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At the Crossroads Right of Copyright Law

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At the Crossroads Right of Copyright Law
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THE MAGAZINE OF THE LOS ANGELES COUNTY BAR ASSOCIATION
AW
MAY 2014 / $4
PLUS
EARN MCLE CREDIT
Right of
Publicity
Copyright Law
Meets New
Technologies
page 36
page 23
Termination
of Copyright
page 10
Taxation
of Art
page 13
Unauthorized Use
of Trademarks
page 30
At the
Crossroads
Los Angeles lawyer
Shaun Clark discusses the
considerations involved in brand
integration deals
page 18
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F E AT U R E S
18 At the Crossroads
BY SHAUN CLARK
Scripted and reality television, music videos, motion pictures, and video games
are among the media to be considered for brand integration deals
23 Copyright Capabilities
BY ANDREW M. WHITE AND JOSHUA M. KEESAN
Two recent copyright cases involve the safe harbor defense and the right of
public performance
Plus: Earn MCLE credit. MCLE Test No. 235 appears on page 25.
30 Making the Mark
BY LEE S. BRENNER AND AUDREY JING FABER
A trademark owner does not have the right to control all depictions of the mark
on film and television
36 Other People’s Personas
BY MARK S. LEE
Courts have created eight tests for reconciling the right of freedom of speech to
the intellectual property rights of others
Los Angeles Lawyer
D E PA RT M E N T S
the magazine of
the Los Angeles County
Bar Association
May 2014
9 Barristers Tips
Adding value to large-scale litigation as a
junior associate
44 Closing Argument
How a private jury trial worked for my
client
BY JOHANNA JACOB
BY ROY JIMENEZ
10 Practice Tips
Negotiating contracts involving copyrights
subject to termination
42 Index to Advertisers
BY BERNICE CONN AND DAN STONE
43 CLE Preview
Volume 37, No. 3
COVER PHOTOGRAPH:
TOM KELLER
13 Tax Tips
Estate and tax guidance for artists and
collectors
BY BRADFORD S. COHEN, SARAH M. JOHNSON, AND
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4 Los Angeles Lawyer May 2014
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6 Los Angeles Lawyer May 2014
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C
utting-edge legal issues often arise at the intersection
of entertainment and technology. For example, in this
age of digital video recorders, how do studios, networks, and cable channels capture the attention of advertisers
who are increasingly looking to redirect their activities to other
platforms? The key may be found in brand integration, which is not merely a
euphemism for product placement. In brand integration deals, brands—products or
services—are used directly in the storyline of the picture or program for artistic purposes and to achieve specific objectives to drive the business of the brand. While brand
integration opportunities appear to deliver fantastic value for advertisers, there are
numerous risks that must be identified and managed in order to achieve that value.
Shaun Clark’s article offers a comprehensive guide to effective brand integration deals.
Another issue producers and distributors confront is how to apply existing legal
protections to the changing modes in which consumers experience entertainment. For
example, in a study reported by Mashable, 34 percent of millennials watch mostly
online video and no broadcast television. According to the Fourth Annual Media
Engagement Barometer, more people now watch TV and movies on tablets in their
bedrooms than on TVs. The article by Andrew M. White and Joshua M. Keesan analyzes recent litigation that showcases “judicial efforts to reconcile longstanding
legal principles with changing technologies.” The article focuses particularly on two
cases. First is Viacom v. YouTube, which addressed the safe harbor for service
providers in Section 512(c) of the Copyright Act. Then it turns to American
Broadcasting Companies, Inc. v. Aereo, Inc., which is presently pending before the
U.S. Supreme Court. In that case, the Court has been called upon to answer the novel
question whether it is lawful for a Web site to retransmit, without authorization, television programming that is broadcast over the air.
In addition to novel issues, other perennial questions producers and broadcasters and distributors face have been evolving. For example, can a trademark owner
assert a Lanham Act claim against a studio if the owner believes that its trademark
has been damaged by its portrayal in the movie or television program—or does First
Amendment protection render these claims moot? The perceptive article by Lee S.
Brenner and Audrey Jing Faber offers guidance.
Television and movies are not the only forms of entertainment subject to complex balancing tests. Mark S. Lee—another author of preeminent knowledge and
experience—lists eight tests in his article concerning video games that use the likenesses of athletes. Another complex area of law involves the termination rights provided in the Copyright Act. Applying termination rights is no simple task. The Practice
Tip by Bernice Conn and Dan Stone cracks the code on the complex procedural rules
that govern the application of these rights. Finally, while brushes and paint are not
exactly cutting-edge technology, tax advice for artists and collectors can be, as
Bradford S. Cohen, Sarah M. Johnson, and Charles K. Kolstad demonstrate in their
article that uses the famous artwork Scream as an example of how proper estate and
tax planning can save collectors money and help keep artists from starving.
■
For independently administrated matters:
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California • Chicagoland • New York Metro • Atlanta
8 Los Angeles Lawyer May 2014
Caroline Y. Bussin is an attorney with Kilpatrick Townsend & Stockton LLP, where she focuses
her practice on all forms of intellectual property enforcement, protection, counseling, and litigation. Gary S. Raskin is the principal of Raskin Anderson Law, LLP, where his practice involves
entertainment transactions with an emphasis on motion pictures and finance. Thomas H.
Vidal is an entertainment and IP litigator with Abrams Garfinkel Margolis Bergson, LLP. Bussin,
Raskin, and Vidal are the coordinating editors of this special issue.
barristers tips
BY JOHANNA JACOB
Adding Value to Large-Scale Litigation as a Junior Associate
NEW ATTORNEYS AT LARGE LAW FIRMS are often added to multiat- check the judge’s standing order. Becoming knowledgeable on local
torney teams on complex litigation. For partners and senior attorneys patent rules by searching blogs that follow the intricacies of these rules
on the case, a complex case may be only one of many large-scale lit- can prove invaluable to any case brought by the firm in that local jurisigations in which they are involved. These cases can seem over- diction. For example, many of the more active jurisdictions for patent
whelming, but by following some simple steps a new attorney can learn litigations have blogs that follow those districts and even certain judges.
Fourth, it is important to read the protective order. In complex litthe ground rules of the case and become an invaluable asset to the team.
The primary task is to read the case management and scheduling igation there often are confidentiality agreements that need to be honorder that contains all dates essential to the case. These dates need to ored. All documents received and produced must be treated approbe recorded on a personal calendar and color coded by case basis. This priately under the protective order. A junior associate is often tasked
is especially important on multiple litigation teams. Many large law firms with production-related issues. Familiarity with the protective order
have a calendaring department that will do this
automatically, but it is always important to
check their calculations. For each date, a
Attorneys always advocate for their clients, but junior attorneys
reminder should be set two weeks and two days
in advance. Depending on the type of deadline
and the amount of time needed to comply with
must advocate for themselves.
it, the timing of the reminders may vary.
At two weeks, if a more senior attorney
on the team has not begun work yet, an inquiry
should be made to the managing attorney to see if help is needed to is essential to treating these documents appropriately. For example,
prepare for the upcoming deadline. This serves to remind the team in patent litigation, source code often has unique protections. Further,
of an important deadline that may be off the radar while allowing there may be restrictions on the amount of code and the number of
enough time to meet the deadline. It also provides awareness that there consecutive pages of code that can be printed. There may be unique
is a junior attorney who understands the case and who wants to help. instructions for printing and producing the code, such as a requireAt two days, checking with the managing attorney to see if any help ment that it be delivered by hard-copy three days after the request for
is required to file or serve the documents related to the deadline serves printing was made, on colored paper, with line numbers and comments
to maintain awareness of the timing of the motion or discovery dead- preserved. All of these restrictions require extra time to comply.
Fifth, it can be very helpful to point out inconsistencies to more
line and ensures that someone is available who knows how to complete these tasks. For example, electronic filing requires using the senior attorneys. Anyone can make a mistake. The more checks and
proper credentials in that jurisdiction. Legal assistants are often not balances in a case, the more likely that something important will not
available if the filing needs to be completed outside of business hours. slip through the cracks. If an important interrogatory is served, and
The junior member of the team should ensure that all procedural prob- a more senior attorney provides a summary, taking a few minutes to
lems are worked out before the filing date in order to avoid undue stress. confirm that the contents of the document match that attorney’s
Second, it is important to calculate hidden, easily missed deadlines. summary can save the firm embarrassment and money. Always be preFor example, it is essential to calculate the last day to serve discov- pared to admit a mistake. Communication is essential to a fully
ery and be able to receive a response prior to fact discovery cutoff. functioning team, and almost everything can be remedied.
The final step entails asking for opportunities to attend hearings,
This varies depending on the forum. Factoring in the ability to file a
motion to compel can be useful in the event that the supplied responses depositions, or other activities that a junior associate might otherwise
are inadequate. Some district courts require meet-and-confer ses- not be able to attend. If the firm wants to keep the bills low, it is prefersions prior to bringing discovery disputes before the court. Bringing able to offer to attend without expense to the client. Some firms proa motion to compel prior to the close of fact discovery should there- vide shadowing hours, which allows a junior attorney to shadow these
fore factor in the days required to request a meet-and-confer with opportunities without billing the client. Affirmatively asking disopposing counsel. Once hidden deadlines are calculated, the calcu- plays confidence, demonstrates keen interest in the case, and signals
lations should be double checked and calendared in the same man- to senior attorneys a willingness to take on greater responsibilities in
the case. Attorneys always advocate for their clients, but junior
ner as the scheduling order with a two-week and two-day alarm.
■
The third step is to become familiar with the local rules. For attorneys also must advocate for themselves.
example, different federal courts have local patent rules that vary
among states and even among district courts in the same state. Local
Johanna Jacob, an associate in the Los Angeles office of Orrick, Herrington &
rules are essential to calculating hidden dates because they often
Sutcliffe, specializes in intellectual property matters, including complex
have specific discovery and motion rules. It is also important to
unfair competition and trade secret litigation.
Los Angeles Lawyer May 2014 9
also
practice tips
BY BERNICE CONN AND DAN STONE
Negotiating Contracts Involving Copyrights Subject to Termination
WHEN J. K. ROWLING COMPLETED THE FIRST Harry Potter novel the termination provisions goes even further, stating that Congress did
in 1995, she was a struggling single mother eager to sell her rights, not intend to “prevent the parties to a transfer or license from voland no one, including Rowling, knew that she had just authored untarily agreeing at any time to terminate an existing grant and
a global phenomenon. The termination provisions of the 1976 negotiating a new one.”3 Under the plain language of the statute, a
Copyright Act are designed to give an author like Rowling the grantor can contract his or her termination rights away before he or
chance to terminate her original copyright grant and renegotiate it she ever has the opportunity to exercise those rights, but only by
after the value of the copyright is established in the marketplace. regranting those rights to the original grantee. This exclusive right of
In short, the termination provisions allow an author to get paid based renegotiation—and, specifically, when and how an author or heir can
on what the copyright is worth and not based on what buyers contract away termination rights to the original grantee—has been
were willing to pay before the copyrighted work had an audience. the subject of two published Ninth Circuit decisions.
While the concept behind termination rights
may be straightforward, taking advantage of
these rights is not.
Until the law is clarified, agreements between an author or heir
Even for intellectual property practitioners, the termination of transfer provisions of
the 1976 Copyright Act are a specialized area
and an original grantee should either expressly extinguish prior
of law. Sections 203 and 304 of the 1976
Copyright Act and the applicable regulations1
are detailed and complex, and case law has
grants and regrant the underlying copyright or expressly reserve
done little to simplify them. For example, if
coauthors entered into a single copyright grant
after January 1, 1978, only a majority of those
the grantor or heir’s termination rights.
authors or their statutory heirs2 can effect termination. Before that majority can terminate,
the statute requires the grantors or their heirs
In Milne ex rel. Coyne v. Stephen Slesinger, Inc.,4 the Ninth
to determine the proper termination window, a five-year period that
may begin either 35 years after the date of execution of the grant at Circuit first addressed this issue. In 1930, the author of the Winnie
issue, 35 years from the date of publication under the grant, or 40 the Pooh books, Alan Milne, assigned certain North American rights
years from execution of the grant, depending on the circumstances. in those books to Stephen Slesinger in exchange for royalties. Slesinger
Even after determining the proper termination window, termination assigned those rights to a corporation (SSI), which, in 1961, granted
can only be effected after serving proper written notice to the origi- those rights to Walt Disney Productions.
nal grantee or its successor in interest during a separate window
In 1983, after the deaths of Milne and his wife, the Pooh works
between two and 10 years before the effective date of termination. were in their notice and termination windows. Milne’s only son,
Rights holders must therefore consider their termination rights years Christopher Robin Milne, entered into an agreement with Disney and
if not decades in advance.
SSI in which Christopher agreed not to seek termination, expressly
These complex procedural aspects of Sections 203 and 304 also revoked his father’s prior grants, and expressly regranted his rights
include an apparent paradox. On one hand, Sections 203 and 304 pro- in the Pooh works to SSI, which, in turn, regranted many of its
vide that an author or statutory heir may effect termination “notwith- rights to Disney. The 1983 contract was far more lucrative for
standing any agreement to the contrary, including an agreement to Christopher than any prior grant. He died in 1996, and his daughmake a will or to make any future grant.” The Copyright Act does ter Clare was his beneficiary.
not define an “agreement to the contrary.” Sections 203 and 304 also
In 1998, Congress amended Section 304 by way of the Copyright
provide that “a further grant, or agreement to make a further grant, Term Extension Act (CTEA) and created a second window for cerof any right covered by a terminated grant is valid only if it is made tain authors to terminate pre-1978 grants. In 2002, Clare attempted
after the effective date of the termination.” Thus, the termination pro- to cut SSI out of the equation by serving SSI with a notice of termivisions clearly restrict how and when a grantor or his or her heirs may nation of the pre-1978 grants and simultaneously assigning her teralienate their termination rights.
mination rights to Disney.
On the other hand, Sections 203 and 304 provide an exception
The Ninth Circuit reversed a district court’s finding that Clare’s
in which the grantor or his or her heirs may provide a “further
grant” to the “original grantee or such grantee’s successor in title, after
Bernice Conn and Dan Stone practice in the Entertainment and Media Litigation
the notice of termination has been served.” The legislative history of Department of the Los Angeles office of Robins, Kaplan, Miller & Ciresi LLP.
10 Los Angeles Lawyer May 2014
terminations were valid, holding that her termination notices were invalid for two reasons.
First, the Ninth Circuit affirmed that the
CTEA only allows for termination of pre1978 grants. The court held that because
Christopher had expressly extinguished any
pre-1978 grants by way of the 1983 agreement, there were no remaining pre-1978
grants for Clare to terminate.
Second, the court held that the 1983
agreement was valid and not an “agreement
to the contrary” because Christopher revoked
the prior grants and regranted his rights with
full knowledge of his termination rights and,
in the process, secured a better deal. The
court concluded that Christopher used his
termination rights as a bargaining chip in a
renegotiation with the original grantee as
contemplated by Section 304, which the
Ninth Circuit interpreted as permitting an
author or heir to give up his or her termination rights before serving a termination
notice.
Classic Media, Inc. v. Mewborn
The Ninth Circuit returned to the same
topic in Classic Media, Inc. v. Mewborn,5 a
case concerning the intellectual property
rights to the fictional dog Lassie. In this
case, author Eric Knight granted the pertinent television rights to Classic Media’s
predecessor in interest, LTI, before his death
in 1943. Knight’s heirs—a wife and three
daughters—filed their copyright renewals
under the 1909 Copyright Act between 1965
and 1967. In 1976, Knight’s daughter Winifred Mewborn entered into an agreement
selling, assigning, and granting her 25 percent share of the motion picture, television,
and radio rights in Lassie to LTI. Mewborn’s
two sisters assigned the same rights, plus
other ancillary rights, to LTI in 1978. In
order to conform the sisters’ differing grants,
Mewborn entered into another agreement
with LTI in 1978 again assigning her share
of the motion picture, television, and radio
rights and assigning the same ancillary rights
that her sisters had assigned. Mewborn’s
1978 agreement explicitly stated that her
grant was “in addition to” the 1976 grant. In
1996, Mewborn served a notice purporting
to terminate the 1976 agreement. The district
court found that Mewborn’s termination was
invalid because she intended to relinquish
and impliedly waived her termination right by
way of the 1978 agreement.
The Ninth Circuit reversed. The court
held that the 1978 agreement was an agreement to the contrary because, as opposed to
Christopher Milne, Mewborn did not have
the right to serve a termination notice at the
time she entered into that agreement and
therefore had nothing with which to bargain. The court also found that the 1978
agreement did not reference Mewborn’s termination rights and there was no other evidence to support Mewborn’s intent to relinquish those rights in the 1978 agreement.
Noting that Mewborn signed the 1978 agreement as is, without the advice of counsel,
the court found that Mewborn had merely
assigned her previously unassigned ancillary
rights to LTI by way of the 1978 agreement.
In this decision, the Ninth Circuit appears to
require two preconditions for an author or
heir to validly assign his or her termination
rights to the original grantee. One is that the
copyright be within the statutory notice period
at the time of the agreement, and the second
is that there must be evidence that the author
or heir contemplated assigning his or her termination right.
The Superman Case
If the Lassie decision brought some semblance of order to copyright terminations,
it appears that the Ninth Circuit’s recent
decision in DC Comics v. Pacific Pictures
Corporation6 may have restored chaos. The
unpublished case, referred to as the Superman decision, concerns a 1992 agreement in
which DC Comics agreed to provide lifetime
pensions to the siblings of the deceased cocreator of Superman, Joseph Shuster. The 1992
agreement, which is governed by New York
law, provides that it “fully settles all claims
regarding any copyrights, trademarks, or
other property right in any and all work created in whole or in part by…Joseph Shuster,
and further now grants to DC any such
rights.” In a majority opinion, the Ninth
Circuit affirmed the district court’s judgment
invalidating the termination notice of the
Shuster heirs and held that, as a matter of
New York law, the 1992 agreement constituted a revocation and regrant of the copyright in Superman.
In doing so, the Ninth Circuit rejected
the argument that federal law imposes certain
additional requirements on a revocation and
regrant, such as that it must be in express
terms. Relying on its finding that the 1992
agreement was a regrant under New York
law, the court went on to hold that the 1992
agreement was not an agreement to the contrary because “it would permit the copyright
termination provision to extinguish a post1977 copyright assignment.”7 The majority
failed to recognize that prior to the passage
of the CTEA in 1998, only a surviving child
or spouse could terminate. Thus, as noted in
the dissent, it is unclear how Shuster’s siblings—who arguably had no termination
rights prior to 1998—could have assigned
those rights by way of the 1992 agreement.8
The Superman decision should be viewed
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as a cautionary tale for attorneys. The relationship between the author of a valuable
copyright and an original grantee often lasts
for decades and may involve numerous agreements that may span more than one generation. An attorney drafting an agreement
involving a copyright should always consider the agreement’s effect on termination
rights. If one party to the agreement is an original grantee, the attorneys should consider
whether the counterparty is a statutory heir
or potential statutory heir. The Superman
decision raises the possibility that potential
statutory heirs, such as an author’s trustee,
may be capable of assigning prospective termination rights before they stand to inherit
those rights.
When a transaction involves an original
grantee and a statutory heir or potential
statutory heir, another question is what state’s
law will govern the contract. After the Superman decision, it appears that state contract
law may become increasingly important in
determining whether an agreement that does
not expressly address termination rights
nonetheless constitutes a revocation and
regrant, thereby extinguishing the termination
right.
The one clear lesson from the Superman
decision is that any new agreement between
an author or heir and original grantee should
expressly address termination rights. As the
Superman decision demonstrates, courts can
be unpredictable in the manner in which they
interpret the impact of agreements that do not
expressly address such rights. Accordingly,
until the law is clarified, agreements between
an author or heir and an original grantee
should either expressly extinguish prior grants
and regrant the underlying copyright or
expressly reserve the grantor or heir’s termination rights.
■
1 See
37 C.F.R. §201.10.
the author is no longer alive when the termination
right vests, 17 U.S.C. §§203 and 304 mandate the
author’s heirs who stand to inherit his or her termination rights: the author’s widow or widower, children,
or grandchildren—or, absent any surviving spouse or
issue—the author’s executor, administrator, personal
representative, or trustee.
3 H.R. Rep. No. 94-1476 at 127.
4 Milne ex rel. Coyne v. Stephen Slesinger, Inc., 430 F.
3d 1036 (9th Cir. 2005).
5 Classic Media, Inc. v. Mewborn, 532 F. 3d 978 (9th
Cir. 2008).
6 DC Comics v. Pacific Pictures Corp., No. 12-57245
(9th Cir. Nov. 21, 2013).
7 Id. at 5.
8 The Superman decision, id., is the latest in a series concerning the copyright in Superman. In that decision and
a prior one—In re Pacific Pictures Corp., 679 F. 3d
1121 (9th Cir. 2012)—the Ninth Circuit expressed
concern as to the ability of a joint venture between the
heirs and a corporation headed by their counsel to
exploit any Superman works recovered by way of the
termination notices at issue.
2 If
12 Los Angeles Lawyer May 2014
tax tips
BY BRADFORD S. COHEN, SARAH M. JOHNSON, AND CHARLES K. KOLSTAD
RICHARD EWING
Estate and Tax Guidance for Artists and Collectors
THE STRUGGLING ARTIST HAS NEVER had an organized lobby in
Congress, a fact reflected in the Internal Revenue Code’s different treatment of artists and art collectors. While based in logic, certain code
provisions can leave artists feeling jilted, especially when compared
to the tax treatment of their patrons, the art collectors. Lawyers
who represent artists or collectors should therefore be aware of how
tax rules affect artists and collectors differently.
For example, one should hesitate before accepting a gift of art from
an artist. Owners of art are treated differently for income tax purposes when art is sold compared to when art is donated to charity.
When a work of art is sold, it can be classified as either ordinary
income property or capital gain collectible property. If a work of art
is held by a collector for more than one year, it is usually a capital
gain collectible property, gain on the sale of which is subject to tax
at a maximum federal rate of 31.8 percent (28 percent plus the 3.8
percent net investment income tax that was phased in beginning in
2013).1 Gain from the sale of art that is ordinary income property
is taxed at a maximum federal rate of 39.6 percent.2 A work of art
is ordinary income property in four circumstances:
• It has been owned for one year or less at the time of the sale,
• It is part of the inventory of an art dealer,
• It was created by the seller, or
• It was received by the seller as a gift from the creator.3
Should the recipient of a work of art gifted by the donor or creator later try to sell the work, the seller will pay tax on the gain at
higher, ordinary income rates. How is this gain calculated? At the most
basic level, gain is the difference between the sales price of the work
of art and the seller’s basis in the work. Like the federal tax rates, basis
is also determined differently for collectors and artists. The collector’s
basis is the purchase price; the artist’s basis is the cost of the materials used to create the work of art. Paint brushes can be expensive, but
their cost would get allocated over multiple paintings sold during their
useful life. Unless one is sculpting out of gold, an artist’s basis in a
creation is likely to be insignificant. Until a work of art is sold or the
owner dies, that almost-zero basis stays with the work.
For example, imagine that a contemporary Edvard Munch paints
Scream with canvas, brushes, and paints costing $150 and sells the
painting to a billionaire some time later for $120 million. 4 The
artist’s tax liability is determined as follows: $120 million sale price
less $150 cost basis equals $119,999,850. Applying the 39.6 percent
ordinary income tax rate results in a tax liability of approximately
$49.5 million.
If instead the painter had given Scream to his sister, Sophie, shortly
after he painted it, and Sophie sold the work several years later for $120
million, she would also have to pay federal ordinary income taxes of
about $49.5 million. The result is different, however, if Edvard had
sold the work to his sister for its fair market value immediately after
he painted it. In this scenario, he charges her only the cost of his materials, $150. When Sophie sells the work several years later for $120
million, she still has a basis of $150 (her purchase price), so the
amount of her gain is the same, but her federal tax rate is 31.8 percent. Her tax liability is just over $38 million—a tax savings of over
$11 million in comparison to having received the painting as a gift from
the artist.
This example is extreme, but it shows why it is better to buy art
than to receive it as a gift. When the recipient later sells the work, he
or she will be taxed at the collectible capital gain tax rate and not the
higher ordinary income tax rate.
Donations to Charities
There is almost no income tax incentive for an artist to donate his or
her works to charity during the artist’s life. An artist’s charitable contribution deduction is limited to his or her basis in the work of art—
the cost of materials.5 So the artist will receive little to no income tax
benefit from the contribution. However, if the artist makes the donation at death, the artist’s estate will receive an estate tax charitable
contribution deduction of 100 percent of the full fair market value of
Bradford S. Cohen is a partner at Venable LLP in Los Angeles whose practice
focuses on business and tax matters for clients in the motion picture, television, music, emerging media, and sports industries. Sarah M. Johnson is
a partner at Venable in Washington, D.C., whose practice includes estate
planning and administration for high net worth clients with significant
interests in art. Charles K. Kolstad is of counsel at Venable in Los Angeles;
his practice focuses on taxation in the entertainment industry.
Los Angeles Lawyer May 2014 13
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14 Los Angeles Lawyer May 2014
the work. Nevertheless, several nontax reasons may exist for giving an artist’s works
to a museum during life. If the museum will
display the artist’s work, the public exposure
can increase the artist’s popularity with art
critics, collectors, and the general public,
thereby increasing the value of the artist’s work
overall.
A recipient of a gift of art from an artist
is subject to the same charitable contribution
rules as the artist. If Sophie from the example received Scream as a gift from its creator, her charitable income tax deduction
would also be limited to $150—the cost of her
brother’s materials. On the other hand, if the
billionaire donated the work to a museum
immediately after purchasing Scream for
$120 million, the billionaire would receive a
charitable contribution deduction up to the
full fair market value of the work, which
should be the $120 million purchase price.
When a collector makes a charitable contribution of a work of art, the collector is entitled to deduct up to 30 percent of his or her
adjusted gross income (AGI).6 Alternatively,
a collector can elect to deduct up to 50 percent of his or her AGI if his or her deduction
is limited to the basis in the work rather than
the work’s fair market value.7 Immediately
after a purchase would be the perfect time to
make the 50 percent deduction election, as the
collector’s basis and fair market value should
be the same. This may be an unusual scenario,
however, as one wonders why a collector
would want to donate a recently purchased
work to charity. The collector could have
second thoughts, or the work could not fit its
intended use. Contributions of cash to charity are also eligible for the 50 percent of AGI
limitation, so one would not likely buy a
work of art and then donate it for the sole
purpose of increasing the percentage limitation. Instead, one would simply donate cash
to the charity.
An ideal time to make the 50 percent
deduction election would be when the beneficiary of an estate receives a work of art on
account of a person’s death. All assets get an
adjustment to basis at death that resets the
basis to the asset’s fair market value.8 If an
artist has charitable inclinations and is married, the artist could leave his or her collection to the surviving spouse, and the surviving spouse could then make the charitable
donation and deduct 50 percent of his or her
AGI, because the basis of the collection would
equal its fair market value due to the basis
adjustment at the artist’s death.
Charitable contribution deduction rules
apply when the work of art is donated to a
public charity or an operating foundation only
if the donee organization uses the work in a
manner related to its exempt purpose.9 A use
is presumed to be related to the charitable
purpose if art is donated to a museum that generally displays art of a similar type. When the
use is either not related, or when the charity
is a private foundation (as opposed to a public charity or an operating foundation), the
charitable contribution deduction will be limited to the donor’s basis in the work, regardless of whether the donor is a collector or an
artist. Donations of art to a private foundation
are also capped at lower levels—20 percent of
the collector’s AGI and 30 percent of the artist’s
AGI (as opposed to 30 percent and 50 percent
caps, respectively, for deductions to a public
charity for a related use).
A public charity is an organization that is
primarily funded by the general public, such
as a university, hospital, museum, or other
organization that actively conducts its charitable purpose. An operating foundation also
actively conducts its charitable purpose, but
it receives most of its funding from one family. The Crystal Bridges Museum of American
Art in Bentonville, Arkansas, is a prime example of an operating foundation that engages
in activities in furtherance of its charitable
purpose, having been funded with three
endowments from the Walton family totaling
$800 million.10 The world-class art museum
offers free admission to the public.
None of these complicated rules about
related use, type of organization, or varying
percentage limitations for creators and collectors applies to the contribution of art to a
charity at death. The estates of both artists
and collectors are able to deduct 100 percent
of the fair market value of the property contributed to a charitable organization at death,
for any type of charity, whether it is a public charity, an operating foundation, or a private foundation.11 Many high-profile artists
and collectors, such as Andy Warhol, Robert
Rauschenberg, Robert Motherwell, and
Frederick Weisman left their art collection to
a private foundation at death. Doing so allows
the art to be kept together as a collection
and avoids the need for a fire sale of the art
at death in order to raise funds to pay estate
taxes. The foundation can hire staff to archive
the works, create catalogues raisonne, and
continue to promote the artist or the collection after death by arranging retrospectives or
exhibitions with museums.
Copyright
When an artist creates a work of art, he or she
also creates a copyright in the work. The
U.S. copyright laws treat a work of art and
the related copyright as two separate property
interests, but our tax laws have always treated
works of art and the copyrights therein as two
interests in the same property.12 This inconsistency makes it impossible to obtain a lifetime charitable income tax deduction for a
donation of art to a charity if the copyright
is not also specifically transferred with the
work. The Code disallows the charitable contribution income tax deduction for gifts of
partial interests in property.13
For yet another reason to wait until death
to donate an artist’s works to charity, the
estate tax rules were changed in 1981 to treat
the work of art and the copyright as two
separate property interests. Therefore, a charitable contribution deduction from the estate
tax is available in certain situations if the
artist gives a work of art to charity at death
but leaves the copyright to the surviving
spouse, children, or other heirs. To receive a
charitable contribution deduction for the art
given to charity when the charity does not also
receive the copyright, the art must be given
to a public charity or operating foundation,
and the use of the property by the organization must be related to its exempt purpose.14
These are the same requirements that allow
a collector to deduct the full fair market
value of a charitable contribution of art. If the
work of art is donated without the copyright
to a private foundation or to a charity that
cannot use the work of art in a manner related
to its exempt purpose, the estate tax charitable
contribution deduction for the value of the
work of art is denied.
So, Edvard could leave Scream to the Getty
Foundation at his death (which would display
the work for the benefit of the general public),
leave the copyright to his sister Sophie, and
receive an estate tax charitable deduction
of $120 million—the fair market value of
Scream. Each time the Getty Center store sold
a book, postcard, mug, or T-shirt with the
Scream image, Sophie would receive a royalty.
On the other hand, if Edvard left Scream to
the hospice that cared for him in his dying days
and the copyright to Sophie, his estate may
have to pay a 40 percent estate tax on the
value of Scream (a liability of $48 million) if
it is determined that the painting was not
related to the charitable purpose of the hospice. No estate tax charitable deduction would
be allowed. The hospice, however, could take
the position that the art on its walls is therapeutic and helpful to its patients, so that the
relatedness test would be satisfied. This position is frequently taken by hospitals, which
accounts for much of the art on their walls.
Whether the IRS would accept the therapeutic-use argument in the case of a hospice
rather than a hospital is unclear.
Artists need to be careful when specifically
bequeathing works of art to charity in their
wills. A bequest of “my painting entitled
‘XYZ’ to the ABC Church; all the rest and
residue of my property to my children” would
probably result in the copyright’s passing
with the residue under state law. If the ABC
Church cannot satisfy the related-use test,
the estate tax charitable contribution is
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denied. The safest course of action is to specifically include the copyright in the bequest
unless the artist has confirmed with the charity in advance that its use of the art will be
related to its exempt purpose. Collectors do
not typically own the copyrights in the works
of art they have purchased, so these rules
usually apply only to artists.
Like-Kind Exchanges
In certain cases, it may be possible for an artist
or art collector to do a tax-free exchange of
art under Section 1031. There are several
hurdles that must be overcome to qualify for
like-kind exchange treatment. First, the owner
must qualify as an investor and not as a
dealer or collector (collectors buy and hold the
art for their own appreciation, not for the
appreciation in the value of the art). Both
pieces of art must be held for investment and
must be of “like kind.”15 For example, an
exchange of an oil painting for a sculpture or
a photograph would not constitute a like-kind
exchange. In addition, the transaction needs
to be accomplished through a qualified intermediary, and the other technical rules for
these exchanges must be properly followed,
such as filing Form 8824.
If the requirements for a like-kind exchange
are satisfied, then the owner does not recognize
gain at the time of the exchange unless cash
is received in an adjustment to properly reflect
the respective fair market values of the art. Furthermore, the tax basis of the old art becomes
the tax basis of the new art.
When an artist or art collector sells a
piece of art, generally sales tax is collected and
paid to the appropriate state tax agency.
There are exceptions for a sale to a buyer who
has a valid resale permit, for occasional sales
(under California’s sales tax rules, this means
selling one or two pieces of art a year), or if
the art is shipped out of California under a
contract requiring that the art be shipped
out of state. California aggressively seeks to
impose and collect its sales tax. California’s
Resale Royalty Act requires the payment of
a 5 percent royalty to certain artists when
their works are sold. If the seller is a California
resident or if the sale occurs in California, the
royalty may be due. There are several pending court cases on the validity of this act.
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16 Los Angeles Lawyer May 2014
When artists or collectors choose to leave
their art to their family and not to charity, one
concern is often the lack of liquid assets to pay
any estate tax that results from the inclusion
of the art collection in the taxable estate. For
an artist with an estate under the $5 million,
inflation-adjusted federal estate tax exemption,16 this is not a concern. But for the successful artist or wealthy collector, estate tax
will often be assessed on the art left to fam-
ily members. Careful planning must be undertaken to avoid a grossly unfair result if the
estate sells the works after the artist’s or collector’s death.
If the artist’s or collector’s estate sells the
works through an auction house or an art
broker, it will pay the auction house or art
broker a commission on the sale of the
works. Often, the commission can be as high
as 20 to 35 percent of the sale price. If a work
sells for $100,000, for example, the estate
will receive only $65,000 to $80,000. Also,
if the work of art is sold during the period
of estate administration, the sales price usually is deemed to be the work’s fair market
value. At a 40 percent rate, this results in an
estate tax of $40,000. If the family pocketed
only $65,000 from the sale and owes a tax
of $40,000, then they will receive only
$25,000 on the sale of a $100,000 painting.
This sad result can be avoided with proper
planning.
The expenses of the sale of estate assets,
including broker’s commissions, are only
deductible if the estate assets must be sold in
order to pay the decedent’s debts, taxes (including estate taxes), or to effect distributions.17 If
the decedent had other liquid assets that allow
for the art’s not being sold in order to pay the
estate tax, no deduction will be permitted for
the broker’s commissions. If, however, the
artist’s or collector’s will mandates that the art
be sold and the proceeds distributed to the family, the expenses should be deductible, as the
sale is necessary to effect the distribution of the
estate in accordance with the will. If the will
of the decedent in the example above had
included this instruction, the family would
have owed the 40 percent estate tax on only
the $65,000 pocketed after the sale, walking
away with $39,000 instead of $25,000.
An even better result, however, would be
to find a broker who would be willing to
serve as the art executor of the estate. This
broker would receive commissions by way of
an executor’s fee. The executor’s fee is always
deductible as an expense of administration,
regardless of whether the will mandates that
the art be sold or not. In California, an executor is entitled to a statutory fee ranging from
4 percent (for small estates) down to .5 percent (for large estates) of the estate assets. This
fee would be paid to the broker in lieu of commissions. The broker could serve as executor
along with other family members who would
not take a commission.
The tax rules applicable to artists and art
collectors can be surprising and have divergent results depending on whether the taxpayer created, purchased, or received the
art as a gift. Understanding these rules can
help mitigate some of the feelings of unfairness that may be experienced by the artist or
the gift recipient and can ensure the best
possible result for the heirs and the art
community.
■
1 I.R.C.
§§1(h)(4), 1411(a)(1).
§§1(a)-(e).
3 I.R.C. §1221(a)(3)(C).
4 Edvard Munch’s Scream was auctioned for almost
$120 million. Kelly Crow, An Art Mystery Solved:
Mogul Is Scream Buyer: Financier Leon Black Paid
Nearly $120 Million for Munch Pastel at May Auction,
WALL STREET J. (July 11, 2012).
5 I.R.C. §170(e)(1)(A). Treas. Reg. §1.170A-4(b)(1)
defines “ordinary income property” to include, for
example, “property held by the donor primarily for
sale to customers in the ordinary course of his trade or
business, a work of art created by the donor, a manuscript prepared by the donor, and letters and memorandums prepared by or for the donor.” This is consistent with the definition of property denied characterization
as a capital asset under I.R.C. §1221(a)(3).
6 I.R.C. §170(b)(1)(B)(i).
7 I.R.C. §170(e)(1)(B); Treas. Reg. §1.170A-4(b)(2).
8 I.R.C. §1014(a).
9 I.R.C. §170(e)(3).
10 Press Release, Crystal Bridges Museum of American Art
Announces Endowment Gifts from Walton Family Foundation (May 4, 2011), available at http://crytabridges
.org/press-releases/crystal-bridges-museum-of-american
-art-announces-endowment-gifts-from-walton-family
-foundation.
11 I.R.C. §2055.
12 I.R.C. §170(f)(3); Treas. Reg. §1.170A-7.
13 I.R.C. §170(f)(2), (3).
14 I.R.C. §2055(e)(4).
15 I.R.C. §1031(a)(1).
16 I.R.C. §2010(c)(3).
17 Treas. Reg. §20.2053-3(d)(2).
2 I.R.C.
Los Angeles Lawyer May 2014 17
At the Crossroads
by Shaun Clark
t the crossroads of Hollywood
Boulevard and Madison Avenue, a
variety of legal and business issues
must be considered and addressed
in order to set the stage for a successful brand integration deal. In
the historical television network model, the
advertiser-brand indirectly finances the content by purchasing television commercial
spots on a television network, and the network uses the revenues from the commercial
spots to acquire content from studios or independent producers with the expectation of
making a profit on the margins between the
cost of the content and the value of the advertising.
In the new world of greatly expanded
channels of distribution, more opportunities
are open for advertiser brands to deliver their
messages to particular demographics. Opportunities exist for brand integration into the
programming, for characters in the program
to represent or use a brand, for brands to be
featured on the desks of judges, for brands to
be the prizes that are sought by competitors,
18 Los Angeles Lawyer May 2014
or for brands to otherwise appear within the
story of the show. Integrations take place in
all forms of audiovisual content, including
scripted television series, reality series, talk
shows, games shows, movies of the week,
music videos, theatrical motion pictures,
video games, Web-specific digital content,
viral videos, and content for in-store use.
Among other benefits, when the brand is
integrated into the content (as opposed to
appearing as a commercial), it is more difficult for the viewer to fast forward through the
message.
No simple answer exists to the question of
how brand integration deals happen. Currently, countless independent reality producers and production companies are attempting
to identify the perfect combination of business
ties, compelling characters, and interesting
stories to create the next big hit. Likewise,
brand and advertising agencies are looking for
new opportunities to establish or deliver brand
messaging and to identify suitable content
for the target demographic. Sometimes the
studio or producer of an existing, established
series looks to generate additional dollars for
the production budget by selling integrations
into their series. Also, it is not uncommon for
network media sales executives to parlay the
value of television commercials or aggregate
specific media into the programming as a
component of the media package that the
brand may purchase. The prominent advertising agencies recognize the value of a successful brand integration and are now developing specific content, including television
series, around brands.
At first glance, brand integration opportunities appear to deliver fantastic value,
costing far less than the old model of paying
for production of a commercial and then
paying additional amounts to have it exhibited. The first glance deserves a second look,
however, because successful brand integration
is not that easy. Risks can be managed, but
A partner in the Entertainment, Technology and
Advertising practice group at Sheppard Mullin, Shaun
Clark has represented producers, agencies, and
brands in negotiations regarding branded content.
KEN CORRAL
A
Brand integration deals involve copyright,
trademark, and insurance considerations
they should be carefully considered and
addressed before embarking on a brand integration adventure.
Some issues are of equal concern to household names and to start-ups striving for brand
recognition. With others, the difference in
approach and tolerance for risk varies
between the established national public company and the smaller single-owner business.
The deals increase in complexity when the
integration includes more than just the brand
and the content, and negotiations among the
brand, the producer, and the distributor (i.e.,
the network, in the case of television) can be
very complex. No two situations are the
same, leverage can vary dramatically from
deal to deal, and the unique brand- or seriesspecific issues require that the various representatives think about each variable and
address all legal and business issues during the
deal negotiations (and often after). A prudent
lawyer or executive should consider every
possible factor in determining whether a proposed brand integration opportunity is right
for the client or should be avoided.
For example, a successful brand integration
may showcase the brand, but it is not a commercial. If a commercial fails, the brand can
simply elect not to exhibit the commercial. On
the other hand, if the content featuring the
integration does not favorably depict the
brand, the brand will have little to no ability
to stop delivery of the content. In an unscripted
show, for example, the brand’s products could
malfunction or otherwise appear in a manner
detrimental to the brand. While steps can be
taken to reduce the likelihood of a negative
depiction (e.g., limit involvement to scripted
projects), brand executives who want to realize the value of a successful integration may
be willing to take the risk.
Before taking the risk, however, executives
should understand that they will not have sole
control over how the brand is depicted or
what role the brand will play in the content.
With scripted content, the brand may simply
ask to read each teleplay or screenplay to
determine how the brand is being depicted
and whether there is any component of the
content that is objectionable to the brand or
inconsistent with its message. However, in
reality programs or video games, this issue
may not be as easy to address because of the
uncertainty of what will result after turning
the cameras on or making the video game. In
situations in which there is no way to ensure
that the brand’s product is going to be
depicted in a positive light or that the product will function properly when being filmed,
the key is to negotiate basic parameters
regarding the use of the products within the
content and to be as involved as possible in
production. Occasionally, the studio producing the content is secretive about the
20 Los Angeles Lawyer May 2014
screenplay (for example, the next installment
of a major superhero franchise). The studio
will only provide the brand with a basic
description of how the product is going to be
depicted, and it is up to the brand to determine whether it is comfortable enough with
what the studio or director is saying about
how the brand will be used.
The most successful integration permits
the brand to deliver a specific message, showcases a new product or service, and independently activates promotions. Sophisticated
brands seek to engage key talent from the content in separate promotional appearances or
the production of commercials or additional
content specific to the brand. Sometimes,
success is found in a jointly funded copromotional campaign, promoting the content
and the brand. For example, an auto manufacturer’s new line of vehicles is depicted in
a hot new video game and the video game
publisher and the auto manufacturer coproduce a series of television commercials around
the launch of the video game. This additional
content drives mutually beneficial brand
awareness for the automobile brand and the
content. These types of copromotional campaigns can be very successful, but they often
require significant resources from the brand
for activation of the campaign and the purchase of media.
The monetary aspects of brand integration
deals vary considerably. With some deals,
the brand pays for all or some of the production costs. Often the brand provides some
in-kind consideration, such as free vehicles,
accommodations, or use of the branded products, including as prizes for contest winners.
In other situations, producers and networks
make the argument that the content’s contribution to the brand is so valuable that
they want an equity interest or participation
in sales of branded products. The brand may
even be considered so essential that the brand
receives a fee for involvement in the content.
Depending upon the level of integration
into the program, it is becoming more prevalent that the networks seek a concurrent
media buy. In other words, the brand may be
require to purchase advertising on the network. This dynamic occurs more frequently
when the brand is seeking the integration or
paying a portion of the production cost. The
ad sales teams at networks receive commissions and so are likely to want to make sure
that they are being compensated in a situation
in which money that might otherwise have
gone to purchasing advertising is instead
going to cover production costs. From the
brand’s point of view, a brand that purchases
media during the exhibition of the content is
more likely to be able to protect against
ambush marketing during the content. No less
important, the greater the investment in the
success of the program and the relationship—
often evaluated by financial contribution—the
greater the likelihood of being able to seek
“make goods” if things do not go as planned
or if the ratings for the program are lower
than anticipated. “Make goods” are additional benefits accorded to a brand or advertiser when the integration does not meet minimum expectations or the ratings for the
content are materially below the values used
to calculate the fees paid by the brand for the
integration or commercial advertising inventory. Make goods often come in the form of
additional integration of the brand in future
episodes or content or additional exhibition
of the brand’s commercials.
While concurrent media buys are fairly
common, other agreements also occur. For
example, a brand may become a producer or
coproducer of the content and receive a fee,
ownership, or potential backend participation.
Brands even occasionally finance all or a
majority of the costs of developing or producing the content rather than just paying an
integration fee or purchasing media. When the
brand is a financier, it can seek the protections
typically accorded to financiers. These range
from repayment of financial contributions,
participation in revenues derived from exploitation, and ownership or attachment to
subsequent productions. Attorneys for brands
should remember that without a proper agreement, a successful initial release (e.g., a motion
picture or the first season of a series) in which
the brand plays a key role may be followed
by a second release in which the producer or
network elects not to be affiliated with the
brand, or even elects to be affiliated with a
competitor of the brand.
Workplace Production
When cameras are permitted in the brand’s
workplace as a component of the integration,
it can be burdensome and create issues with
the brand’s employees. A television episode
may only be 22 minutes long, but the filming
that goes into production can take days, if not
weeks, and can be very intrusive in the workplace. A workplace is not necessarily as interesting on film as it is in real life, and requests
are often made to enhance the workplace for
the filming. Often, art such as posters may be
removed to avoid rights claims, and additional lighting is required. Customers may be
asked to sign releases when they visit the
brand’s premises. The brand has to be prepared for the disruption of a production team’s
filming employees for weeks and weeks, with
multiple crews maneuvering to capture the
required footage. It is, therefore, very important to have a comprehensive understanding
of the producer’s expected access requirements and production-related accommodations before completing a deal.
In some situations, the brand’s employees are not deemed to be ideal for television.
Producers may request that the brand hire
new employees who may be more attractive
for the television audience. The brand’s regular employees can prove problematic. Each
employee represents the brand, and the things
an employee says or does not say can have positive or negative effects on the success of the
brand, making it all the more important to
screen the employees who will be involved in
the content to assure that selected employees
obtain adequate media training before the
cameras start recording.
Throughout the production process the
brand should foster a close relationship with
the producer in order to mitigate production
issues. What may be best for the program
may not be best for the brand, and vice versa.
Except in special circumstances, brands should
not expect final approval over the content. A
good relationship with the producer goes a
long way toward avoiding situations in which
a network refuses to eliminate a particular storyline or scene that could be problematic for
the brand. For example, it can be good entertainment if a product malfunctions or employees are disrespectful to customers behind their
backs. With a respectful producer, these scenes
may not even make it to the rough cut.
Negotiating the Deal
Regardless of the level of sophistication of
the brand and its executives, the value of the
brand, and how much the producer or financing network desires to include the brand
within the content, brands can take certain
precautions during negotiations to protect
the brand. In a brand integration deal, the
brand accords the producer and network the
right to depict the brand in the content. The
producer or network will control the exploitation of the content pursuant to a very broad
license. It is not uncommon for brands to
seek reasonable limitations on the use of the
brand and to block footage depicting the
brand in copromotions with third-party
brands, certain merchandise, or in any programs other than the content in which the
footage was filmed.
Additionally, brands should determine if
the integration agreement contains minimum obligations regarding the nature of the
depiction of the brand in the content. First,
brands should be cautious when considering integration into content that does not
have guaranteed distribution. Even with guaranteed distribution, it is a mistake to think
that because the brand is permitting a producer to shoot at the brand’s facilities, they
will appear in the final content. The brand
may expect that when one of its employees
appears on screen, a graphic will identify
that person (e.g., John Smith, VP of Customer
Relations at Brand). However, without a contractual obligation to depict the brand for a
certain amount of time, or that there will be
graphic identification or voice-over recognition of the brand during the content, the producer may not include the shots, graphics, or
audio references that deliver value to the
brand. In situations in which the brand has
a significant amount of leverage or is paying
for the integration, minimum depiction
requirements and even potentially minimum
protections regarding the time and date of
exhibition of the content should be set forth
as obligations or as conditions to payment of
any integration fee.
Networks and producers will sometimes
require strict confidentiality agreements in
connection with the brand integration deal.
For example, the success or failure of contestbased reality programming is maintaining
secrecy over who wins, who gets a rose, or
who goes home until the initial public exhibition of the episodes. It may be weeks or
months between the completion and exhibition of an episode. As a result, the networks
and producers require strict confidentiality
obligations from anyone who is involved in the
production, and this includes the brands
involved in providing benefits or services in
connection with the content. As a brand executing an integration agreement, internal procedures must be established to avoid the disclosure of confidential information, as even
inadvertent disclosures can result in damage
claims in the millions.
To ensure the brand gets the most from the
integration arrangement, a brand may want
to prohibit the depiction of a competitor in
the content. If a brand’s integration deal is for
one episode, it is unlikely that the brand will
have the leverage to demand categoric exclusivity for the entire series. For example,
episode one of a series could feature the
brand’s new vehicle extensively, and the brand
may be able to negotiate that no other automobile brands will be prominently featured
in that episode or that no other auto brands
can purchase advertising during the episode.
Episode two, however, could be home for a
new integration deal with a competitive automobile brand. This can be acceptable. However, the owner of a high-end sushi restaurant
that is the inspiration for a new series called
The Sushi Samurai may not countenance
other sushi chefs or restaurants in the same
episode, season, or subsequent seasons,
because the affiliation between the brand
and the series is so inextricably linked that an
association with another sushi restaurant
could be detrimental to the brand. Likewise,
if the brand is making a real contribution to
the costs of production, it is reasonable to seek
protections against the integration of (or even
the mention or depiction of) competitors in
the same content.
There also may be implications for the
brand if competitors are allowed to advertise
during the content. A brand that makes a significant contribution to the series (e.g., through
a media buy, contribution to production financing, or extensive access to the company and its
employees) is often able to obtain protections
from the producer and the network that the
network will not exhibit competitor advertising during the program. While the definition
of “competitor” or “categoric exclusivity”
can be subject to a significant amount of negotiation, it is essential that a brand not make a
big investment into a series and leave open the
possibility that a brand competitor can engage
in ambush marketing during the program. For
example, consider an adventure-driven competition series in which an auto manufacturer
contributes vehicles for the contestants to
drive, pays an integration fee, purchases commercial spots on the network, and agrees to
promote the series at its dealerships. In that situation, it would be disastrous for the network
to sell a competitive automobile brand advertising during the program. It is therefore essential that the brand negotiate its expectations
and exclusions in detail.
When negotiating the integration agreement, a brand should determine whether the
agreement will limit the brand’s normal media
exposure. The producer or network may seek
to limit media exposure of the brand in the
weeks or months leading up to the initial
exhibition of the content and sometimes for
a period thereafter. These types of restrictions may not be consistent with the ongoing
customary media strategy for the brand or
may be inconsistent with the brand’s expectations in connection with the integration.
Sometimes these restrictions can even go as
far as to limit or restrict key executives from
making appearances in the press or on other
television programming during a window
around the initial exhibition of the content.
It is crucial that the brand fully understand
the expectations regarding any restrictions on
the brand prior to proceeding forward with
the integration.
Finally, a brand should evaluate the opportunity to utilize the content for its own purposes and how to do so. The brand may be
able to help copromote the content through
its digital platforms, social media, e-mail,
and point-of-sale materials. In most brand
integration relationships the brand does not
own the content. As a result, any use of the
content (or even references to it) needs to be
made pursuant to a license from the entity
that owns the content. The licensed use is
likely to be subject to approvals designed to
maintain the quality and consistency of message regarding the content. The use also must
avoid divulging confidential information
Los Angeles Lawyer May 2014 21
regarding the content. If there are celebrities
or actors depicted in the content that the
brand desires to license, this can trigger an
additional layer of approvals and royalty
obligations.
Little Case Law, but General Guidance
Brand integration arrangements are relatively
new to the legal landscape and, as a result, a
dearth of legal precedent exists to guide parties and their representatives. These deals
involve a variety of general legal issues that
do appear in case law, which in turn can
affect agreements.
For example, if the brand’s business
involves significant trade secrets or confidential information about customers, careful
consideration should be given to the access
accorded to the producers of the content.
Contracts should address procedures to avoid
disclosure of trade secret or confidential information. A florist who handles celebrity weddings may have confidential information
regarding a wedding that is subject to an
nondisclosure agreement. A medical facility
may have HIPPA liability regarding patient
information. A security company or advertising agency could have information that
should not be broadcast to the world. The
brand needs to consider and negotiate appropriate limitations on what can and cannot be
recorded or divulged, and the brand should
take steps to adequately police this process
during production.
If the brand is going to be involved in the
production of the content, the brand should
make sure that adequate insurance exists for
the production. Special insurance policies are
available to protect producers. The brand’s
general liability insurance policy may or may
not cover claims arising out of production
(e.g., a fire started by a short in production
equipment). Thus, it is prudent to not only
confirm coverage with existing carriers but
also have the brand added as an additional
insured on the policy carried by the producer.
It is also common that the brand be added to
the producer’s errors and omissions policy.
Further, the brand should understand that
in most situations its remedies will be limited
by contract. In other words, in the event of
a material breach—even one regarding depiction of the brand—it may not be possible to
seek any type of injunctive relief as these
contracts usually limit the brand’s remedies
to monetary damages or make goods.
The brand should also be aware that the
law requires disclosures regarding any promotional consideration paid for inclusion of
products or services in content exhibited on
television. Section 317 of the Communications
Act1 requires that stations broadcast a notice
NotSoBIGLAW.com
copyright • trademark
NOT SO BIGLAW® is a service mark of Paul D. Supnik
that there is a sponsorship arrangement in
connection with television programming when
money, services, or other consideration have
been provided in exchange for the agreement
to include a brand or product in programming.
As a result, the brand engaging in a brand integration deal with content that is going to be
broadcast should expect to hear a voice-over
or see credits stating, “Promotional consideration was provided by Brand.”
Trademark issues can also arise, especially if the content has a title that includes
the brand’s trademark. If the content is based
on the brand (e.g., a television series about a
fashion designer and her company called Hot
Fashion) and the producer wants to use the
brand in the title of the content (e.g., the
series will be titled Hot Fashion), discussions
should take place regarding the scope of
rights accorded to the producer in connection
with the use of the brand’s trademark. While
the proposed use of the brand’s name and
trademarks in the title of the content might
be valuable for the brand, it can create confusion in the marketplace and present a legal
puzzle for those crafting the agreement. For
example, the producer and network may seek
to sell Hot Fashion T-shirts at Target in promotion of the content, but that might not be
consistent with the Hot Fashion company’s
exclusive distribution arrangement with
Neiman Marcus. When this issue arises, the
trademark rights accorded to the producer
and network should be subject to a carefully
crafted license. Similar issues arise in connection with the official Web site for the content, as the brand will want to ensure that
consumers seeking the brand’s products or services are not misdirected to the series site
when attempting to purchase the brand’s
products online.
Traffic is increasing at the intersection of
Hollywood and Madison. Ultimately, the
quality of the content is the most determinative factor in the success or failure of the
integration. If the content is compelling, it is
more likely that a greater number of people
will view the content and that when it is
viewed it will resonate favorably with the
viewer. However, it is possible that great content with significant viewership can be considered a failure for the brand. Sometimes
even less successful content can still be considered a win for the brand. Addressing the
foregoing factors does not guarantee a successful brand integration deal. However,
lawyers and executives charged with responsibility for these deals will certainly be better
able to sleep at night knowing that they have
addressed these issues, matching expectations with obligations and mitigating risk for
their clients.
■
1
22 Los Angeles Lawyer May 2014
47 U.S.C. §317.
MCLE ARTICLE AND SELF-ASSESSMENT TEST
By reading this article and answering the accompanying test questions, you can earn one MCLE credit.
To apply for credit, please follow the instructions on the test answer sheet on page 25.
Copyright Capabilities
by Andrew M. White and Joshua M. Keesan
A
Courts continue to be challenged to reconcile
the Copyright Act to new technologies
s consumers shift to experiencing
television, movies, and other entertainment through Internet-based
delivery systems, broadcasters, studios, and other traditional content
providers struggle to preserve their
intellectual property rights (and income
streams) under legal frameworks that were
devised in an earlier, less technological environment. The proliferation of new content
distribution technologies has also led to an
array of new methods to misappropriate
works without obtaining permission from
the owners of the intellectual property in
those works. When old laws are interpreted
with respect to technology that was unfore-
seen when the laws were enacted, how can
content producers, distributors, and lawyers
understand what is permissible?
Recent litigation continues to demonstrate
judicial efforts to reconcile longstanding legal
principles with changing technologies. Two
areas of acute interest in this conflict between
copyright protection and technological innovation are 1) Internet services that allow
users to upload and share video clips without
permission from copyright owners, and 2) an
Internet service that allows its customers to
view broadcast television programs over the
Internet, even though the program owners did
not grant the service provider permission to
copy or transmit the programs. The first con-
flict was addressed under a particular safe
harbor provision of the Digital Millennium
Copyright Act (DMCA) in Viacom v. YouTube.
The second conflict is found in American
Broadcasting Companies, Inc. v. Aereo, Inc.
The implications of these cases for content
owners, potential infringers, and service
providers are significant.
In 1998, recognizing that existing copyright law was in need of an update for the
Andrew M. White is a partner and Joshua M. Keesan
is an associate in the Los Angeles office of Kelley Drye
& Warren LLP. The authors represent film, television,
and other entertainment companies in intellectual
property and general business litigation.
Los Angeles Lawyer May 2014 23
digital age, Congress passed the DMCA.1
The act includes Title II, the Online Copyright Infringement Liability Limitation Act,2
the purpose of which is “to detect and deal
with copyright infringements that take place
in the digital networked environment.”
Rather than rewrite copyright law in its
entirety, Congress created safe harbors to
exclude liability for certain common activities of service providers.3 The four safe
harbors under Section 512 of the act are
for 1) transitory communications, 2) system caching, 3) storage of information on
systems or networks at the direction of users,
and 4) information location tools.4 Notably,
these safe harbors apply only “if the provider
is found to be liable under existing principles of law.”5
The third safe harbor deals with information uploaded by users onto systems or networks and is only available if the service
provider 1) does not have actual knowledge
that the material or an activity using the
material on the system or network is infringing, 2) in the absence of such actual knowledge, is not aware of facts or circumstances
from which infringing activity is apparent, or
3) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material.6
Although securing adequate rights and
avoiding intellectual property disputes can be
a tricky business even under more traditional
content delivery models, things get trickier in
the case of the many Internet services (such
as YouTube, Vimeo, and others) that allow
users to upload and share content of their
own. In these situations, the safe harbor is
important in defending against infringement
claims. Although video sharing sites have
proven to be remarkably popular, useruploaded content raises a number of copyright
concerns for rights holders.
infringing” and “facts or circumstances from
which infringing activity is apparent” should
be construed to mean a general awareness that
infringements are widespread and common,
or instead to mean actual or constructive
knowledge of “specific and identifiable
infringements of individual items.”9 The district court concluded that the latter approach
was proper.10
Part of the rationale for this decision was
that, unlike most statutory schemes, the
DMCA places the burden of policing copyright infringement on the copyright owners
rather than on the defendant.11 Thus, the
DMCA safe harbors do not condition protection on whether the service provider
actively monitors its service or affirmatively
seeks facts indicating infringing activity. What
matters is what the service provider does
after learning about infringing material.12
The district court concluded that, based on the
record on summary judgment, it was uncontroverted that when YouTube was given takedown notices by Viacom and others, it quickly
removed the potentially infringing material.
As a result, YouTube was thus protected from
liability.13
The plaintiffs appealed immediately, arguing that if affirmed, the district court’s interpretation of Section 512(c) “would radically
transform the functioning of the copyright system and severely impair, if not completely
destroy, the value of many copyrighted creations.”14 Rather than looking to specific
instances of actual knowledge of infringement, the plaintiffs argued that under the
DMCA, Internet service providers “that not
only are aware of pervasive copyright infringement, but actively participate in and profit
from it, enjoy no immunity from the copyright
laws and may be held to account for their
theft of artists’ creations.”15
Viacom v. YouTube
In April 2012, the Second Circuit issued its
unanimous opinion.16 On the central issue of
the requirements of DMCA safe harbor found
in Section 512(c)(1)(A), the Second Circuit
noted that the act offers two scenarios—one
subjective and one objective. The court held
that the reference in Section 512(c)(1)(A)(i) to
a service provider’s “actual knowledge that
the material or an activity using the material
on the system or network is infringing,”
implicates the defendant’s subjective belief—
in other words, liability turns on “whether the
provider actually or ‘subjectively’ knew of specific infringement.”17 On the other hand,
under Section 512(c)(1)(A)(ii), which provides a safe harbor for a provider that “in the
absence of such actual knowledge, is not
aware of facts or circumstances from which
infringing activity is apparent,” liability turns
on “whether the provider was subjectively
The challenges of interpreting the requirements of the safe harbor found in Section
512(c) came to a head in Viacom International,
Inc. v. YouTube, Inc.7 The case, which was
merged with a case brought by various film
studios, music publishers, and sports leagues,
sought substantial damages for the alleged
public performance, display, and reproduction
of approximately 79,000 clips appearing on
YouTube between 2005 and 2008.8
In 2010, the U.S. District Court for the
Southern District of New York granted summary judgment to YouTube and its parent
company Google, finding that YouTube was
entitled to safe harbor protection. In reaching this determination, the critical question for
the district court was whether the safe harbor’s phrases “actual knowledge that the
material or an activity using the material…is
24 Los Angeles Lawyer May 2014
The Second Circuit’s Opinion
aware of facts that would have made the
specific infringement ‘objectively’ obvious to
a reasonable person.”18 Thus, the Second
Circuit affirmed the lower court’s ruling that
“actual knowledge or awareness of facts or
circumstances that indicate specific and identifiable instances of infringement will disqualify a service provider from the safe harbor.”19
Despite this affirmation of the district
court’s interpretation of the law, the Second
Circuit concluded that in light of the facts presented, summary judgment was premature.
For example, the court acknowledged various
internal e-mail messages among YouTube
principals that appeared to acknowledge the
presence of illegal and infringing content on
the site.20 Based on those messages, a reasonable juror could conclude that YouTube
“had actual knowledge of specific infringing
activity, or was at least aware of facts or circumstances from which specific infringing
activity was apparent.”21
The plaintiffs also argued that, regardless
of Section 512(c)’s requirements, the evidence showed that YouTube was “willfully
blind” to specific infringing activity, a concept from common law.22 The Second Circuit
held that because the DMCA does not abrogate the doctrine of willful blindness, it
could be applied, in appropriate circumstances, to establish a defendant’s knowledge
or awareness of specific instances of copyright infringement.23 The court remanded to
allow the district court to consider whether
YouTube made a “deliberate effort to avoid
guilty knowledge” as a matter of common
law.24
Following remand, YouTube submitted
to the district court a list of 63,060 video clips
that were at issue in the litigation and that it
claimed were never subject to any takedown
notices and challenged the plaintiffs to provide evidence of notice sufficient to meet the
standards of Section 512(c).25 Over the objections of the plaintiffs, the district court concluded that it remained their burden to show
that YouTube was aware of the specific
infringements at issue and that the plaintiffs
lacked sufficient evidence to allow a clip-byclip assessment.26
On the issue of willful blindness, the district court similarly concluded that the evidence proffered by the plaintiffs demonstrated, at best, that YouTube was aware
that infringing activity was taking place with
respect to particular works but not that
YouTube knew the specific locations of the
infringements.27 The court concluded that
the plaintiffs had not presented evidence of
willful blindness as to the specific clips at
issue.28 On these and other remaining issues,
the district court granted summary judgment
in YouTube’s favor, dismissing the case and
MCLE Test No. 235
The Los Angeles County Bar Association certifies that this activity has been approved for Minimum
Continuing Legal Education credit by the State Bar of California in the amount of 1 hour.
MCLE Answer Sheet #235
COPYRIGHT CAPABILITIES
Name
Law Firm/Organization
1. DMCA stands for:
A. Digital Media Communications Act.
B. Digital Millennium Communications Act.
C. Digital Millennium Copyright Act.
D. Digital Media Copyright Act.
2. Congress passed the DMCA in 1998.
True.
False.
3. The U.S. Supreme Court addressed safe harbor
protection for Internet service providers (ISPs) in
Viacom International, Inc. v. YouTube, Inc.
True.
False.
4. Title III of the DMCA is the Online Copyright
Infringement Liability Limitation Act (OCILLA).
True.
False.
5. Which of the following is not one of OCILLA’s safe
harbors?
A. Transitory communications.
B. System caching.
C. Storage of information on systems or
networks at the direction of users.
D. Content chosen by the ISP.
E. Information location tools.
6. In Viacom v. YouTube, the U.S. District Court for
the Southern District of New York granted summary
judgment to Viacom.
True.
False.
7. Viacom v. YouTube places the burden of policing
copyright infringement on the copyright owners
rather than on ISPs.
True.
False.
8. Viacom v. YouTube holds that an ISP’s safe
harbor protection depends on whether the ISP
actively monitors its service for infringing activity.
True.
False.
demonstrate that it was unaware of the specific
infringements at issue.
True.
False.
City
State/Zip
12. On remand in Viacom v. YouTube, the district
court denied YouTube’s motion for summary
judgment.
True.
False.
13. The parties to Viacom v. YouTube announced a
settlement in 2014.
True.
False.
14. The central issue in American Broadcasting
Companies, Inc. v. Aereo, Inc. (ABC v. Aereo) is
whether retransmission of television programming
via Web sites constitutes the creation and broadcast
of unauthorized derivative works.
True.
False.
15. In ABC v. Aereo, the U.S. Supreme Court granted
ABC’s petition for certiorari.
True.
False.
16. Aereo provides a service that allows subscribers
to watch broadcast television programs over the
Internet on a pay-per-view basis.
True.
False.
17. One of the exclusive rights which the Copyright
Act grants to the copyright owner is the right to
perform the copyrighted work publicly.
True.
False.
18. In ABC v. Aereo, the Second Circuit Court of
Appeals ruled that the potential audience for each
Aereo transmission is any user who could have
accessed the program.
True.
False.
9. In Viacom v. YouTube, the Second Circuit affirmed
that actual knowledge of a specific infringement
disqualifies an ISP from safe harbor protection.
True.
False.
19. In ABC v. Aereo, Judge Denny Chin called Aereo’s
system a “contrivance, over-engineered in an
attempt to avoid…the Copyright Act.”
True.
False.
10. Viacom v. YouTube holds that an ISP may lose
safe harbor protection if it deliberately avoids
knowledge of infringing activity on its service.
True.
False.
20. Who called for substantial copyright reform in
March 2013?
A. David Nimmer.
B. The Register of Copyrights.
C. The Motion Picture Association of America.
D. Chief Justice John Roberts of the U.S. Supreme
Court.
11. On remand in Viacom v. YouTube, the district
court concluded that it was YouTube’s burden to
Address
E-mail
Phone
State Bar #
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1. Study the MCLE article in this issue.
2. Answer the test questions opposite by marking
the appropriate boxes below. Each question
has only one answer. Photocopies of this
answer sheet may be submitted; however, this
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Los Angeles Lawyer May 2014 25
entering judgment.29 The appeal from that
judgment was pending30 when the parties
announced a confidential settlement in March
of this year.31
I
The Ripple Effect
The Second Circuit’s interpretation of the
Section 512(c) safe harbor in Viacom affected
other cases across the country. For example,
the decision revived a case from 2011, Capitol
Records, Inc. v. MP3tunes, LLC, in which a
group of record companies and music producers sued MP3tunes, a now-defunct stor-
pirated works, and in the absence of recent
U.S. Supreme Court precedent on this issue,
Viacom offers the most definitive current
statement of the nuances of the safe harbor
defense of Section 512(c).
Aereo and Internet Broadcasting
Another case may prove to be as widely
watched and followed as Viacom is American
Broadcasting Companies, Inc. v. Aereo, Inc.
In Aereo, the U.S. Supreme Court is poised to
wade into the legality of Web sites that
retransmit television programming that is
(the transmit clause), which defines public
performance as:
[T]o transmit or otherwise communicate a performance or display of the
work to [a place open to the public or
at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered] or to the public,
by means of any device or process,
whether the members of the public
capable of receiving the performance
or display receive it in the same place
n March 2013, Maria A. Pallante, the Register of
Copyrights, called for substantial copyright reform,
including to the DMCA and the Copyright Act, in
testimony before the House Judiciary Committee’s
Subcommittee on Courts, Intellectual Property, and the
Internet. She called for Congress to draft “the next great
copyright act” to address such pressing issues as
“reviewing the efficacy of the DMCA” and “updating the
framework for cable and satellite transmissions.”
age service for MP3 files.32 In October 2011,
the U.S. District Court for the Southern
District of New York granted a motion for
summary judgment on a claim for contributory infringement against MP3tunes and its
founder as to songs identified in takedown
notices but not subsequently removed.33
Following Viacom, both parties moved for
reconsideration.34 The plaintiffs sought to
overturn the summary judgment for the defendants that was based on the their partially successful Section 512(c) safe harbor defense,
arguing that the district court needed to
engage in fact-finding for willful blindness.35
The district court vacated that portion of its
2011 order in light of the Second Circuit’s
opinion.36 The court also withdrew its prior
grant of summary judgment to the defendants with respect to their lack of red-flag
knowledge as relevant to the safe harbor,
concluding instead that, based on Viacom’s
analysis, material issues of fact warranted
trial.37
Since the Second Circuit issued its opinion in Viacom, the case has served as critical
precedent in DMCA safe harbor cases across
the country, and its impact may grow over
time.38 As content creators continue to combat the proliferation of sites that traffic in
26 Los Angeles Lawyer May 2014
broadcast over the air when the retransmission has not been authorized by the owner of
the broadcast programming.39 The central
issue in Aereo will be whether unauthorized
retransmission constitutes a “public performance” under the Copyright Act.40 The
Supreme Court granted ABC’s petition for certiorari in January.41
Aereo provides a service that allows subscribers to watch broadcast television programs over the Internet in exchange for a
monthly fee.42 The company uses thousands
of dime-sized antennas in its central facility
to receive transmission. According to Aereo,
each individual antenna is separately assigned
to a subscriber and feeds the broadcast to a
server that the user accesses.43 In 2012, the
U.S. District Court for the Southern District
of New York denied the motion of ABC and
other broadcast networks for a preliminary
injunction, finding that the plaintiffs were
unlikely to prevail on the merits of their
claims for copyright infringement.44 In April
2013, the Second Circuit affirmed in a 2-1
decision.45
One of the exclusive rights that the
Copyright Act grants to the copyright owner
is the right “to perform the copyrighted work
publicly.”46 Aereo turns on a particular clause
or in separate places and at the same
time or at different times.47
The complaining broadcasters argue that
Aereo’s transmissions of television programs
while the programs are airing on broadcast
television falls within the transmit clause,
and as such are public performances. 48
Following its earlier decision in Cartoon
Network LP v. CSC Holdings, Inc. (also
known as the Cablevision case),49 the Second
Circuit, in a split decision, found that when
an Aereo customer watches or records a program, the Aereo system creates a unique copy
of that program on a hard drive assigned
only to that particular user.50 The Second
Circuit concluded that when the Aereo customer later watches the program, he or she
is watching a transmission generated from
that unique copy. Based on that conclusion,
the court ruled that the potential audience for
each Aereo transmission is only the single
user who requested that the program be
recorded, and as such, the transmissions are
not public performances.51
In a vigorous dissent, Judge Denny Chin
took a dim view of what he perceives as
Aereo’s creation of a series of complicated
technological contrivances to get around the
Copyright Act. He wrote: “[Aereo’s] system
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is a Rube Goldberg-like contrivance, overengineered in an attempt to avoid the reach
of the Copyright Act and to take advantage
of a perceived loophole in the law.”52 Even
though each subscriber has an individual
antenna and a unique copy, Judge Chin
reasoned, these are nonetheless public performances.53 In other words, because Aereo
is transmitting television signals to paying
strangers, all of its transmissions are to
the public, even if intervening devices or
processes limit the potential audience of each
separate transmission to a single member of
the public.54
Just as the contours of the DMCA safe
harbors continue to bedevil parties and courts
struggling to determine if such safe harbors
apply to new (and sometimes innovative)
services, Aereo makes clear that even the
classic exclusive rights (such as the public
performance right) in the Copyright Act may
require clarification or revision in order to be
brought up-to-date with the latest technological practices. In March 2013, Maria A.
Pallante, the Register of Copyrights, called for
substantial copyright reform, including to
the DMCA and the Copyright Act, in testimony before the House Judiciary Committee’s
Subcommittee on Courts, Intellectual Property, and the Internet.55 In her testimony, she
called for Congress to draft “the next great
copyright act,” which could address such
pressing issues as “reviewing the efficacy of
the DMCA” and “updating the framework
for cable and satellite transmissions.”56
Although the Supreme Court’s forthcoming decision in Aereo could bring clarity to the
interpretation of the Copyright Act’s public
performance right in a more modern day
context, more technological change and more
uncertainty is inevitable, and it is only a matter of time before new technologies and new
online practices bring an entirely new slew of
unanticipated legal challenges.
■
1 See,
e.g., Ellison v. Robertson, 357 F. 3d 1072, 1076
(9th Cir. 2004).
2 17 U.S.C. §512.
3 Ellison, 357 F. 3d at 1076. Service providers are
“provider[s] of online services or network access, or
the operator[s] of facilities therefor.” 17 U.S.C.
§512(k)(1)(B).
4 17 U.S.C. §§512(a)-(d).
5 Ellison, 357 F. 3d at 1077 (emphasis in original).
6 17 U.S.C. §512(c)(1)(A).
7 Viacom Int’l, Inc. v. YouTube, Inc., 718 F. Supp. 2d
514 (S.D. N.Y. 2010); 17 U.S.C. §512.
8 See Viacom Int’l, Inc. v. YouTube, Inc., 676 F. 3d 19,
25-26 (2d Cir. 2012).
9 Viacom Int’l, 718 F. Supp. 2d at 519.
10 Id. at 523.
11 Id. (citing Perfect 10, Inc. v. CCBill LLC, 488 F. 3d
1102, 1113 (9th Cir. 2007)).
12 Viacom Int’l, 718 F. Supp. 2d at 524-25.
13 Id. at 526.
14 Opening Brief for Plaintiffs-Appellants at 3, Viacom
Int’l Inc. v. YouTube, Inc., No. 10-3270, Docket No.
28 Los Angeles Lawyer May 2014
63 (2d Cir. Dec. 7, 2010).
15 Id. at 3-4.
16 Viacom Int’l, Inc. v. YouTube, Inc., 676 F. 3d 19,
25-26 (2d Cir. 2012).
17 Id. at 31.
18 Id.
19 Id. at 32.
20 Id. at 34.
21 Id.
22 Id. at 34-35.
23 Id. at 35.
24 Id. The Second Circuit also remanded as to other
ancillary issues in the case. Id. at 36-42.
25 Viacom Int’l Inc. v. YouTube, Inc., 940 F. Supp. 2d
110, 113 (2013).
26 Id. at 115.
27 Id. at 117.
28 Id.
29 Id. at 123.
30 Plaintiffs’ Notice of Appeal, Viacom Int’l Inc. v.
YouTube, Inc., No. 7-2013, Docket No. 454 (S.D.
N.Y. Apr. 30, 2013).
31 Todd Spangler, Google and Viacom Settle CopyrightInfringement Lawsuit over YouTube, VARIETY, Mar.
18, 2014, available at http://variety.com/2014/biz
/news/google-and-viacom-settle-copyright-infringement
-lawsuit-over-youtube-1201137538.
32 Capitol Records, Inc. v. MP3tunes, LLC (Capitol II),
No. 7-9931, 2013 WL 1987225 (S.D. N.Y. May 14,
2013).
33 Capitol Records, Inc. v. MP3tunes, LLC (Capitol I),
821 F. Supp. 2d 627, 650-51 (S.D. N.Y. 2011).
34 Capitol II, 2013 WL 1987225, at *1.
35 Id. at *2.
36 Id. at *3.
37 Id. at *4.
38 See, e.g., UMG Recordings, Inc. v. Shelter Capital
Partners LLC, 718 F. 3d 1006, 1011 (9th Cir. 2013)
(relying on Viacom in concluding that Veoh, which
enables users to share videos, was entitled to safe harbor defense under §512(c)); Disney Enters., Inc. v.
Hotfile Corp., No. 11-20427, 2013 WL 6336286, at
*1 (S.D. Fla. Sept. 20, 2013) (relying on Viacom in concluding that Hotfile, a repository for numerous pirated
copyrighted works, was not entitled to any safe harbor
protection under §512(c)); Columbia Pictures Indus.,
Inc. v. Fung, 710 F. 3d 1020, 1023-24 (9th Cir. 2013)
(holding that defendant, who operated various sites that
allowed third parties to download infringing copies of
copyrighted works, was not entitled to DMCA protection).
39 ABC, Inc. v. Aereo, Inc., No. 13-461 (U.S. Jan. 10,
2014).
40 Petition for Writ of Certiorari, Aereo, No. 13-461,
Docket No. 1 (U.S. Oct. 11, 2013).
41 Aereo, No. 13-461.
42 WNET, Thirteen v. Aereo, Inc., 712 F. 3d 676, 680
(2d Cir. 2013).
43 Id. at 682-83.
44 ABC, Inc. v. Aereo, 874 F. Supp. 2d 373, 405 (S.D.
N.Y. 2012).
45 WNET, Thirteen, 712 F. 3d at 696.
46 17 U.S.C. §106(4).
47 17 U.S.C. §101(2).
48 WNET, Thirteen, 712 F. 3d at 686.
49 Cartoon Network v. CSC Holdings, 536 F. 3d 121
(2d Cir. 2008).
50 WNET, Thirteen, 712 F. 3d at 690.
51 Id.
52 Id. at 697.
53 Id.
54 Id. at 699.
55 Statement of Maria A. Pallante, Register of Copyrights, Mar. 20, 2013, available at http://www
.copyright.gov/regstat/2013/regstat03202013.html.
56 Id.
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by Lee S. Brenner and Audrey Jing Faber
P
Making the Mark
When the use of trademarked products in film and
television programs does not create consumer confusion,
Lanham Act claims are likely to fail
30 Los Angeles Lawyer May 2014
In the film Flight, released in 2012, Denzel
Washington played an alcoholic pilot who
crashes a passenger plane after engaging in a
night of debauchery, including excessive consumption of drugs and alcohol. After surviving the crash, Washington’s character falls
into an alcohol-fueled tailspin and handles a
case of Budweiser and numerous other alcoholic beverages throughout the film. AnheuserBusch and other alcohol distributors requested
that the film studio remove or obscure their
logos, marks, and other branding from the
film. However, the studio’s use of the marks
in the film was consistent with and permitted
pursuant to recently developed case law con-
cerning these issues. Accordingly, the studio
had no obligation to remove or obscure the
logos, marks, or other branding.
Nevertheless, there are exceptions to this
rule, and litigation may arise when a film or
television program features a product or
trademark without the owner’s authorization. The typical claims asserted in this context are federal claims under the Lanham
Act for trademark infringement, unfair comLee S. Brenner and Audrey Jing Faber are intellectual property, business, and entertainment litigators in the Los Angeles office of Kelley Drye &
Warren LLP.
AMANE KANEKO
roducts and related trademarks
commonly appear in such entertainment content as films and television programs. Iron Man 3 featured Audi’s R8 luxury sports car,
and the Bugaboo stroller became
an overnight success after it was featured in
the popular television program Sex and the
City. Owners are often delighted to see their
products and trademarks featured in entertainment content; however, when the product
or mark is portrayed in a manner that may
be deemed uncomplimentary, the owner may
attempt to block the use or pursue other
remedies.
petition, and trademark dilution.1 In general,
the plaintiff alleges that use of its product in
the entertainment program confuses the consumer to believe, erroneously, that the plaintiff sponsored or is affiliated with the project,
and such use harms the mark itself. Such
claims rarely are successful. As a fundamental
matter, the appearance
of products in entertainment programs
is commonplace, and
courts have routinely
held that no such consumer confusion exists.
Without the ability
to establish consumer
confusion—the core of
trademark and unfair
competition law—
the claims fail. Similarly,
courts have rejected dilution claims by holding that the unauthorized use of the mark
in entertainment programs does not tarnish
or harm the reputation
of the mark, or harm
the ability of the mark
to serve as an identifier
of the product.
Even if the plaintiff
can establish potential
consumer confusion,
recent court decisions
have emphasized that
the use of products
and trademarks in entertainment programs
without the owners’
permission will not
give rise to liability if
the creator establishes
that such use is protected by the First Amendment. As the courts
have expressed, although a trademark
serves an identifying
purpose, the trademark owner does not have
the right to control all public discourse about
its marks or products. And, while most entertainment programs are commercial products,
such content consists of communicative “vehicles through which ideas and opinions are disseminated.”2 The reasoning of these courts is
clear: The public has at least as much interest in the free exchange of ideas as it does in
avoiding misleading advertising.
The General Rule
In 2003, The Northern District of California
cleared the way for a producer’s alleged unauthorized use of a famous product in Wham-
O, Inc. v. Paramount Pictures.3 Wham-O
arose out of Paramount’s unauthorized use of
Wham-O’s iconic Slip ‘N Slide in the film
Dickie Roberts: Former Child Star. The film
included a scene that depicted the main character’s exaggerated misuse of the Slip ‘N
Slide, such as coating the slide with cooking
oil and then careening off it and crashing
into a wooden fence. The scene, which lasted
approximately 70 seconds, played a prominent role in the promotion of the film in the
months leading up to its theatrical release,
appearing in the film’s trailer, in television
advertisements, and on the film’s Web site.
Wham-O contacted Paramount the day
before commercial release of the film and
requested that Paramount insert a disclaimer
regarding the slide’s trademark and its proper
use. Paramount refused, and Wham-O filed
a lawsuit in the U.S. District Court for the
Northern District of California for trademark infringement, unfair competition, and
dilution under the Lanham Act. Wham-O
also subsequently filed a motion for a temporary restraining order. The court denied
Wham-O’s motion on the grounds that
Wham-O failed to establish that it was likely
to succeed on the merits.4
In rejecting Wham-O’s trademark infringement and unfair
competition claims, the
court explained that
consumers would not
be confused about who
makes the Slip ‘N Slide
since, among other reasons, Paramount was
not a toy manufacturer
or distributor. Moreover,
the manner in which the
slide was used in the film
did not suggest sponsorship or endorsement
by Wham-O. The court
recognized that “[a]s
any moviegoer can
attest, it is not unusual
for movie producers to
use a signature scene—
and the products and
props therein—to cultivate interest in a film.
Films with car chases
do so with cars; films
with gunplay do so with
firearms; films with
haute couture wardrobes do so with clothing.” 5 The court also
rejected Wham-O’s dilution claims, stating that
the misuse of the slide
was so “hamfisted and
exaggerated” that it did
not tarnish or harm the
reputation of the mark.6
Nor did the purported
use or misuse harm the
ability of the mark to
serve as an identifier of
Wham-O’s product.7
The same year, the Central District of
Illinois refused to enjoin the release of a children’s film based on the unauthorized and
purported misuse of well-known trademarks.
The action, filed by Caterpillar, Inc., against
the Walt Disney Company and Buena Vista
Home Entertainment, Inc., arose out of
Disney’s depiction of Caterpillar machinery
bearing the Caterpillar and CAT trademarks
in the children’s film George of the Jungle 2.8
The film’s protagonist, George, was a Tarzanlike man who was raised in the jungle and
could converse fluently with animals. The
film’s plot involved the villains’ evil plan to
oust George from his jungle home on the ficLos Angeles Lawyer May 2014 31
tional Ape Mountain. To do this, the villains
used Caterpillar bulldozers, which bore the
recognizable CAT trademark. The bulldozers,
which appeared only briefly in the film, are
shown running over plants and into the animals, while the narrator of the film describes
the machines as “deleterious dozers” and
“maniacal machines.”9
Caterpillar filed suit against Disney on
the eve of the film’s commercial release, alleging claims for trademark infringement, unfair
competition, and dilution. In addition, Caterpillar sought an order enjoining the release of
the film until “the acts allegedly violating its
trademarks [were] undone.”10 The district
court denied Caterpillar’s request for preliminary relief. As in Wham-O, the court
noted that the appearance of products bearing well-known trademarks in entertainment
content is common and questioned whether
the mere appearance of a car, for example,
could be sufficient to constitute a Lanham Act
violation. With regard to the unfair competition and trademark infringement claims,
the court held that Caterpillar failed to establish improper intent on behalf of Disney and
failed to establish any confusion that Caterpillar somehow sponsored the film. The court
also rejected Caterpillar’s dilution claim, finding that the film made clear that it was the
humans—and not the CAT bulldozers—who
wanted to destroy George’s jungle home.11
Subsequent cases have reached similar
conclusions concerning unauthorized use of
consumer products in entertainment content.12 For example, in one subsequent case,
Gottlieb Development LLC v. Paramount
Pictures Corporation, the Southern District
of New York dismissed the plaintiff’s Lanham
Act claims at the pleading stage on the ground
that Paramount’s use of the plaintiff’s Silver
Slugger pinball machine as a background
prop in the film What Women Want could not
plausibly confuse consumers as to the sponsorship or affiliation of Paramount’s film (or
of the pinball machines).13
The First Amendment Defense to
Lanham Act Claims
The Second Circuit was the first to address the
intersection between the First Amendment
and the Lanham Act in the landmark decision
Rogers v. Grimaldi.14 Rogers arose out of the
1986 film titled Ginger and Fred, which is a
story about two fictional Italian dancers who
imitated Ginger Rogers and Fred Astaire and
became known as “Ginger and Fred.” Ginger
Rogers brought a claim for, among other
things, false designation of origin under the
Lanham Act, alleging that the use of her name
in the film’s title suggested that she sponsored,
endorsed, or was otherwise affiliated with the
film. The Second Circuit upheld the defendant’s use of Rogers’ name in the film’s title on
32 Los Angeles Lawyer May 2014
the ground that such use was artistic expression protected by the First Amendment.15
In reaching this conclusion, the court
devised a two-prong test, under which a
defendant will be liable under the Lanham Act
for the unauthorized use of a plaintiff’s trademark in an expressive work only if 1) the use
of the plaintiff’s trademark has no artistic
relevance to the work or 2) the use of the
plaintiff’s trademark has some artistic relevance to the work, but it explicitly misleads
as to the source or content of the work.16
The first prong—artistic relevance—asks
whether the use of the mark is related to the
content of the defendant’s own work, e.g.,
whether it is related to the story of the defendant’s work. This very low threshold seeks to
protect the public interest in free expression.
In its simplest terms, the second prong—
explicit misstatement—asks whether the
defendant explicitly misled or expressly misstated that the plaintiff produced, sponsored,
or endorsed the defendant’s work.
Following the Second Circuit’s decision,
the Fifth, Sixth, Ninth, and Eleventh Circuits
each adopted the Rogers test.17 The Ninth
Circuit applied Rogers in a pair of lawsuits
brought by Mattel, Inc., in which the court
refused to grant Mattel relief under the
Lanham Act for the unauthorized and purported misuses of Mattel’s Barbie trademark.
In Mattel Inc. v. MCA Records, Inc., the
court held that Danish band Aqua’s use of
“Barbie” in the title of its song Barbie Girl did
not infringe Mattel’s trademark, finding that
the use of the mark was clearly relevant to the
underlying work (a commentary of Barbie and
her values) and that it did not suggest (explicitly or implicitly) that it was produced by or
associated with Mattel.18 The Ninth Circuit
reached the same result one year later in
Mattel Inc. v. Walking Mountain Productions,
which arose out of artist Thomas Forsythe’s
use of the Barbie mark in connection with a
series of photographs entitled Food Chain
Barbie in which Barbie is shown being
attacked by various kitchen appliances.19
In 2008, the Ninth Circuit applied the
Rogers test in another case, E.S.S. Entertainment 2000 v. Rock Star Videos.20 The E.S.S.
case arose out of Rockstar’s Grand Theft Auto:
San Andreas, the seventh installment of its
highly successful Grand Theft Auto video
game series. Like its predecessors, San Andreas
is a role-play game set in fictional, crime-riddled big cities modeled after actual American
urban areas. San Andreas is partially based in
the city of Los Santos, which was meant to lampoon the seedy underbelly of Los Angeles.
One of the places that players could elect to
visit was the fictional Pig Pen strip club, which
Rockstar conceded was inspired in part by
the real-life Play Pen Gentlemen’s Club in East
Los Angeles. The owner of this club brought
various Lanham Act claims alleging that
Rockstar’s use of the distinctive Play Pen logo
without authorization caused consumer confusion as to E.S.S.’s endorsement of or involvement with the video game.21
The Ninth Circuit affirmed the district
court’s grant of summary judgment in favor
of Rockstar, holding that Rockstar’s use of the
Pig Pen mark and trade dress was protected
by the First Amendment under the Rogers
test.22 First, Rockstar’s use of the term “Pig
Pen” was “relevant to Rockstar’s artistic
goal, which is to develop a cartoon-style parody of East Los Angeles.” Second, Rockstar’s
use of the “Pig Pen” did not mislead consumers as to the source of the game. There
was no explicit indication that E.S.S. sponsored or had any role in producing San
Andreas. As such, the First Amendment provided Rockstar with an absolute defense to
E.S.S.’s Lanham Act claims.
Following the Ninth Circuit’s decision in
E.S.S., a number of federal courts have applied
Rogers and determined that a defendant’s
unauthorized use of a trademark or product
in a film, television program, or other expressive work was protected speech that did not
give rise to liability under the Lanham Act,
including the use of a plaintiff’s trademark on
the back cover of the book Hannah Montana:
Rock the Waves, 23 the identification of
weapons as “Dillinger” guns in The Godfather
video game series,24 the use of a knockoff
travel bag bearing the famous Louis Vuitton
Toile Monogram trademark in the film The
Hangover: Part III,25 and the use of football
legend Jim Brown’s name and other identifying information in the Madden NFL video
game series.26 In a very recent decision, Fortres
Grand v. Warner Bros.,27 the plaintiff filed an
action against Warner Bros. arising out of
the Batman film The Dark Knight Rises. The
plaintiff, Fortres Grand Corporation, is a
software company that develops, markets,
and sells a program called Clean Slate, which
wipes previous user activity from public access
computers. The Dark Knight Rises included
scenes in which Catwoman attempts to procure a software program, referred to as the
“clean slate” program, that would erase her
storied criminal history from every computer
database in the world. Warner Bros. also used
the descriptor “clean slate” in its online advertisements for the film, including on its promotional Web sites for the movie.
Two months after the theatrical release of
The Dark Knight Rises, Fortres Grand sued
Warner Bros. for reverse trademark infringement and unfair competition, claiming that
the film’s use of the phrase “clean slate”
caused consumers to confuse or mistakenly
associate the fictional clean slate program
with Fortres Grand’s real-world Clean Slate
computer security software. Warner Bros.
moved to dismiss the claims on the grounds
that Fortres Grand failed to state a claim
under the Lanham Act and that the studio’s
use of the phrase “clean slate” was protected
by the First Amendment. The district court
agreed with Warner Bros., first finding that
“no consumer—reasonable or otherwise—
[could] believe the fictional ‘clean slate’ software in the movie emanates from, is sponsored by, or connected to Fortres Grand
because the fictional software does not exist
in reality.” Second, the court held that “no
consumer—reasonable or even unreasonable—would believe that The Dark Knight
Rises itself is connected to Fortres Grand.”
Next, applying the Rogers test, the district
C
Despite the substantial leeway that the
Rogers test affords the creators of expressive
works, it is not unlimited. As the Rogers
court cautioned, “Poetic license is not without limits. The purchaser of a book, like the
purchaser of a can of peas, has a right not to
be misled as to the source of the product.”32
By way of example, in Parks v. LaFace
Records, civil rights icon Rosa Parks claimed
that hip-hop duo OutKast’s unauthorized
use of her name in the title of the song Rosa
Parks infringed her trademark rights.33 The
Sixth Circuit found for Parks, holding that the
level of artistic relevance of the title Rosa
Parks to the lyrics and content of OutKast’s
song was “highly questionable.”34 Although
confusion,” including allegations that Textron
products, trademarks, and trade dress were
given “particular prominence” in the game,
allegations that Electronic Arts featured
Textron products in advertisements and on its
Web page to entice consumers to purchase the
game, and allegations that the ability to fly
Textron’s helicopters was a main selling point
of the game.38 Consequently, the court held
that, at least at the pleading stage, the gist of
Electronic Arts’s conduct could be interpreted
as an explicit misstatement that Bell
Helicopter sponsored the Battlefield 3 video
game. As such, the court was not willing to
find that the First Amendment defense applied
as a matter of law on a motion to dismiss.
ourts have recognized that while the public certainly
has a right not to be misled about the source or
endorsement of a product, it also has a First
Amendment interest in free expression. And even
though an expressive work—be it a work of art, book,
movie, or television show—may be a commercial product
or otherwise sold in commerce, it is also a valuable means
of communication, deserving of protection under the law.
court held that even if the fictional “clean
slate” program could conceivably give rise to
consumer confusion, the use of the phrase in
the film and promotional Web sites was
nonetheless protected by the First Amendment.28 The court found that Warner Bros.
satisfied both prongs of the Rogers test. First,
the studio’s use of the phrase “clean slate” was
clearly relevant to the plot of The Dark
Knight Rises and the related Web sites, which
served as creative outgrowths of the movie
itself. Second, the court held that the use was
not “explicitly misleading,” and noted the
absence of any “affirmative statement…that
would indicate that Fortres Grand sponsored
or endorsed the use of ‘clean slate’ in The
Dark Knight Rises.”29
Exceptions to the Rule
The Rogers test clearly favors a defendant’s
First Amendment interests. The first prong of
the test requires only that there be “some” relevance between the trademark and the expressive work. In the Ninth Circuit, the defendant
must demonstrate that the level of “artistic relevance” is “merely above zero.”30 The second
part of the test requires a showing that the
defendant made an “explicit indication,”
“overt claim,” or “explicit misstatement” of
sponsorship or endorsement.31
OutKast claimed that the use of Parks’s name
was “symbolic,” the court doubted, among
other things, how Parks’s qualities of “freedom, humanity, dignity and strength” were
“artistically related to the content of a song
that appear[ed] to be diametrically opposed
to those qualities.”35 Indeed, OutKast itself
admitted that it “never intended for the song
to be about Rosa Parks or the civil rights
movement.”36
Similarly, in Electronic Arts, Inc. v. Textron, Inc., the Northern District of California
denied the video game creator’s motion to
dismiss Lanham Act claims filed by helicopter
manufacturer Bell Helicopter Textron Inc.
on the ground that Electronic Arts failed
to meet the explicit misstatement prong of the
Rogers test. This case arose out of Electronic
Arts’s Battlefield video game series, a multiplayer, first-person shooter game that gives
users the ability to participate in fictional
and historical wars using a variety of weapons, aircraft, and other vehicles. Bell alleged
that Electronic Arts featured and used Textron’s helicopters and trademarks in the game
Battlefield 3, including on packaging and
marketing materials, without permission.37
The court found that Textron’s allegations
were “sufficient to establish plausible disputes as to the existence of actual consumer
Perhaps the district court opinion in Electronic Arts v. Textron is an outlier and it can
be confined to an analysis regarding the pleading stage. It may signal, however, an exception to the clear First Amendment defense in
these cases. If so, it means that if a defendant
goes too far in its use of the plaintiff’s mark
(for example, by giving it too much prominence), a court could find that the defendant’s First Amendment protection has been
lost. At least under the district court’s reasoning in the Textron case, the use of the
plaintiff’s mark, if it is too prominent or pervades the defendant’s work, can give rise to
an inference that the plaintiff somehow
endorsed or sponsored the defendant’s work.
Nevertheless, a relatively bright-line rule has
emerged, one that provides significant protection to the creators of entertainment content.
First, the mere use or appearance of a mark in
an expressive work does not automatically
give rise to liability under the Lanham Act.
Additionally, if the unauthorized use of the
product in the body of the movie or television
program is lawful, the courts most likely will
find that it is lawful for the advertising for those
entertainment programs to feature that product as well. The Sixth Circuit’s reasoning in
Parks v. LaFace Records is instructive. The
court observed that “if a song is sold, and the
Los Angeles Lawyer May 2014 33
title is protected by the First Amendment, the
title naturally will be ‘inextricably intertwined’
with the song’s commercial promotion.” The
same logic was employed in the Wham-O and
Fortres Grand cases in which the advertising
also did not give rise to liability.
Finally, so long as the use of the mark
bears some relevance to the expressive work
and does not overtly mislead as to the source
of the work, the use is protected by the First
Amendment. Courts have recognized that
while the public certainly has a right not to
be misled about the source or endorsement of
a product, it also has a First Amendment
interest in free expression. And even though
an expressive work—be it a work of art,
book, movie, or television show—may be a
commercial product or otherwise sold in
commerce, it is also a valuable means of
communication, deserving of protection under
the law.
■
1 To establish a claim for trademark infringement
under the Lanham Act, a plaintiff must demonstrate
that the defendant used 1) a valid registered mark, 2)
in commerce, 3) in connection with the sale or advertisement of goods or services, 4) without the plaintiff’s
consent, 5) in a manner that is likely to cause consumer
confusion as to the origin, affiliation, sponsorship,
endorsement, or approval, of a product, service, or commercial activity. 15 U.S.C. §§1114, 1125(a). Likewise,
the gravamen of an unfair competition claim is that the
defendant used the plaintiff’s mark with the intent of
poaching or free-riding off the mark’s name or goodwill. New Kids on the Block v. News Amer. Pub.,
Inc., 971 F. 2d 302, 305 (9th Cir. 1992); 15 U.S.C.
§1125(a). Finally, dilution claims are based upon allegations that the defendant’s use of a mark harms the
reputation of a famous mark or impairs the mark’s ability to serve as a unique identifier of the plaintiff’s
product. 15 U.S.C. §1125(c).
2 Hicks v. Casablanca Records, 464 F. Supp. 426, 430
(S.D. N.Y. 1978).
3 Wham-O, Inc. v. Paramount Pictures Corp., 286 F.
Supp. 2d 1254 (N.D. Cal. 2003).
4 Id. at 1260-64.
5 Id. at 1264.
6 Id. at 1261.
7 Id. at 1261-62.
8 Caterpillar v. The Walt Disney Co., 287 F. Supp. 2d
913 (C.D. Ill. 2003).
9 Id. at 917.
10 Id. at 915.
11 Id. at 922.
12 Gottlieb Dev. LLC v. Paramount Pictures Corp.,
590 F. Supp. 2d 625, 634-35 (S.D. N.Y. 2008); Naked
Cowboy v. CBS, 844 F. Supp. 2d 510 (S.D. N.Y.
2012).
13 Gottlieb, 590 F. Supp. 2d at 634-35.
14 Rogers v. Grimaldi, 875 F. 2d 994 (2d Cir. 1989).
15 Id. at 1001-02.
16 Id. at 999-1000.
17 Parks v. LaFace Records, 329 F. 3d 437, 448-49 (6th
Cir. 2003).
18 Mattel Inc. v. MCA Records, Inc., 296 F. 3d 894,
901-02 (9th Cir. 2002).
19 Mattel Inc. v. Walking Mountain Prods., 353 F. 3d
792, 807 (9th Cir. 2003).
Law Offices of Paul P. Young
Enforcing Judgments in all California Courts
20
E.S.S. Entm’t 2000, Inc. v. Rock Star Videos, Inc.,
547 F. 3d 1095 (9th Cir. 2008).
21 Id. at 1098.
22 Id. at 1101.
23 Stewart Surfboards, Inc. v. Disney Book Group,
LLC, 2011 U.S. Dist. LEXIS 155444 (C.D. Cal. May
11, 2011).
24 Dillinger, LLC v. Electronic Arts Inc., No. 1:09CV-1236-JMS-DKL, 2011 WL 2457678 (S.D. Ind.
June 16, 2011).
25 Louis Vuitton Malletier S.A. v. Warner Bros. Entm’t
Inc., 868 F. Supp. 2d 172 (S.D. N.Y. 2012).
26 Brown v. Electronic Arts, 724 F. 3d 1235 (9th Cir.
2013).
27 Fortres Grand Corp. v. Warner Bros. Entm’t Inc., 947
F. Supp. 2d 922 (N.D. Ind. 2013), appeal docketed, No.
13-2337 (7th Cir. June 19, 2013).
28 Id. at 934.
29 Id. at 932.
30 E.S.S. Entm’t 2000, Inc. v. Rock Star Videos, Inc.,
547 F. 3d 1095, 1100 (9th Cir. 2008).
31 Rogers v. Grimaldi, 875 F. 2d 994, 1001 (2d Cir.
1989) (emphasis added). See also Brown, 724 F. 3d
1235; University of Ala. Bd. of Trustees v. New Life
Art, Inc., 683 F. 3d 1266, 1278-79 (11th Cir. 2012);
ETW Corp. v. Jireh Pub., Inc., 332 F. 3d 915, 937 (6th
Cir. 2003).
32 Rogers, 875 F. 2d at 997.
33 Parks v. LaFace Records, 329 F. 3d 437 (6th Cir.
2003).
34 Id. at 459.
35 Id. at 456.
36 Id. at 452.
37 Electronic Arts, Inc. v. Textron Inc., 2012 WL
3042668, at *1-2 (N.D. Cal. July 25, 2012).
38 Id. at *3-4.
626.744.1838
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Other People’s
Personas
by Mark S. Lee
A
s Justice Ruth Bader Ginsburg
stated, “the First Amendment
securely protects the freedom to
make…one’s own speech; it bears
less heavily when speakers assert
the right to make other people’s
speeches.”1 Similarly, courts have struggled
with how to reconcile the right of freedom of
speech with the right of publicity and other
intellectual property rights. In the process,
courts have created eight different tests to
address the issue. They can be characterized
as 1) the merchandise versus media test, 2) the
U.S. Supreme Court’s test in Zacchini v.
Scripps-Howard Broadcasting Company, 3)
the transformative use test, 4) the constitu36 Los Angeles Lawyer May 2014
tional malice test, 5) the balancing test of
Rogers v. Grimaldi, 6) the relatedness test
found in the Restatement (Third) of Unfair
Competition, 7) the alternative means test,
and 8) the predominant use test.2
Two Ninth Circuit decisions—In re
NCAA Student Athlete Name & Likeness
Licensing Litigation (NCAA)3 and Brown v.
Electronic Arts4—as well as a similar case
from the Third Circuit, Hart v. Electronic
Arts,5 are recent reported appellate attempts
to address four of these tests as they apply to
the right of publicity.
NCAA and Hart hold that groups of former college football players could pursue
claims against video game maker Electronic
Arts (EA) for the unauthorized use of their
likenesses in a football video game. Brown,
in contrast, holds that football great Jim
Brown could not pursue similar claims against
EA for its use of his avatar in a video game.
The difference in result turns not on different
facts but on the different legal tests that were
applied.
In Hart, the Third Circuit reversed a district court’s dismissal of a right of publicity
class action suit. Hart first discusses the legal
standard that should apply to the First
Mark S. Lee is a partner at Manatt, Phelps & Phillips,
LLP, and was one of the lawyers who represented Jim
Brown in Brown v. Electronic Arts, Inc.
HADI FARAHANI
Three recent decisions balance the right of publicity against
the First Amendment right of a video game maker
Amendment defense and determined that,
based on Zacchini, the court must balance the
competing First Amendment and right-ofpublicity interests.6 Hart then evaluates three
tests that the parties had advocated to balance
those interests: 1) the predominant use test
adopted by the Missouri Supreme Court in
Doe v. TCI Cablevision, 2) the balancing
test adopted by the Second Circuit in Rogers
v. Grimaldi, and 3) the transformative use test
adopted by the California Supreme Court in
Comedy III v. Saderup.7d
The “predominant use” test looks at
whether the use of a person’s identity predominantly exploits or makes an expressive
comment. Exploitation is infringing; an
expressive comment is not.8 This test has not
yet been accepted outside Missouri. Hart
declines to follow this test, characterizing it
as “subjective at best, arbitrary at worst.”9
Hart next looks at the Rogers balancing
test. Rogers involved Lanham Act and right
of publicity claims arising from the use of the
names of two celebrities in a movie title.
Rogers claims to balance relevant rights,
determining that the use of Ginger Rogers’s
name in a movie title does not violate the
Lanham Act unless 1) the title has no artistic relevance to the underlying work, or, 2) if
it has some artistic relevance, the title explicitly misleads as to the source or content of the
work. The court in Rogers found artistic relevance and no deception.10
The balancing test of Rogers has been
adopted by panels in several circuits,11 but the
Hart court declined to apply it. The court was
reluctant to extend Rogers beyond use of a
name or mark in the title of a work and
believed it was inappropriate to broadly apply
the test to the right of publicity (rather than
trademark) because “the right of publicity is
broader and, by extension, protects a greater
swath of property interests.”12
Hart also discusses the transformative use
test, which was first articulated by the California Supreme Court in Comedy III. That
case involved a drawing of the Three Stooges
that was reproduced in prints, posters, and
merchandise. Taking the notion of transformative use from the first prong of copyright
law’s fair use test, the California Supreme
Court asked courts to determine “whether the
literal and imitative or the creative elements
predominate in the work.” The First Amendment prevails if the creative elements predominate.13
The Hart court adopted this transformative use test and held that the modest changes
made to the avatars of football players in
EA’s video game were not sufficiently transformative to allow EA to avoid liability.
Noting the realistic depictions of the players in EA’s game, Hart holds that the creative
elements of the game did not transform
38 Los Angeles Lawyer May 2014
those realistic depictions and thus did not
avoid liability.14
Two months after Hart was decided, the
Ninth Circuit in NCAA affirmed a district
court’s denial of an anti-SLAAP motion to dismiss a right of publicity claim that had been
made on First Amendment grounds. In contrast to Hart, which engages in an extensive
discussion about the appropriate legal standard to apply to the facts, NCAA simply
applies the transformative use test without a
significant discussion of the alternatives.
NCAA, like Hart, also holds that under transformative use standards the altered avatars
used in EA’s video game are not sufficiently
transformed to avoid right of publicity liability, stating: “Given that NCAA football
realistically portrays college football players
in the context of the college football games,
the district court was correct in concluding
that EA cannot prevail as a matter of law
based on the transformative use defense at the
anti-SLAAP stage.”15 The NCAA court thereafter quickly declined EA’s invitation to adopt
the balancing test of Rogers “wholesale for
right of publicity claims,” noting that its conclusion was consistent with Hart.16
Hart and NCAA are largely consistent
with each other and appear to stand for the
proposition that the unauthorized use of
avatars of people in creative audiovisual
works can violate their rights of publicity
and do not constitute speech protected by the
First Amendment. Should these rulings prove
influential, they could resolve an issue that has
been debated in the motion picture industry
for 15 years. The legality of avatars in video
games (and by implication, realistic digital animation of actors in motion pictures) that
appear to depict performances of individuals
who did not actually render them has been
unclear under right of publicity law.
The Supreme Court previously held that
the unauthorized recording and broadcast of
an individual’s actual performance without
permission could violate the right of publicity and withstand First Amendment attack.17
Also, a few lower courts have held that imitating a celebrity’s performance violated his
or her right of publicity.18 On the other
hand, with the encouragement of the Motion
Picture Association of America, several states
have enacted right of publicity statutes that
specifically exempt motion picture or video
game use.19
Hart and NCAA clearly support the position that the use of avatars can violate the right
of publicity. These decisions could have a significant impact on whether actors or others
who are digitally recreated in motion pictures
and video games will be compensated for
such uses of their identities if their holdings are
accepted in other states or federal circuits.20
Given the general disarray of First Amendment
jurisprudence in this area, however, it is unclear
whether Hart and NCAA, or the analytic
methodologies they adopt, will be widely
accepted. There remains a not insignificant
possibility that another court will apply one
of the other legal tests that have been applied
in this area and reach a contrary result.
Indeed, that is what the NCAA panel
itself did in Brown. The same day that the
Ninth Circuit panel rejected the balancing
test and ruled for the athletes in NCAA, it
ruled just the opposite in Brown, which, in
contrast to NCAA, adopted the balancing
test. Brown holds, contrary to NCAA, that
Jim Brown could not pursue a Lanham Act
claim against EA for its unauthorized use of
his altered avatar in a video game.21 What
accounted for the different legal test and
result? Not the facts, which although not
identical, were not distinguishable in any
material way. Hart, NCAA, and Brown all
involved unauthorized use of modestly altered
avatars in EA’s video games.22
The same panel issued the NCAA and
Brown decisions, and it was well aware of its
different analysis and results in the two cases.
To address those differences, the panel emphasized in Brown that the appeal related only
to Brown’s Lanham Act claim. The court
argued that had the right of publicity causes
of action been before it, the analysis may
have been different and a different outcome
may have been obtained.23
The same panel also emphasized that it
applied the transformative use test in NCAA
rather than the balancing test it applied in
Brown because a relatively broader right of
publicity claim was being asserted in NCAA.
The court stated: “The right of publicity…
does not primarily seek to prevent consumer
confusion…rather, it primarily protects a
form of intellectual property in one’s person
that society deems to have some social utility…The right of publicity protects the
celebrity, not the consumer.”24 NCAA’s characterization echoed the Hart court’s statement that the right of publicity deserves more
room than the Lanham Act because it “protects a greater swath of property interests.”25
The court in NCAA declined to apply the balancing test to the right of publicity claims
before it for this reason.
How persuasive is the panel’s reasoning for
distinguishing NCAA and Brown? Why
should consumers receive less protection than
celebrities? One can make reasoned arguments that, in fact, the panel’s affirmance of
the dismissal of Brown’s Lanham Act claim
irreconcilably conflicts with its NCAA decision, for at least two reasons.
First, the Lanham Act rights that Brown
sought to protect are the same property rights
in goodwill that the college football players
were permitted to protect in the NCAA deci-
sion. The Lanham Act and right of publicity
both seek to protect the goodwill associated
with a trademark or individual’s identity,
which in the celebrity endorsement context
are often the same thing.26 Further, case law
affirms that the Lanham Act protects not
only against consumer confusion but also
against the unauthorized taking of a trademark owner’s property rights.27 Since the
same property rights in personas were being
violated in Brown and NCAA, one can make
a reasoned argument that the same First
Amendment standard should have applied
in both cases.
Second, the only significant legal difference
between NCAA’s right of publicity claim and
Brown’s Lanham Act claim further calls into
question the consistency of the Brown and
NCAA decisions. The right of publicity is a
creature of state law that restricts speech
more broadly than does the Lanham Act.
Right of publicity claims, unlike trademark
claims, prohibit even nonconfusing commercial uses of an individual’s persona.28
The Lanham Act claim at issue in Brown
thus inherently provided more First Amendment protection than does the right of publicity claim at issue in NCAA because the
Lanham Act regulates only commercially
misleading uses of Brown’s persona and
because the Lanham Act has statutory fair use
and other defenses that significantly accommodate First Amendment concerns.29 The
panel’s decisions in NCAA and Brown effectively hold that because right of publicity
claims seek to restrict more speech than
Lanham Act claims, they must be permitted
to do so. Is that logical? The First Amendment
accommodates the broader restrictions on
speech present in NCAA, so one could logically argue that it must accommodate the
lesser restriction on speech presented by
Brown’s Lanham Act claim. Another interesting aspect of Brown is that it mentions, but
does not substantively address, several prior
Ninth Circuit panel decisions that had
adopted different standards for addressing
First Amendment defenses to Lanham Act
claims. In International Olympic Committee
v. San Francisco Arts & Athletics (SFAA), a
Ninth Circuit panel held that use of the
Olympics trademark in political speech was
not protected by the First Amendment and
infringed trademark rights because there were
alternative means to communicate the message that would not infringe trademark
rights.30 In Dr. Seuss Enterprises, LP v. Penguin Books USA, Inc., another Ninth Circuit
panel held that the First Amendment did not
protect potentially confusing uses of marks on
the cover of and within a book, applying the
Lanham Act’s traditional likelihood-of-confusion test to reject the First Amendment
related parody defense.31 Finally, in Hoffman
v. Capital Cities/ABC, Inc., the Ninth Circuit
applied the constitutional malice test to evaluate a First Amendment defense to a Lanham
Act claim, holding that a digitally altered
photograph of Dustin Hoffman did not violate the Lanham Act because the photo was
not published with constitutional malice.32
There was no dispute in Brown that constitutional malice did not apply, as case law
out of a cannon.37 SFAA involved an organization that claimed a First Amendment
right to use the “Olympics” mark in the title
“Gay Olympic Games” because it was political speech and because its use allegedly was
not confusing.38
The Supreme Court rejected First Amendment defenses in both cases. In Zacchini, the
Supreme Court did not articulate an analytic
has applied it only to newspapers and magazines. However, Brown argues that either of
the other two approaches was preferable to
the balancing test and that under either the
approach of SFAA or Dr. Seuss, Brown, rather
than EA, would have prevailed.33
The Brown court acknowledged these
earlier panel decisions but declined to follow
them because two other panel decisions had
instead applied the balancing test in the trademark setting.34 However, recent panel decisions cannot overrule earlier panel decisions;
only an en banc decision may do that.35
Further, earlier decisions can be distinguished
by a subsequent panel, but the Brown panel
did not attempt to distinguish Brown from the
earlier panel decisions that had articulated the
other standards.36
Finally, the approaches followed in Hart,
NCAA, and Brown arguably are all inconsistent with Supreme Court authority. Zacchini
v. Scripps-Howard Broadcasting Company
involved a local television station that claimed
a First Amendment right to broadcast on the
evening news a human cannonball being shot
methodology to the right of publicity claim
before it but merely stated that copying someone’s entire act was no more immune from
right of publicity liability than it would be
from copyright infringement liability.39
In SFAA, in contrast, the Supreme Court
engaged in extensive First Amendment analysis. The Court did not dispute that some of
SFAA’s speech was political40 but nevertheless
combined content-neutral time, place, and
manner case law restricting speech with commercial speech case law, as well as language
from Zacchini, to articulate what amounts to
an intermediate level of review for trademark infringement actions. Applying that
standard, the Court stated:
Section 110 [of the Olympic Trademark Act] restricts only the manner in
which the SFAA may convey its message.…The appropriate inquiry is thus
whether the incidental restrictions on
First Amendment freedoms are greater
than necessary to further a substantial
governmental interest.41
Concluding that the incidental restricLos Angeles Lawyer May 2014 39
tions on SFAA’s political speech were not
greater than needed to further the government’s interest in protecting USOC’s property
rights in its mark, the Court further stated:
The SFAA’s expressive use of the word
[“Olympic”] cannot be divorced from
the value USOC’s efforts have given
to it. The mere fact that the SFAA
claims an expressive, as opposed to a
purely commercial, purpose does not
give it a First Amendment right to
“appropriate to itself the harvest of
those who have sown.” The USOC’s
right to prohibit use of the word
“Olympic” in the promotion of athletic
events is at the core of its legitimate
property interest.42
The Supreme Court further noted that the
SFAA’s proposed use of the word “Olympic”
was “a clear attempt to exploit the imagery
and goodwill created by the USOC.”43 Two
years later the Supreme Court described this
as an intermediate scrutiny standard.44
Which Standard to Apply?
One can reasonably argue that the Supreme
Court’s intermediate scrutiny standard, rather
than the other standards articulated by lower
courts in the years since, should have applied
to Hart, NCAA, and Brown, not to mention
Rogers and Comedy III. EA’s actions in
Brown should have been actionable under the
intermediate scrutiny standard regardless of
the prior holdings of any lower courts. The
trademark regulation under the Lanham act
at issue in Brown is permissible under the
intermediate scrutiny standard because it
promotes a substantial government interest
that would be achieved less effectively absent
regulation.45 National protection of trademarks is desirable because trademarks foster
competition in the maintenance of quality
by securing to the producer the benefits of a
good reputation.46 These government interests would be achieved far less effectively if
parties could not protect their trademarks
when infringement occurs within an allegedly
expressive work.
Further, the trademark regulation at issue
in Brown was content-neutral because its
purposes of protecting intellectual property
and avoiding consumer confusion are unrelated to the content of the video games. Any
effect on EA’s speech rights would have been
truly incidental, because EA could still produce and distribute football or other sportsrelated video games with or without using
Brown’s likeness and persona.47
The apparent reluctance of appellate
courts to accept and apply Supreme Court
authority, and the diverging paths that appellate courts continue to follow as they grap-
ple with these issues means that there likely
will be continued judicial uncertainty over
how First Amendment concerns should be
addressed when the likenesses and performances of people are digitally imitated in
creative works.
■
1 Eldred
v. Ashcroft, 537 U.S. 186, 221 (2003).
Dallas v. Stanglin, 490 U.S. 19 (1989); Zacchini
v. Scripps-Howard Broad. Co., 433 U.S. 562 (1977);
Comedy III Prods., Inc. v. Gary Saderup, Inc., 25 Cal.
4th 387 (2001); Hoffman v. Capital Cities/ABC, Inc.,
255 F. 3d 1180 (9th Cir. 2001); Rogers v. Grimaldi,
875 F. 2d 994 (2d Cir. 1989); RESTATEMENT (THIRD)
OF UNFAIR COMPETITION §47 cmt. c (1995); Parks v.
LaFace Records, 329 F. 3d 437, 448-50 (6th Cir.
2003); Doe v. TCI Cablevision, 110 S.W. 3d 363 (Mo.
2003); Mark S. Lee, Intellectual Property and Free
Speech, Chap. 17:13-21 in E NTERTAINMENT &
INTELLECTUAL PROPERTY LAW (2013-14); Mark S. Lee,
Agents of Chaos: Judicial Confusion in Defining the
Right of Publicity-Free Speech Interface, 23 LOY. L.A.
ENT. L. REV. 471, 472 (2003).
3 In re NCAA Student Athlete Name & Likeness
Licensing Litig., 724 F. 3d 1265 (9th Cir. 2013).
4 Brown v. Electronic Arts, Inc., 724 F. 3d 1235 (2013).
5 Hart v. Electronic Arts, Inc., 717 F. 3d 141 (3d Cir.
2013).
6 Hart, 717 F. 3d at 152; Zacchini, 433 U.S. 562.
7 Hart, 717 F. 3d at 152; TCI Cablevision, 110 S.W.
3d 363 (en banc); Rogers v. Grimaldi, 875 F. 2d 994
(2d Cir. 1989); Comedy III, 25 Cal. 4th 387.
8 TCI Cablevision, 110 S.W. 3d at 374.
9 Hart, 717 F. 3d at 154.
10 Rogers, 875 F. 2d at 1000-01.
2 See
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11 Panels
in at least four circuits have adopted the balancing test in the trademark setting. See, e.g., University
of Ala. Board of Trustees v. New Life Art, Inc., 683 F.
3d 1266 (11th Cir. 2012); E.S.S. Entm’t 2000, Inc. v.
Rock Star Videos, Inc., 547 F. 3d 1095 (9th Cir. 2008);
ETW Corp. v. Jireh Pub., Inc., 332 F. 3d 915 (6th Cir.
2003); Westchester Media v. PRL USA Holdings, Inc.,
214 F. 3d 658, 664 (5th Cir. 2000).
12 Hart, 717 F. 3d at 157-58.
13 Id. at 159; Comedy III Prods., Inc. v. Gary Saderup,
Inc., 25 Cal. 4th 387, 407 (2001).
14 Hart, 717 F. 3d at 165-66.
15 In re NCAA Student Athlete Name & Likeness
Licensing Litig., 724 F. 3d 1265, 1279 (9th Cir. 2013).
16 Id. at 1280.
17 Zacchini v. Scripps-Howard Broad. Co., 433 U.S.
562 (1977).
18 See, e.g., Apple Corps. Ltd. v. Lieber, 229 U.S.P.Q.
1015 (Cal. Super. Ct. 1986) (unpublished noncitable)
(judgment entered against producers of unauthorized theatrical production concerning the Beatles on right of publicity grounds; First Amendment defense rejected);
Groucho Marx Prods., Inc. v. Day & Night Co., 523 F.
Supp. 485 (S.D. N.Y. 1981), rev’d on other grounds, 689
F. 2d 317 (2nd Cir. 1982) (unauthorized imitation of a
performance of the Marx Brothers violated their rights
of publicity); Presley’s Estate v. Russen, 513 F. Supp.
1339 (D. N.J. 1981) (A theatrical production that imitated a live Elvis Presley show violated the Presley
Estate’s right of publicity.).
19 See, e.g., CIV. CODE §3344.1(a)(2); IND. CODE §32-361-4, 15; OKLA. STAT. tit. 12:25, §1448N; PA. CONS.
STAT. 42:8316(3)(iii).
20 For example, in 1999 the Screen Actors Guild unsuccessfully attempted to amend California’s posthumous
right of publicity statute to expressly prohibit photorealistic digital animation of deceased celebrities in motion
pictures. See CIV. CODE §3344.1.
21 Brown v. Electronic Arts, Inc., 724 F. 3d 1235 (2013).
22 The back cover of some editions of the Madden NFL
game featured an African American football player in a
jersey that resembled the jersey that Brown wore during his years in the NFL. See id. at 1246.
23 The Brown court only considered the Lanham Act
claim because although Brown had alleged Lanham Act
and right of publicity claims in the district court, it dismissed only the Lanham Act claim and declined to exercise supplemental jurisdiction over the right of publicity claim. The Ninth Circuit’s statement amounted to an
invitation for Brown to refile his right of publicity claim
in state court, and Brown accepted that invitation and
filed suit in state court following the Ninth Circuit’s decision. See Brown v. Electronic Arts, Case No. BC520019
(L.A. Super. Ct. Aug. 30, 2013).
24 NCAA, 724 F. 3d at 1280-81 (emphasis in original,
internal quotations and citations omitted).
25 Hart v. Electronic Arts, Inc., 717 F. 3d 141, 157-58
(3d Cir. 2013).
26 As the panel in Brown acknowledged, “[i]n cases
involving confusion over endorsement by a celebrity
plaintiff, ‘mark’ means the celebrity’s persona.” Brown
v. Electronic Arts, Inc., 724 F. 3d 1235 (2013); Brown,
724 F. 3d at 1239, n.1. Persona rights are precisely
what California’s common law right of publicity also protects. See Downing v. Abercrombie & Fitch, 265 F. 3d
994, 1004 (9th Cir. 2001) (right of publicity protects
property goodwill represented by persona); see also
College Savs. Bank v. Florida Prepaid Post-Secondary
Educ. Expense Bd., 527 U.S. 666, 673 (1999) (trademark
law protects goodwill in mark).
27 See, e.g., College Savs. Bank, 527 U.S. at 673; Kmart
Corp. v. Cartier, Inc., 485 U.S. 176, 185-6 (1988)
(“Trademark law…confers private rights, which are
themselves rights of exclusion.”).
28 See Downing, 265 F. 3d at 1001.
29 See 15 U.S.C. §1115(d)(iv).
30 International Olympic Comm. v. San Francisco Arts
& Athletics, 781 F. 2d 733 (9th Cir. 1986).
31 Dr. Seuss Enters., LP v. Penguin Books USA, Inc., 109
F. 3d 1394, 1405-06 (9th Cir. 1997).
32 Hoffman v. Capital Cities/ABC, Inc., 255 F. 3d 1180
(9th Cir. 2001).
33 Brown v. Electronic Arts, Inc., 724 F. 3d 1235, 1241
(2013).
34 Id.
35 Hulteen v. AT&T Corp., 498 F. 3d 1001, 1009-10
(9th Cir. 2007).
36 Brown, 724 F. 3d at 1241.
37 Zacchini v. Scripps-Howard Broad. Co., 433 U.S.
562 (1977).
38 San Francisco Arts & Athletics, Inc. v. United States
Olympic Comm., 483 U.S. 522, 535 (1987).
39 Id. at 574.
40 Id. at 535-36.
41 Id. at 536-37.
42 Id.
at 541.
at 541 n.19.
44 See Ward v. Rock Against Racism, 491 U.S. 781, 798800 (1989).
45 San Francisco Arts & Athletics v. United States
Olympic Comm., 483 U.S. 522, 536-37 (1987); see
also Eldred v. Ashcroft, 537 U.S. 186, 244 (2003)
(Breyer, J., dissenting).
46 Park’N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S.
189, 198 (1985).
47 For example, EA could 1) create video games with fictional figures and teams, 2) use only current NFL team
logos and players with appropriate permission from
the trademark owners, 3) create a game that actually does
not use Brown’s likeness and persona, 4) obtain a license
to use Brown’s persona, or 5) use Brown’s persona
without permission if it factually could prove that its use
were not likely to mislead the public as to Brown’s
endorsement or otherwise violate Brown’s rights.
43 Id.
Los Angeles Lawyer May 2014 41
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Introductory TAP (i-TAP)
STARTING TUESDAY, MAY 6, Trial Advocacy and the Litigation Section will host a
program on the evenings of May 6, 8, 13, 14, 20, and 21 from 5:30 to 8:30 P.M. in
one in a series of courses offered by LACBA’s Trial Advocacy Project (TAP). Designed
for attorneys who have little or no trial experience, this course provides trial
advocacy instruction, mock trial performance, and constructive feedback.
Participants will learn to mark exhibits, lay evidentiary foundation, deliver
opening statements, conduct direct and cross examinations, and deliver closing
arguments. Classes will be taught at the LACBA-Executive Presentations Mock
Courtroom. The course instructors are local prosecutors. Successful completion of
this course meets the prerequisites for admission to the five-week Traditional TAP
course taught annually in the fall. Completion and certification from Traditional
TAP qualifies participants for a pro bono practicum with a local prosecutorial
agency trying criminal cases. Written course materials will be distributed via email prior to the first class, so a correct e-mail address at the time of registration is
needed. The program will take place at the Los Angeles County Bar Association,
1055 West 7th Street, 27th floor, Downtown. On-site registration and dinner will
begin at 5:00 P.M. Parking is available at 1055 West 7th Street and nearby lots. The
registration code number is 012259.
$995—LACBA member
$1,095—all others
16.5 CLE hours, including 1 hour in ethics
3rd Annual International Arbitration Conference
ON FRIDAY, MAY 9, the International Law Section will host a conference on attorneyclient privilege, ethics, bias, and appointment of arbitrators. Leading international
arbitrators and practitioners from Australia, Canada, China, England, Hong Kong, and
the United States will share accounts of trends and legal developments in
international arbitration. The program will take place at the Los Angeles County Bar
Association, 1055 West 7th Street, 27th floor, Downtown. Parking is available at 1055
West 7th Street and nearby lots. On-site registration and breakfast will begin at 8
A.M., with the program continuing from 9 A.M. to 5:30 P.M. The conference will be
preceded by an opening reception hosted at the American Arbitration Association
headquarters at 725 South Figueroa Street, Downtown, on May 8 from 6:30 to 8:30
P.M. The registration code number is 012283.
$150—CLE+ member
$300—International Law Section member
$300—ICDR member
$345—LACBA member with meal
$375—all others with meal
7.5 CLE hours, including 1 hour elimination of bias and 1 hour in ethics
Advanced Mediation
Skills Practicum
ON MAY 16, 17, AND 19, the Center for
Civic Mediation will host a three-day
interactive course from 9 A.M. to 4 P.M.
that includes practice and coaching in
advanced mediation skills.
Participants will receive a minimum
10 hours of litigated case training,
including nine hours of lecture and
nine hours of role-playing,
observation, coaching, and feedback.
Speakers Steven R. Cerveris, Jeff
Kichaven, and Gail Nugent will cover
such topics as assessing the conflict;
consensus building; problem-solving;
managing multiparty, multiissue
agendas; legal ethics; and
distributive and integrative
bargaining. Case studies will include
a range of practice areas (e.g.,
personal injury, employment,
contracts, real estate, and property).
Prior mediation training is required
for this course. The program will take
place at the Los Angeles County Bar
Association, 1055 West 7th Street,
27th floor, Downtown. On-site
registration and the meal will begin at
8:30 A.M., with the program
continuing from 9 A.M. to 4 P.M. each
day. Parking is available at 1055 West
7th Street and nearby lots. The
registration code number is 012280.
$515—general price
18 CLE hours, including 3 hours in
ethics and 1 hour elimination of bias
The Los Angeles County Bar Association is a State Bar of California MCLE approved provider. To register for the programs
listed on this page, please call the Member Service Department at (213) 896-6560 or visit the Association Web site at
http://calendar.lacba.org, where you will find a full listing of this month’s Association programs.
Los Angeles Lawyer May 2014 43
closing argument
BY ROY JIMENEZ
How a Private Jury Trial Worked for My Client
CONTINUANCES ARE MORE COMMON in today’s civil courts. Court pute resolution concern that could handle this new endeavor. After
staff employees have been laid off, departments have been closed, and contacting several companies, we learned this had never been done
judges are finding themselves sharing staff and courtrooms. This before. Once selected, the alternative dispute resolution company coorhas resulted in a backlog of cases waiting for trial. In late 2012, I found dinated the judge and the jury, located vacant office space, and
myself waiting in line and decided a private jury trial would be the rented authentic courtroom furniture. The jury was called in the
same manner and from the same pool as any jury would be summoned.
best solution for my client.
I represented Gentec Enterprises, Inc., against Transistor Devices, We stipulated the use of a smaller number of jurors in the event we
Inc. The parties entered into a purchase agreement in which Gentec lost some of them. We also agreed to pay them handsomely for their
was to purchase a subsidiary company of TDI. My client paid the ini- services and offered them a bonus provided that they stayed until the
tial down payment, took possession of the subsidiary’s facility, and end of deliberations. This prevented them from leaving us and causassumed the lease and other financial obligations. A dispute arose as to whether my client
could use the name of the subsidiary. The issue
We conducted the trial following the same rules and procedures
was whether the contract was an asset purchase
agreement or a stock purchase agreement. The
deal included a large lease obligation, payroll,
we would in federal court, where the case was venued.
employee transportation, security, and utilities.
The deal never closed, however, and we filed
a lawsuit in November 2010.
The original trial date was February of 2012. Due to the economic ing a mistrial. We conducted the trial following the same rules and
crisis, however, the courts became backlogged, and the court vacated procedures we would in federal court, where the case was venued. We
our trial date on the eve of trial. Later that year, another trial date performed voir dire, empaneled our jury, and for three weeks conwas set for September 11, 2012. Once again on the eve of trial, the ducted a private jury trial. At the conclusion of deliberations, the jury
court unilaterally vacated the trial date and ordered us to a manda- found that TDI had breached the purchase agreement and awarded
tory settlement conference, although we had already participated in damages to Gentec.
The experience of the private jury trial far surpassed a regular jury
mediation and numerous settlement discussions. My client was still
paying for the subsidiary’s obligation and still had no trial date in sight. trial or a standard arbitration. The paid jury wanted to be of assistance. We were able to schedule our court days according to everyAn alternative solution was needed.
I have experience conducting arbitrations and experience using one’s schedule, so there was no wasted time waiting in hallways. The
mock juries to evaluate cases. Since I represented the plaintiff in this venue provided a pleasant environment for the trial with nice waitmatter and knew damages would be an issue, I did not want to go ing rooms for witnesses. Each side had a war room and did not have
to traditional arbitration. During the mandatory settlement confer- to rush out of a courthouse at 4:30, making the trial experience
ence, I asked if we could put together a jury panel with the assistance much more enjoyable for the attorneys and more efficient in respect
of a trial consultant and hire a retired judge to conduct a private trial. of the judge’s and jurors’ time. Unlike a standard arbitration, we did
Pursuant to the Federal Arbitration Act, parties can limit the issues not have one to three retired judges deciding the fates of our clients.
they choose to arbitrate, agree on the rules under which the arbitra- We had a full jury panel of individuals with different backgrounds
tion will proceed, specify with whom they choose to arbitrate their and experiences to make the critical factual findings.
This process was costly, but it saved my client attorney’s fees,
disputes, and choose who will resolve the specific disputes.1 At the
conclusion of the settlement conference, I proposed a private jury trial. reduced the operating costs of the subsidiary, and gave my client cerTDI’s counsel agreed, and the magistrate judge assisted with draft- tainty to move on with its business. We were allowed to move to the
front of the line for our day in court. In today’s congested courtrooms,
ing the agreement.
We agreed to arbitrate all issues involved in the case, dismiss the alternative ways to expedite trials should be explored. While a private
pending action, and request the court to retain jurisdiction to enforce jury trial may not be the best solution for every continuance, it may
the verdict and award. We stipulated that the final award would be be a viable option. If conditions are right, private jury trials ensure that
binding and could be converted into a judgment. We agreed that there clients achieve legally binding, timely conclusions to their disputes. ■
would be no right of appeal. We defined how costs would be split,
what rules would govern the proceeding, and what number of jurors 1 Stolt-Nielsen S.A. v. AnimalFeeds Int’l, 130 S. Ct. 1758, 1774 (2010).
would be used to act as the trier of fact.
We signed the arbitration agreement during the mandatory set- Roy Jimenez, a partner at Tredway Lumsdaine & Doyle, LLP, specializes in business and real estate litigation.
tlement conference and began the process of locating an alternate dis44 Los Angeles Lawyer May 2014
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