)” by Anand Bhatt, owned

by Favorecido Productions. As a result, its publication on your profile has been blocked.

You can dispute this report, if you believe the copyright content has been mistakenly identified or if you have obtained all the necessary rights, licenses and/or permissions to upload and share this material on SoundCloud.

Specifically identify your content and the infringer(s) content. Then state your next course of legal action.

Notify the infringer of their right to respond to your notice. Then provide the infringer with your contact information.

79 Â Â Please do so by filling out our dispute webform at the following link: https://soundcloud.com/settings/disputes/6512879 If you would like to learn more about copyright, please visit our copyright information page.

Thanks, (Copyright Owner or Licensor)

(Note depending on your field, membership in an artist union or art organization provides access to standard form infringement notices that will be mailed and/or issued on your behalf to any known infringer regarding the unlicensed use of your work.)

What should I do if I receive an infringement notice?

If you receive an infringement notice like the one sampled about you MUST immediately comply with the notice unless you have a legal basis to believe that your use of the copyrighted and/or trademarked content falls under Fair Use or the Public Domain. If you need more information after receiving an infringement notice please contact your local Volunteer Lawyers Organization.

*Publicity Rights

80

What are Publicity Rights?

Publicity Rights arise from Invasion of Privacy. The right to privacy117 is invaded by: ▪ unreasonable intrusion upon the seclusion of another (for example, photographing someone through the window of their house, unbeknownst to them); or ▪ appropriation of another’s name or likeness; or ▪ unreasonable publicity given to another’s private life; or publicity that unreasonably places another in a false light before the public.

A person’s right of publicity is the right to protect his or her name or likeness from being commercially exploited without consent and/or compensation. Although the right of publicity arises from invasion of privacy it is also treated as a property right (the right to profit from the use of one’s own image or identity). This includes the use of your: ▪ image (photos, videos, film); ▪ likeness (drawings, paintings, prints, etc.); ▪ name (this includes nicknames and former names); ▪ voice; or ▪ signature.

Preventing invasion of privacy by appropriation of likeness is easier said than done. In the age of social media one’s publicity rights can be easily invaded. Celebrity social media accounts are the most expensive free commodity in today’s entertainment industry. Not only do social media accounts track real time purchases they also give celebrities a unique platform to reach their fans 24/7.

117

Restatement Second of Torts §652.

81

Some pseudo social media accounts allow non- celebrities the unique opportunity to build a fan base from someone else’s persona. Along with a performance artist’s name or persona being manipulated digitally for profit a recording artist also uses his or her name and likeness to drive merchandise sales, and appearance bookings. Merchandise items such as t-shirts and other apparel, books, fragrances, jewelry and headphones and other electronics etc. are often an artist’s main source of income. Publicity rights are thus essential to protecting an artist’s ability to collect income without the interference of other parties. (Note publicity rights protect your interest and ability to negotiate endorsement contracts without the influence of other parties.)

Why should I sell my publicity rights?

Publicity rights are a great opportunity to grow your financial income and increase awareness of your brand. Outside of employment contracts (recording contracts, publishing contracts, and works-for-hire) touring and merchandise sales are an entertainer’s greatest source of income.

How do I sell my publicity rights?

Publicity rights do not require registration under federal law before they can be sold. Your publicity rights are inherent in your person meaning ownership derives from your presence on the earth. While every person maintains their own publicity rights some are more valuable than others. Celebrity publicity rights negotiate in the millions of dollars. So how do you sell your rights? Simple find someone who wants to buy them for way above market value. Most

82 independent artist share a close relationship with their fans and some companies are willing to pay for your relationship’s association with their brand.

The average person discovers new brand through artist relationships, whether it is a new apparel line, food brand, Liquor Company, or transportation app, artist and brand recognition go hand in hand. The majority of publicity right negotiations are for percentages rather than monetary value. Brands usually offer a percentage of profits on the back end for artists and rarely a lump sum payment.118 This percentage is referred to as royalties (we learned this in last chapter as well regarding album royalties). Depending on the industry, profile of the company, and status of the artist brand royalties can range from 3 – 15%.119 Publicity rights are distinct from licensee royalty rates. In the case of a licensee, you have created the next Hunger Games brand and are interested in licensing your brand to NBC Universal for movie production. Publicity royalty rates reference royalty rates for services. In most cases it is difficult to calculate the royalty but compensation is usually tied directly to the extent of the use of the character or celebrity.120

118

Battersby and Grimes at 2-3.

Id. 120 Battersby and Grimes, at 9.

119

83 Â Â

APPENDIXES APPENDIX A Pro Bono Resources California Lawyers for the Arts Legal Referral Service Hotline: 1-888-775-8995 nclegal@calawyersforthearts.org http://www.calawyersforthearts.org/ Colorado Lawyers for the Arts c/o Levine Sullivan Koch & Schulz LLP 1888 Sherman St., Suite 370 Denver, CO 80203 tel: (888) 822-2104 x2 info@coloradolawyersforthearts.org http://www.coloradolawyersforthearts.org/ Connecticut Volunteer Lawyers for the Arts 1 Financial Plaza 755 Main Street Hartford, CT 06103

84 Phone: 860-566-4770 Fax: 860-566-6462 Email: Artsinfo@CtArts.org (specify VLA in the subject line) www.ctarts.org/vla.htm Washington Area Lawyers for the Arts 1629 K Street, NW Suite 300 Washington, DC 20006 tel: (202) 289 4440 fax: (202) 289 4985 legalservices@waladc.org http://waladc.org/ Florida Lawyers for the Arts, Inc. PO Box 2091 St. Petersburg, FL 33731 Phone: 727.823.5809 Fax: 413.826.5809 Email: j@artfulattorney.com www.ArtsLawFL.org

Georgia Lawyers for the Arts Meredith Ragains, Executive Director 887 West Marrietta Street, Suite J-101 King Plow Arts Center Atlanta, GA 30308 (404) 873 3911 www.glarts.org

85 Lawyers for the Creative Arts (Illinois) 213 W. Institute Pl., Suite 403 Chicago, IL 60610 tel: (312) 649-4111 fax: (312) 944- 2195 http://www.law-arts.org Creative Arts Legal League (Indiana) Volunteer Lawyers for the Arts 20 North Meridian St., Ste: 500 Indianapolis, IN 46204 info@indycall.org Louisiana Volunteer Lawyers for the Arts 818 Howard, Ste: 300 New Orleans, LA 70113 tel: (504) 523 1465 fax: (504) 529 2430 http://www.artscouncilofneworleans.org Maine Volunteer Lawyers for the Arts 511 Congress Street, U 1-A PO BOX 17911 Portland, ME 04112-8911 (207) 699-4600 info@mainevla.org http://www.mainevla.org/ Maryland Lawyers for the Arts 113 West North Avenue

86 Â Â Baltimore MD 21201 tel: (410) 752-1633 fax: (410) 752-1090 info@mdartslaw.org www.mdartslaw.org

Volunteer Lawyers for the Arts of MA, Inc. Arts and Business Council of Greater Boston 15 Channel Center Street, Suite 103 Boston, MA 02210 tel: (617) 350-7600 TTY: (617) 350-7600 fax: (617) 350-7610 mail@artsandbusinesscouncil.org http://www.artsandbusinesscouncil.org/ ArtServe Michigan Lawyers for the Creative Economy Riley Broadcast Court 1 Clover Court Wixom, MI 48393 tel: (248) 912-0760 fax: (248) 912-0768 lce@artservemichigan.org www.artservemichigan.org Saint Louis Volunteer Lawyer & Accountants for the Arts 6128 Delmar St. Louis, MO 63112

87 tel: (314) 863-6930 fax: (314) 863-6932 vlaa@stlrac.org www.vlaa.org Lawyers for the Arts/ New Hampshire One Granite Pl. Concord, NH 03301 tel: (603) 224-8300 fax: (603) 226-2963 arts@nhbca.com www.nhbca.com/lawyersforarts.php New Jersey Volunteer Lawyers for the Arts P.O. Box 1520 Laurel Springs, NJ 08021 tel: (856) 963-6300 fax: (856) 963-6301 info@njvla.org www.njvla.org Volunteer Lawyers for the Arts (New York) 1 E. 53rd St., 6th Fl. New York, NY 10022 tel: (212)319·ARTS (2787) ext. 1 fax: (212) 752-6575 vlany@vlany.org www.vlany.org

88 North Carolina Volunteer Lawyers for the Arts PO Box 26513 Raleigh, NC 27611-6513 tel: (919)491-4625 (contact Dan Ellison) fax: (775) 255 5286 info@ncvla.org Volunteer Lawyers and Accountants for the Arts – Cleveland c/o The Cleveland Bar Association 1301 East 9th St., Second Level Cleveland, OH 44114-1253 (216) 696-3525 (Lawyer referral service) www.clevelandbar.org Oklahoma Accountants and Lawyers for the Arts c/o Eric King, Gable & Gotwals One Leadership Sq., 15th Fl. 211 N. Robinson Oklahoma City, OK 73102 tel: (405) 235-5518 fax: (405) 235-2875 eking@gablelaw.com Northwest Lawyers and Artists c/o Swider, Medeiros & Haver 621 SW Morrison Street, Suite 1417 Portand, Oregon 97205 tel: (503) 295-2787 fax: (503) 295-2737 artcop@aol.com

89

Philadelphia Volunteer Lawyer for the Arts 200 S. Broad Street, Ste: 700 Philadelphia, PA 19102 tel: (215) 790-3836 ext.1 fax: (215) 790-3888 e-mail: pvlalegal@artsandbusinessphila.org http://www.artsandbusinessphila.org/pvla/ Ocean State Lawyers for the Arts PO Box 19 Saunderstown, RI 02874 tel: (401) 789-5686 dspatt@artslaw.org www.artslaw.org

Texas Accountants and Lawyers for the Arts 1540 Sul Ross Houston, TX 77006 (800) 526-8252 (toll-free) tel: (512) 459-8252 fax: (713) 526-1299 info@talarts.org www.talarts.org Utah Lawyers for the Arts PO Box 652 Salt Lake City, UT 84110 Contact: Andrew Deiss

90 adeiss@joneswaldo.com Virginia Lawyers for the Arts Phone/fax: 888-223-4674 Email: Ptotaro@cox.rr.com Executive Director: Paige Conner Totaro, Esq. www.arts.virginia.gov Washington Lawyers for the Arts 701 5th Ave, Suite 4100 Seattle, WA 98104 tel: (206) 328-7053 info@thewla.org www.thewla.org Wisconsin Lawyers for the Arts P.O. Box 1054 Madison, WI 53701 tel: (608) 255 8316 info@artswisconsin.org www.artswisconsin.org

APPENDIX B Notice of Compulsory License NOTICE OF INTENTION TO OBTAIN A COMPULSORY LICENSE FOR MAKING AND DISTRIBUTING RECORDS

91 Â Â To: ___________________________________________, copyright owner of the musical work entitled: __________________________________________________ music by: ______________________________, lyrics by: _________________________________.

Pursuant to the compulsory licensee provisions of the United States Copyright Act and the interim regulations issued by the Copyright Office, we hereby apply for a license to make and distribute phonorecords of the above nondramatic musical work, and provide the following information.

1. Full legal name of the person or entity intending to obtain the compulsory license: ____________________________________________________________________________________ _______________________ 2. Fictitious or assumed names used for the purpose of making and distributing phonorecords: ___________________________________________________ ___________________________________________________ 3. Street address: _____________________________________ ______________________________________________________ 4. Business organizations: ____ corporation, ___ partnership, ____ proprietorship 5. Name of individuals who own a beneficial interest of 25% or more in the entity: __________________________________ ______________________________________________________ ______________________________________________________ 6. If a corporation, names of the corporation’s officers and directors: ____________________________________________ _____________________________________________________

92 Â Â 7. Types of phonorecord confirguration(s) intended to be made under the compulsory license: ____ single disc, ____ long playing disc, ___ cassette, ____ CD, ____ MD, _____ DCC. 8. Catalog number(s): __________________________________ 9. Label name(s): ______________________________________ 10. Principal recording artist(s):_________________________ ______________________________________________________11. Anticipated date of initial release: ____________________ ______________________________________________________ We agree to pay royalties at the statutory rate provided for by the Copyright Act; however, we request that we be allowed to render statements and pay royalties quarterly rather than monthly.

Date: ________________ By: ____________________________ (signature) ____________________________ (typed name)

APPENDIX C Synchronization/ Performing/ Master Use and Mechanical License

93 THIS SYNCHROICATION/PERFORMING/MASTER USE AND MECHANICAL LICENSE is made and entered into as of ________, by and between ________ (“Licensor”) at ______ and _______ (“Licensee”), at ________. The parties hereby agree as follows: 1. GRANT OF RIGHTS: Licensor hereby irrevocably grants to Licensee the non-exclusive right to include in the photoplay tentatively entitled “_________” (the “Film”) and in promoting, advertising and publicizing of the Film that certain musical compositions written and owned by Licensor (the “Compositions”) and the recording of an instrumental and vocal performance thereof owned by Licensor (the “Recording”). The license shall continue in perpetuity and be effective for any and all media, whether now known or hereafter devised, throughout the universe. The license shall include, but shall not be limited to, the following: (a) Use of the compositions, and any recording and any performance thereof, in synchronized or timed relation to the Film and nay remake or remakes thereof for exploitation in any and all media now known or hereafter devised (including, but not limited to, audio visual devices), including the recording and distribution of the Film on videocassette, videodisc, by television (including cable, pay TV, and broadcast TV), electronic publishing rights, theatrical and non-theatrical exhibition, and in advertisements in-context and out-of-context, trailers, “music-videos” and other promotional and ancillary uses of the Film or such other audio visual work. (b) Use of the compositions, any recording and any performance thereof, on a soundtrack album including CD’s and tapes (“Album”) and to manufacture, sell, distribute and advertise copies of the Album embodying the Compositions and Recordings by methods and in any configurations now known or hereafter devised; for the release of same under any trademarks, trade names or label; to perform the Compositions and Recordings publicly; and to commit to public performance thereof by radio and/or television, or by any other media now known or hereafter devised, and to permit any other person, corporation or other entity to do any or all of the foregoing. Licensor shall have the right to release the Recording as a so-called single (“Single”).

94 (c) Right to make, import and export copies of the Composition and Recording in the Film.

2. NAME AND LIKENESS: Licensor hereby grants to Licensee the irrevocable universe wide right, in perpetuity, to use and permit others to use Licensor’s name, voice, approved photograph, likeness, and biographical material concerning Licensor in connection with the Film, Album and any photograph records derived therefrom and any promotions and advertisements thereof. Any photograph, likenesses or biographical material submitted or furnished by Licensor to Licensee shall be deemed approved, and, promptly following the execution of this Agreement, Licensor shall submit to Licensee a reasonable assortment of approved photographs, likenesses and biographical materials for use by Licensee in connection herewith. All materials submitted by Licensee to Licensor for approval (which approval shall not be unreasonably withheld) shall be deemed given in the event Licensor fails to submit written objections thereto within five (5) days after the applicable photographs, likenesses and/or biographical materials have been submitted to Licensor for approval.

3. RE-RECORDING: Licensee shall have the right to re-record, edit, mix, and remix, dub, and re-dub the Recording in Licensee’s sole discretion, and nothing contained herein shall be construed to obligate Licensee to employ Licensor in connection with same.

4. COMPENSATION: (a) Provided Licensor fully performs all material obligations under this Agreement, and in full consideration of all rights granted herein, Licensee shall pay or cause to be paid to Licensor, within thirty (30) days of the initial commercial release of the Film, the sum of $______.

95 (b) It is specifically understood and agreed that the sums set forth in this Clause 4 and the record royalties set forth in Clause 5 below shall constitute payment in full to Licensor, and to all persons or entities deriving or claiming rights through either Licensor.

5. ROYALTIES: (a) With respect to the exploitation of the Recording if embodied on the Album or other phonograph records derived therefrom, Licensee shall pay to Licensor a basic royalty at the rate of _____% (the “Basic Album Rate”) of the suggested retail list price (“SLRP”) in respect of net sales of Albums sold through normal retail channels in the United States in the form of black vinyl discs, cassettes, CD, and any other configuration, pro-rated by multiplying the applicable royalty rate by a fraction, the numerator of which is the number one (1), and the denominator of which is the total number of master recordings, including the Recording, contained on the Album (the “Licensor Fraction”). (b) The royalty payable to Licensor for singles, budget records, foreign record sales and other sales of records or exploitations of the Master shall be reduced and pro rated in the same proportion that the basic United States Album rate payable to Licensee in respect of the Album (the “Basic Distributor Rate”) is reduced or pro-rated pursuant to Licensee’s agreement with the applicable Distributor, provided that with respect to such sales of records or exploitations of the Master for which Licensee receives a royalty which is computed as a flat fee or as a percentage of the Distributor’s net receipts from such use, Licensor’s royalty in respect to such sale shall be equal to the amount of Licensee’s flat fee or net receipts, multiplied by the product of the following: Basic Album Rate x Licensor Fraction Basic Distributor Rate (c) Except as otherwise provided in this Agreement, Licensor’s royalties hereunder shall be computed, determined, calculated and paid to Licensor on the same basis (e.g.,

96 packaging deductions, free goods, reserves, definition of suggested retail list price, percentage of sales, discounts, returns policy, taxes, etc.) and at the same times nas royalties are paid to Licensee by the applicable Distributor. (d) Notwithstanding anything to the contrary contained in this Agreement, (i) Licensor shall not be entitled to receive any record royalties at all with respect to records sold prior to the recoupment of all Recording Costs for the Album, if any, and Conversion Costs from the royalties otherwise payable to Licensor hereunder; and (ii) following such recoupment Licensor’s royalties shall be credited to Licensor’s account hereunder solely in respect of records thereafter sold which embody the Recording. The term “Recording Costs” shall mean all direct costs incurred by Licensee in the course of producing and recording any master recordings, including the Recording embodied on the Album and including, without limitation, the cost of studio time, musician fees, union payments, instrument rentals, producer’s fees and advances and the costs of tape, editing, mixing, re-mixing and mastering and other similar costs customarily regarded as recording costs in the phonograph record industry. The term “Conversion Costs” shall mean all direct costs incurred in connection with the conversion of the Recording from use in the Film to use in the Album including, without limitation, new-use, re-use, re-mixing, and re-editing costs and all other costs which are now or hereafter recognized as conversion costs in the phonograph record and motion picture industries. (e) Licensor shall be deemed to have consented to al royalty statements and all other accounts rendered by Licensee, unless specific objection in writing, stating the basis thereof, is given by Licensor to Licensee within one (1) year from the date such statement is rendered.

During this one (1) year period, Licensor may, at its expense, but not more than once annually, audit the books and records of Licensee, solely in connection with royalties payable to Licensor pursuant to this Agreement, provided such audit is conducted by a reputable certified public accountant, during business hours and upon reasonable written notice. Licensor shall be foreclosed from maintaining any action, claim or proceeding against Licensee in any forum or tribunal with respect to any statement or accounting rendered

97 hereunder unless such action, claim or proceeding is commenced against Licensee in a court or competent jurisdiction within one (1) year after the date on which Licensee receives Licensor’s written objection. (f) Licensee shall account to Licensor upon a semiannual basis within 90 days of June 30 and December 31. Licensee shall have the right to rely upon Distributor’s accounting and statements. (g) Licensor shall be entitled to inspect such books and records of Licensee relating to the Album during regular business hours shall be entitled to audit such books and records of Licensee relating to the Album upon reasonable notice to Licensee and provided that not more one (1) audit is conducted every calendar year and further provided that not more one (1) audit is conducted every calendar year and further provided that such audit shall last not more than thirty (3) consecutive business days once begun and does not interfere with Licensee’s normal operations. Within Thirty (30) days of the completion of the audit, Licensor will furnish Licensee with a copy of said audit. All audit expenses shall be borne by the Licensor.

6. CREDITS (a) If the Recording and/or Composition is contained in the Film, Licensee shall accord Licensor a credit in substantially the following form in the end titles of release prints of the Film approximately adjacent to the titles of the Compositions and Recordings: WRITTEN BY: ___________________ PERFORMED BY: ____________________ The type, size, shape, color, placement, duration and all other characteristics shall be at Licensee’s sole and absolute discretion. Without limiting the generality of the foregoing,

98 such credit may be shared with and/or adjacent to credits relating to other contributors to the Recording and/or the Compositions. (b) No casual or inadvertent failure by Licensee or any failure by a third party to comply with the provisions of this Clause 6 shall constitute a breach of this Agreement.

7. WARRANTIES: Licensor, on its own and on Licensor’s behalf, hereby warrants and represents that: (a) it has the full right, power, and authority to enter into this Agreement and to grant all rights granted herein, that it is not under, nor will it be under, any disability, restriction or prohibition with respect to its rights to fully perform in accordance with the terms and conditions of this Agreement and that there shall be no liens, claims, or other interests which any interfere with, impair or be in derogation of the rights granted herein; (b) the Album shall be freely available for use by Licensee, the Single(s) and other phonograph records derived therefrom and in the Film in any and all media (whether now known or hereafter devised) in which the Film is to be distributed (and in any and all publicizing, promoting and advertising therefor), throughout the universe including, without limitation, in theaters, free and pay television, in home video devices, and in radio, television and theatrical trailers, without further payment by Licensee, except as set forth herin; (c) any party who may be entitled to Licensor’s exclusive recording services shall have given a written waiver of such rights in connection with Licensee’s exploitation of the Recording as herein provided; (d) Licensee shall not be required to make any payments of any nature for, or in connection with, the acquisition, exercise or exploitation of rights by Licensee pursuant to this Agreement except as specifically provided in this Agreement;

99 (e) Neither the Recording, nor the Compositions nor any other material supplied by Licensor will violate or infringe upon any common law or statutory right of any person, film, or corporation including, without limitation, contractual rights, copyrights, and rights of privacy. (f) Licensor owns or controls 100% of the Recording and the Composition.

8. INDEMINITY: Licensor hereby agrees to indemnify Licensee, Licensee’s successors, Licensee’s distributors, sub-distributors and assigns, and the respective officers, directors, agents and employees of each of the foregoing, from and against any damages, liabilities, costs and expenses, including reasonable attorneys’ fees actually incurred, arising out of or in any way connected with any claim, demand or action inconsistent with this Agreement or any warranty, representation or agreement made by Licensor herein.

9. REMEDIES FOR BREACH: Licensor’s rights and remedies in the event of a breach or alleged breach of this Agreement by Licensee shall be limited to an action at law for damages, if any, and in no event shall Licensor be entitled by reason of any such breach or alleged breach to enjoin, restrain, or to seek to enjoin or restrain, the distribution or other exploitation of the Film, Album, Single, or other work which may embody the Recording and Licensee shall not have the right to rescind this Agreement. This Agreement shall not be deemed to give ay right or remedy to any third party whatsoever unless the right or remedy is specifically granted by the parties hereto in writing to the third party. Licensor shall execute any further documents necessary to fully effectuate the intent or purposes of this Agreement.

10. ASSIGNMENT: Licensee shall have the right, at Licensee’s election, to assign any of Licensee’s rights hereunder, in whole or in part, to any person, firm or corporation including, without limitation, any distributor or sub-distributor of the Film, Album or other phonograph records derived therefrom, or other work which may embody the Master.

Licensor shall not assign rights without Licensee’s prior written consent and any attempted

100 assignment without such consent shall be void and shall transfer no rights to the purported assignee.

11. ENTIRE AGREEMENT: This Agreement sets forth the entire understanding of the parties thereto relating to the subject matter hereof and supersedes all prior agreements, whether oral or written, pertaining thereto. No modification, amendment, or waiver of this Agreement or any of the terms or provisions hereof shall be binding upon Licensor or Licensee unless confirmed by a written instrument signed by authorized officers of both Licensor and Licensee. No waiver by Licensor or Licensee of any terms or provisions of this Agreement or of any default hereunder shall affect their respective rights thereafter to enforce such term or provision or to exercise any right or remedy upon any other default, whether or not similar.

12. RIGHT TO CURE: No failure by Licensee to perform any of Licensee’s obligations hereunder shall be deemed a breach hereof, unless Licensor gives Licensee written notice of such failure and Licensee fails to cure such nonperformance within thirty (30) days after Licensee’s receipt of such notice.

13. NOTICES: All notices hereunder shall be sent certified mail, return receipt requested, or delivered by hand to the applicable address set forth below, unless and until written notice, via registered mail, to the contrary is received by the applicable party.

If to Licensee: ____________(Licensee), ______________ (Licensee Address); courtesy copies to __________________, _____________________.

If to Licensor: _____________, __________________.

Notwithstanding the foregoing, all accounting statements and payments may be sent by regular mail. Except as required by law, the date of mailing of such notice shall be deemed the date upon which such notice was given or sent.

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14. APPLICABLE LAW: This Agreement has been entered into in the State of ________, and its validity, construction, interpretation and legal effect shall be governed by the laws of the State of ________________ applicable to contracts entered into and performed entirely within the State of ______________.

15. ARBITRATION: Any controversy or claim arising out of or relating to this Agreement or any breach thereof shall be settled by arbitration in accordance with the Rules of the American Arbirtraion Associaton. The parties select expedited arbitration using one arbitrator as the sole forum fro the resolution of any dispute between them. The venue for arbitration shall be ___________. The arbitrator may make any interim order, decision, determinations, or award he deems necessary to preserve the status quo until he is able to render a final order, decision, determination or award. The determination of the arbitrator in such proceeding shall be final, binding, and non-appealable. Judgement upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The prevailing party shall be entitled to reimbursement for costs and reasonable attorney’s fees.

IN WITNESS WHEREOF, the parties hereto executed this Agreement as of the year and date first above written.

“Licensor” ________________________ (Licensor) Accepted And Agreed To: “Licensee”

102 Â Â ___________________________ (Licensee) APPENDIX D Television Film Synchronization License To:___________________________TV Lic. #__________ Date _____________________________ Composition:_________________________________________ 1.

In consideration of the sum of _____________________________ payable upon the execution hereof, we grant you the non-exclusive right to record on film or video tape the above identified musical composition(s) in synchronization or timed relation with a single episode or individual program entitled ________________________________________________ for television use only, subject to all of the terms and conditions herein provided.

2. (a) The type of use is to be _____________________________________________________ (b) On or before the first telecast of the said film, you or your assigns agree to furnish to us a copy of the Cue Sheet prepared and distributed in connection therewith.

3.

The territory covered by this license is the world.

4. (a) This license is for a period of ________________________ from the date hereof, (b) Upon the expiration of this license all rights herein granted shall cease and terminate and the right to make or authorize any further use or distribution of any recordings made hereunder shall also cease and terminate.

5.

This is a license to record only and does not authorize any use of the aforesaid musical composition(s) not expressly set forth herein. By way of illustration but not limitation, this license does not include the right to change or adapt the words or to alter the fundamental charactlicense issued by us or frer of the music of said musical composition(s) or to use the title(s) thereof as the title or sub-title of said film.

6.

Performance of the said musical composition(s) on the exhibition of said film is subject to the condition that each television station over which the aforesaid musical composition(s) is are to be so performed shall have a performance license issued by us or

103 Â Â from a person, firm, corporation, society, association or other entity having the legal right to issue such performance license.

7.

No sound records produced pursuant to this license are to be manufactured, sold, and/or used separately or independently of said film.

8.

The film shall be for television use only and may not be televised into theatres or other places where admission is charged.

9.

All rights not herein specifically granted are reserved by us.

10.

We warrant only that we have the legal right to grant this license and this license is given and accepted without other warranty or recourse. If said warranty shall be breached in whole or in part with respect to (any of) said musical composition(s), our total liability shall be limited either to repaying to you the consideration theretofore paid under this license with respect to such musical composition to the extent of such breach or to holding you harmless to the extent of the consideration theretofore paid under this license with respect to such musical composition to the extent of said breach.

11.

This license shall run to you, your successors and assigns, provided you shall remain liable for the performance of all of the terms and conditions of this license on your part to be performed and provided further that any disposition of said film or any prints thereof shall be subject to all the terms hereof, and you agree that all persons, firms or corporations acquiring from you any right, title, interest in or possession of said film or any prints thereof shall be notified of the terms and conditions of this license and shall agree to be bound thereby. ____________________________________ (Licensor) By ____________________________________

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