May 12, 2021 Feature

Litigation & Industry Updates

Michelle M. Wahl, Partner, Swanson, Martin & Bell, LLP, Tyler Kennedy, Georgetown University Law Center, J.D. Candidate 2023, Madison Amboian, DePaul University, College of Law, J.D. Candidate 2022, Zachary Prociuk, DePaul University, College of Law, J.D. Candidate 2021, Alexa Upton J.D. Candidate, Notre Dame Law School, J.D. Candidate 2021, Kayla M. Stetzel, Loyola University Chicago School of Law, J.D. Candidate 2022

Atlantic Recording Corp. Spinrilla, LLC – A Win for the Labels

Jeffery Dylan Copeland, founder of Spinrilla, a streaming and downloading service for hip-hop music, was sued by several major record labels after they allegedly failed to remove infringing sound recordings from their website and related Apple and Android applications.

Spinrilla began in 2013 as an online music service but quickly grew to nearly 20 million registered users and 1.5 million daily users, with nearly 1.4 million songs available for download and streaming by 2017. Hip-hop DJs setup “artist accounts” in order to upload their respective music to the site. However, in early 2015, several labels took notice of unlicensed music on the site and began sending Sprinrilla notices of copyright infringement. In fact, from 2015 to 2017, Spinrilla had received 59 takedown notices demanding that over 400 sound recordings be removed from Spinrilla’s website and related applications.

Spinrilla’s policy on repeat copyright infringers was first provided in its Terms of Service in 2017 and provided that user accounts would be terminated. Spinrilla also designated its Digital Millennium Copyright Act (DMCA) agent with the U.S. Copyright Office around the same time it modified its Terms of Service to address repeat infringers. However, all of these steps occurred after Plaintiffs filed suit against them.

Although Spinrilla maintained that it removed any infringing sound recordings following the labels’ notices of copyright infringement, Plaintiffs argued Defendants failed to remove them all and identified specific instances in support. Specifically, Plaintiffs alleged that Spinrilla infringed on over 4,000 sound recordings and further alleged that Spinrilla and Copeland were directly liable for copyright infringement, as streaming the songs amounted to “public performances”, which were an exclusive right of the copyright holders. Namely, Plaintiffs argument centered on the DMCA’s exclusive right to publicly perform sound recordings by means of a digital audio transmission, which includes the right to transmit or otherwise communicate a performance to the public, by means of any device, whether those receiving it are in the same or separate places at the same or different times.

There was no dispute that the 4,000 sound recordings in question were in fact uploaded and streamed, but Spinrilla argued it had no liability for those songs given its customers had engaged in the infringing activity, and not Spinrilla itself. In support of its position, Spinrilla relied on a number of cases that provided Internet Service Providers (ISPs) with insulation from copyright infringement liability. Determining who was liable for streaming music online, Spinrilla or its users, became the central issue for the Court.

To support its position that Spinrilla itself was liable, the Plaintiffs looked to ABC v. Aereo and similar case precedent that established that an ISP communicates images and sounds to the user by means of a device or process, and transmits the images or sounds when the communication is contemporaneous with the images or sounds that are either visible or audible on the end user’s device. 573 U.S. 431 (2014). Applying this same logic and case law, the Court concluded Spinrilla was directly liable for copyright infringement.

Copeland and Spinrilla moved for summary judgment arguing the DMCA’s “safe harbors” provision insulated them from liability. However, those protections are only afforded to ISPs when very specific conditions are met. Namely, they must not have had knowledge of infringing activity or at least must have acted quickly to remove or disable that content upon notification by the copyright holder. Moreover, ISPs are required to have designated registered agents for receiving these notices and not only list them on their website, but also register them with the U.S. Copyright Office. Additionally, ISPs must create and communicate its repeat infringer policy to its users and execute it accordingly.

Because Spinrilla’s steps to comply with the DMCA’s safe harbor provision came in 2017, after plaintiffs filed the present lawsuit, the Court found that Defendants could not take advantage of the DMCA safe harbors for any infringing activity pre-dating that time. The Court further condluded that there was no need to determine application of the safe harbors after July 2017 since the 4000+ works at issue did not include any sound recordings that Plaintiffs identified as involving repeat infringement. In so concluding, it appears the Court determined that lack of compliance with the repeat infringer policy only disqualifies that ISP from the safe harbors as to such infringements involving repeat infringers.

After ruling in favor of the Plaintiffs on Defendants’ safe harbor defense, the Court ordered the parties try the case to determine appropriate damages.

Equal Pay Claims Out in Women’s Soccer Suit

Sports associations with both professional men’s and women’s teams have a unique challenge, how to equitably structure compensation between the two teams. In the world of international soccer, the men’s and women’s national teams each are governed by separate collective bargaining agreements with United States Soccer Federation (U.S. Soccer), the sport’s governing body. Members of the United States Women’s National Soccer Team (USWNT) coming off their 2019 World Cup victory believe that their suit alleging violations of the Equal Pay Act and Title VII of the Civil Rights Act is an attempt level the playing field between them and their male counterparts. Members of the team sought $66 million in compensatory damages that members of the team claimed would have been paid to them under a system similar to the male team’s compensation structure. A federal district court dashed the team’s hopes when it granted in part U.S. Soccer’s motion for summary throwing out the equal pay claims, but the court allowed claims focused on inferior travel and support services to survive. Morgan v. United States Soccer Fed’n, Inc., 455 F. Supp 3d 635 (C.D. Cal. 2020).

The court focused on the rate of pay rather than total or potential compensation and examined the terms set forth in each team’s independently negotiated collective bargaining agreement. By comparing the two teams during the period covered in the suit, the women’s team played 111 games and was compensated $24.5 million averaging $220,747 per game. Id. at 654. The men’s team played 87 games and was compensated $18.5 million, averaging only $212,639 per game approximately. Id. This women’s team was paid $8,000 more on a per-game basis. These calculations suggest that the women were paid a rate of pay that was similar if not greater than their male counterparts. Next, the court addressed the argument that if the women’s team would have been paid under the same compensation structure the team would have been paid sustainably more. The court focused on the history of negotiations between the parties highlighting that the women’s team rejected an offer to be paid under the same pay-to-play structure as the men, and instead requested to forgo higher potential bonuses for different contractual benefits such as greater base compensation. Id. at 655. The court did not think it should be allowable for the USWNT to alter the CBA retroactively to have the most optimal outcome.

The issue of disparity in compensation between women’s and men’s professional sports teams will continue to be highlighted as societal views of equality and justice continue to evolve, particularly in sports and entertainment. This case presented some insight into how future courts will analyze and address the issue, specifically when both teams fall under a common organization. The trial on the issues of travel accommodations and support services have been delayed until a later date due to the COVID-19 pandemic. This case could be the first step in ensuring equality for professional athletes.

Antitrust and Forced Arbitration in International Matches

The ability of independent organizers to hold, promote, and profit from international soccer matches is subject to a web of complex agreements involving both the international and national soccer organizations. Relevent Sports, a soccer promotion company based out of Miami, Florida, alleged that U.S. Soccer has unlawfully conspired with FIFA and other member organizations to punish clubs and players that participate in matches in the United States that have not been approved by U.S. Soccer. To host a match outside of a team’s home territory a promoter must obtain approval from: each team’s national association(s); (b) each team’s regional confederation(s); and (c) the host country’s regional confederation. Relevent Sports, LLC v. United States Soccer Fed’n, Inc., No. 19-CV-8359 (VEC), 2020 WL 4194962, at *1 (S.D.N.Y. July 20, 2020). Matches will also only be approved if the organizer uses a FIFA licensed match agent. Id. at *2. Relevent sports argued that this agreement is an anti-competitive measure to protect and benefit U.S. Soccer’s marketing partner, and prevents fans from seeing their favorite international teams compete in the United States. In both 2018 and 2019, Relevent tried to organize matches between international teams to be played in the United States. Id. Acting through its agent, Relevent applied for U.S. Soccer’s approval, and the application was denied. U.S. Soccer cited a FIFA rule that requires “exceptional circumstances’’ to host an event outside a team’s territory. Relevent without U.S. Soccer’s approval was unable to hold the match as planned. Id.

U.S. Soccer filed a motion to compel arbitration or in the alternative, dismiss the suit entirely. The district court granted the motion in part and denied the motion in part. Id. at *1. The court held that the plaintiff is bound by the arbitration agreement with respect to the tortious interference claim. However, the court disagreed that FIFA was the appropriate venue to address the antitrust claims, and denied the motion to compel arbitration for that portion of the claim. Id. at *9. The court also required Relevent to file an amended complaint in the antitrust matter with more substantial factual allegations, which it filed in September. The plaintiff also released a letter sent from the Department of Justice to U.S. Soccer and FIFA stating the department was concerned “that FIFA could violate U.S. antitrust laws by restricting the territory in which teams can play league games.” Victoria Graham, FIFA, U.S. Soccer’s U.S. Match Ban May Violate Antitrust Laws, Bloomberg Law (Sept. 2, 2020, 12:25 PM), https://www.bloomberglaw.com/product/blaw/document/XBR0L2GK000000 . If the amended complaint is accepted by the court, the results of the antitrust claims have the potential to fundamentally alter the ability of international organizations to set requirements on holding events in the United States.

Kanye’s ‘Servitude’ Claim Against EMI: A Reminder that Governing Law Really Does Matter

While many artists live and work in California, record labels and publishers apply New York law to artists’ contracts in order to avoid certain California laws. One law in particular is California’s personal servitude statute. The California statute prohibits a label from enforcing obligations under a personal service contract for more than seven calendar years. Cal. Lab. Code § 2855(a). This law is clearly favorable to artists in allowing them flexibility and freedom to renegotiate contracts or even change record labels. Kanye West brought this issue to light in a suit he filed against EMI Records.

West sued his record label and publisher, EMI, in 2019. West stated he was in a contract of “Servitude” and “Slavery.” The California Labor Code section 2855(a) states the only relevant fact is whether the contract services began more than seven calendar years earlier. West argued that after seven years, the one who renders a personal service contract is entitled to a “moment of freedom” to decide whether they’d like to continue working for the same employer. West Compl. 1:22. With this in mind, he noted his contract’s seven-year period ended on October 1, 2010. This suit was filed in 2019, with West and EMI continuing to operate under the same contract, as amended and extended various times.

West further claimed the California courts had proper subject matter jurisdiction because West was a resident of Los Angeles, EMI maintained an office and did business within Los Angeles, and the wrongful acts by EMI occurred in Los Angeles. West Compl. 2:10-15.

EMI filed countersuit in New York, claiming West chose to enter into an extensively negotiated co-publishing agreement with EMI in 2003. Modifications and options were agreed to in 2004, 2005, 2006, 2009, 2011, 2012, and 2014. In all of these modifications, West agreed to be subjected exclusively to New York forum selection and New York choice of law. EMI Compl. 1. EMI rebutted West’s attempt to forum shop by reiterating the New York clauses. These clauses state EMI was entitled to a declaratory judgment because § 2855, the sole basis that West relies upon in his California Action, does not apply to the agreement because New York law, not California law, governs the agreement.

To fully appreciate why the choice of law is so important, let’s rewind to the 1944 landmark decision in De Havilland v. Warner Bros. Here, actress Olivia de Havilland contracted with Warner to a one-year agreement with six options to renew by the studio. De Havilland wanted more creative freedom, and so she attempted to terminate her contract after seven years. Warner argued it had the right to extend the contract due to interruptions caused by several interim De Havilland suspensions for various improprieties. If allowed, the contract would be enforced for well beyond seven years. The Appellate Court ruled in favor of De Havilland based on the common sense interpretation of the California Labor Code section 2855(a) that a studio cannot enforce a personal service contract for longer than seven calendar years. See De Havilland v. Warner Bros., 67 Cal. App. 2d 225, 236 (1944). This statute, which is the basis for West’s “moment of freedom” assertion, became known in the industry as The De Havilland Law.

The De Havilland Law became a powerful tool for artists. However, in 1987 the statute was amended to exempt recording artists from the seven-year protection. Cal. Lab. Code § 2855(b). This was to obligate recording artists to produce the agreed upon number of qualified compositions and albums irrespective of the seven-year mark. If an artist wants to terminate a contract, the amendment states the artist must give written notice to its counterparty of intent to terminate the contract. Id. at § 2855(b)(1). The artist would be liable for damages to the record label if the artist had failed to satisfy the contractual production commitment, notwithstanding the seven-year limit. Id. at § 2855(b)(2). This amendment means artists could be tied up well beyond seven years trying to turn out qualified compositions and albums or deal with likely lengthy settlement negotiations to determine the value of the abstract damages arising from this.

Under this amendment, if West had not fulfilled his contractual obligations at the time of filing suit he might have been subject to paying damages agreed upon between the parties. However the California statute could still have been his ticket to freedom if his real objective was to break the contract with EMI. For West to succeed in this argument, he would have had to demonstrate that extension options EMI exercised failed to provide West with a “moment of freedom” mandated by the California statute. Of course, under New York law West had no claim because no servitude statute exists in New York.

Nevertheless, this suit resulted in West and EMI settling after arduous negotiations. The interests of other recording artists and, for that matter, the recording labels might have been very well served had governing law been litigated. Lacking clarity, both sides will continue dancing around the governing law question for recording artists.

Overall, when new artists and attorneys are negotiating contracts for recording artists, they must be mindful of the governing law. The California Labor Code is a friend of recording artists, and should be fought for when possible.

BMG Bridges the Gap caused by Controlled Composition Clauses

BMG has announced it will eliminate Controlled Composition clauses from any new US record contracts. Controlled composition clauses are notorious for reducing the income of songwriters, composers and lyricists. Last year alone, they lost an estimated $14 million through these clauses. For many starving artists, BMG’s decisions is extremely good news. For BMG, and the others following, the times they are a changin’.

The majority of agreements contain a controlled composition clause providing if the recording artist or producer has written or co-written a song, has ownership or control of a song, or any interest in any composition on the album or single, the mechanical royalty rate payable by the record company for that composition is reduced. Usually, this is reduced to a 75% rate, which is a statutory rate of $0.091 per copy of a composition. In addition, these clauses often include a cap on the number of songs per album that can have mechanical royalty fees; usually 10-12 songs regardless of how many songs are actually on that album.

Composition owners have incurred significant opportunity costs because of these clauses. With this in mind, BMG has decided, effective immediately, it will no longer apply any reductions in new record deals as well as remove these reductions from its catalog over the course of the next year. The purposes behind this movement are to improve fairness in music contracts and to differentiate BMG as a leader and musician-friendly group in the marketplace. The music industry has seen the power pendulum swing too far and this proactive change is a welcomed sign, recognizing and valuing the importance and strength of the actual music and its creators.

BMG states, “the move forms part of its ongoing program to rebalance the music industry in favor of artists and songwriters by abandoning longstanding practices designed to reduce the incomes of musicians.” Murray Stassen, BMG Eliminates ‘Poisonous’ Controlled Composition Clauses From Its US Record Contracts, Music Business Worldwide (October 29, 2020), https://www.musicbusinessworldwide.com/bmg-exterminates-poisonous-controlled-composition-clauses-from-its-us-record-contracts/. This is a noble move by BMG, even if a nudge or two by Taylor Swift and the like contributed to this rebalancing.

BMG’s CEO further states that amidst the coronavirus, music companies must support their artists rather than burden them with unfair terms. BMG feels this is the best way to provide support to its artists. In addition, the music business is ever changing. BMG’s Ben Katovsky acknowledged the controlled composition deduction is “an anachronism which has no place in the new music business.” Id.

Music companies around the globe such as The Ivors Academy, SONA, NMPA, and NSAI support BMG. NSAI’s Bart Herbison applauded BMG’s move. Id. BMG’s elimination of controlled composition clauses is a huge step forward for songwriters, composers and lyricists. Music professionals around the world hope this is the first step of many toward a stronger and fairer industry. The industry seems to have figured out it’s time once again to let the music do the talking.

Major League Baseball 2020 Season Negotiations—A Follow-Up

Well, the 2020 baseball season came and went like the excitement of a new school year, and so the offseason is now upon us. That is not to say that the baseball season was not entertaining and exciting in its own right. In fact, in the most 2020-esque fashion, the baseball season almost ended faster than anyone could have been imagined when two Major League Baseball (“MLB”) teams experienced coronavirus outbreaks just weeks into the season. MLB Insiders, Is their season in jeopardy? What the Marlins’ coronavirus outbreak means for the team -- and MLB, ESPN https://www.espn.com/mlb/story/_/id/29547022/what-marlins-coronavirus-outbreak-means-mlb.

However, the season chugged on and the teams completed the full 60-game schedule with very few cancellations. That is not to say controversies regarding player conduct did not occur, such as when Cleveland Indians’ players broke Covid-19 protocols, ultimately leading to clubhouse turmoil and one player being shipped across the country to another franchise. Jeff Passan, Broken curfews, COVID outbreaks and ... bubble ball? Passan on MLB’s latest 2020 battles, ESPN https://www.espn.com/mlb/story/_/id/29679112/broken-curfews-covid-outbreaks-bubble-ball-passan-mlb-latest-2020-battles . Notwithstanding, baseball gave sports fanatics something to look forward to especially as the regular season came to a close and the postseason commenced.

As was described in the previous edition of the ABA Entertainment and Sports Lawyer, the negotiations between MLB and the Major League Baseball Players Association (“MLBPA”) were very contentious and ultimately led to Commissioner Manfred implementing the 60-game season. This implemented season also included a postseason comprised of the normal 10-team format. See Jeff Passan, MLBPA, owners clear final hurdles; players set to report to camps July 1, ESPN https://www.espn.com/mlb/story/_/id/29354014/sources-mlbpa-agrees-report-july-1-discussing-health-safety-protocols. These combative negotiations occurred in the backdrop of future renegotiations regarding a collective bargaining agreement set to expire in the winter of 2021 and the possibility of potential grievances filed by both the MLBA and MLB. As a result, MLB attempted to restore a peaceful relationship by meeting the MLBPA on its earlier demands for an expanded postseason format.

A part of the way through the 2020 baseball season, MLB decided to expand the playoff format to include 16 teams, an original proposal from the MLBPA, and move the site of the playoff contests to several bubble locations. ESPN.com, MLB’s expanded playoffs format for the 2020 postseason, ESPN https://www.espn.com/mlb/story/_/id/29831991/mlb-expanded-playoffs-format-2020-postseason. The nature of this expanded format was quite unique in that it provided a path for a team that was below .500 to come within one game of reaching the world series—not to mention that this team was also subject to significant controversy for its role in a sign steeling scheme in previous seasons. Even with the peculiar nature of the new format—a format that seemed ripe for upsets—a situation occurred that is quite rare. Not only did the best team in baseball hoist the Commissioner’s Trophy as champions, but the best team in each league, both American and National, dueled it out in the World Series.

One may question the reason the Commissioner and MLB felt obligated to expand the postseason. On one hand, MLB recognized the need to generate additional revenue in lieu of the lost revenue from ticket sales and other stadium sales. Tyler Kepner, M.L.B. Expands Playoffs for 2020 Season, The New York Times https://www.nytimes.com/2020/07/23/sports/baseball/mlb-playoffs.html. In turn, MLB estimated the expanded format would generate an additional $100 million in revenue, a return that would significantly benefit the many stakeholders. See Barry Bloom, MLB Playoffs Begin Anew With More Teams, Revenue, and Safety Bubbles, Sportico https://www.sportico.com/leagues/baseball/2020/mlb-to-start-expanded-playoffs-tuesday-with-increased-revenue-1234613746/.

Alternatively, the Commissioner may have felt pressure to cool any tensions between MLB and the MLBPA in light of the upcoming collective bargaining negotiations and the potential grievances. There is no denying the boiling tension between MLB and the MLBPA due to the quarrels regarding the implementation of the 2020 baseball season. Both sides were worried these spats would carry over into the offseason, whether it be in the form of grievances filed by both sides arguing bad faith negotiations and violations of the original agreement between MLB and the MLBPA for the 2020 season or in the form of combative collective bargaining negotiations.

Whatever the reason for the expanded postseason, the outcome appears to be a success for all those involved. At the time being, there seems to be a sense that MLB and MLBPA are on good terms as the offseason begins. However, I do not think this means either party will forget how the 2020 baseball season negotiations were handled just a short time ago.

Name, Image, Likeness Bill Introduced in Congress—Another One?

The hottest debate in all of college sports is whether student-athletes should be paid for their “services.” Originally, the argument for why student-athletes should be compensated took the form of an employer/employee relationship. These arguments went far and even included attempts by players to unionize. Ultimately, the issue of whether student-athletes can be considered employees reached the courts and not long thereafter the cause shifted. Now, the main arguments relate to compensation for use of the name, image, and likeness (NILs) of student-athletes—an argument that is not new or novel but has gained significant force over the years.

The first time this concept really hit a national level was when multiple federal appellate court cases determined that a college football video game was subject to a right of publicity claim by student-athletes. See Hart v. Elec. Arts, Inc., 717 F.3d 141 (3d Cir. 2013); Keller v. Elec. Arts Inc., 724 F.3d 1268 (9th Cir. 2013). More recently, the debate on whether student-athletes should be paid for use of their NILs hit a turning point when California became the first state to develop a legislative effort to recognize a student’s right to be compensated for the use of his or her NILs. See Cal. Educ. Code § 67456. Soon after, several states followed suit and the National Collegiate Athletic Association (“NCAA”) Board of Governors showed support for rule changes that would allow student-athletes to be compensated for their NILs while still maintaining their amateurism.

As the movement within states and the NCAA itself continued, the federal legislature recognized an opportunity to proactively approach this challenge and develop a uniform system. There have been several federal legislative proposals regarding NIL bills and even an attempt to establish a “College Athlete Bill of Rights.” Most recently, Rep. Anthony Gonzalez (R-Ohio) and Rep. Emanuel Cleaver (D-Mo.) have orchestrated a bipartisan effort to draft a NIL bill and to subsequently introduce the piece of legislation. Dan Murphy, Bipartisan federal NIL bill introduced for college sports, ESPN https://www.espn.com/college-sports/story/_/id/29961059/bipartisan-federal-nil-bill-introduced-college-sports.

The bill itself is a huge step toward providing student-athletes the flexibility to earn compensation from a variety of endorsement deals. In fact, the bill, even though it provides for federal preemption and certain restrictions regarding what products or companies a student-athlete may endorse, neglects to implement several of the restrictions the NCAA and college administrators have asked to be imposed on any NIL bill. In turn, this bill is more student-athlete friendly than any other piece of federal legislation previously introduced, although it does provide that schools can prohibit the student-athlete from wearing endorsement gear during games or at university sponsored events and that universities themselves should not directly compensate the student-athletes for the use of their NILs. Ross Dellenger, Bipartisan Name, Image, Likeness Bill Focused on Endorsements Introduced to Congress, Sports Illustrated https://www.si.com/college/2020/09/24/name-image-likeness-bill-congress-endorsements.

Additionally, the bill makes a conscious effort to preserve the student-athlete’s right to sign endorsement deals with competitors of companies that sponsor their school. This is important because it keeps the marketplace open for student-athletes to exploit, as opposed to allowing a situation in which schools could dry up the entire market.

One of the key components of this bill is the creation of a 13-member commission that would provide recommendations for how the law could be developed to respond to changes in collegiate athletics. This commission will consist of current or former student-athletes, coaches, athletic directors, conference administrators, sports marketing experts and corporate governance experts. Congress will appoint 12 of the members and those members will select the 13th member whom will also act as the leader of the commission.

The bill also allocates oversight and enforcement of the NIL law to the Federal Trade Commission. In this respect, the key issue is that there is no guidance on how the FTC is to distinguish between an endorsement deal and mere payments for the recruit disguised as an endorsement deal. The drafters did not believe they could legislate fair market value on endorsement deals, but instead trust that the market will work itself out overtime. Further, these are the types of issues the aforementioned 13-member commission will opine on.

Whether or not this bill is passed into law is still to be seen. There appears to be several other bills that have been introduced or are currently being drafted, including a potential NIL bill presented by the NCAA. Further, there is a divide on how far any federal NIL bill should go with some viewing the issue as one that should be addressed by state legislators and others believing any federal legislation needs to expand beyond NIL. Even though many in the industry believe that any federal bill will not pass until well into 2021, there is sort of a de facto deadline in that some state NIL statutes, such as in Florida, are set to take effect in the summer of 2021. This leaves little answered in the world of student-athlete NIL bills at the moment, but one thing is certain: college sports, and the NCAA as a whole, are in for one wild ride in 2021.

The Politics of Music Use for Campaigns

Since America’s founding, music has been an important aspect of political campaigns, beginning with the creation of a parody of “God Save the King,” on behalf of George Washington called “God Save Great Washington.” Politicians use music as an avenue to relate to and convey their values to their target audiences while energizing the crowd at their campaign stops. Today, politicians are frequently under fire for using popular songs as part of their campaigns. Musicians take to Twitter, and other social media sites to express their disapproval of being associated with a specific politician or party, especially if the artist’s political values do not align. In 2008, Sam Moore asked Barack Obama to stop playing “Hold On, I’m Comin’” at his rallies where the audience would replace the words with “Hold on, Obama’s comin’.” Moore explained that his vote is a private matter and that he had not endorsed Obama. Most recently, Tom Petty’s family issued an official cease and desist notice to the Trump Campaign for using “I Won’t Back Down,” indicating that Donald Trump was not authorized to use this song to “further a campaign that leaves too many Americans and common sense behind.” Although this may result in positive publicity for the artist, it can also turn into negative publicity for the politician.

But how does a politician obtain authorization to use a song for their campaign and avoid a public reprimand from the musician? It appears that the only way a politician can guarantee she will not be threatened with a lawsuit is if the campaign obtains permission directly from the artist or the artist’s estate, even if the candidate has already fulfilled the necessary legal requirements for using the music. Under the Copyright Act, the owner of a creative work has the exclusive right to publicly perform that work. Thus, in order to legally exploit another’s copyrighted work, the user must obtain licenses to ensure that everyone who contributed to the creation is paid for its use. To publicly play an original pre-recorded song, the campaign must obtain a public performance license, mechanical license for the use of the composition, and master license for the use of the recording. If the candidate wants to use the song for a campaign commercial that will be aired on television or the internet, the candidate must obtain a synchronization (sync) license from the copyright holder in place of a mechanical license. A sync license is necessary whenever one combines any visual work with music. Most large arenas and convention centers have blanket performance licenses with at least one performing rights organization (PRO). This allows the entire catalogue of the PRO to be played at the venue without the venue having to negotiate directly with each individual publisher or artist for the performance of his or her song. However, PROs like ASCAP and BMI exclude music used during conventions, expositions, and campaign events from their blanket licenses and require that the campaign itself obtain a public performance license. This license extends until the candidate is sworn into office and covers every campaign stop along the way. Additionally, if an ASCAP or BMI artist do not want his creations associated with any political party, the artist can request to withhold the use of his music at any political event.

Even after then-candidate Donald Trump played “Rolling in the Deep” and “Skyfall” at one of his 2016 rallies in New Hampshire and obtained the appropriate licenses, a spokesperson for Adele publicly stated that Adele did not give permission for her music to be used “for any political campaigning.” Although Trump may not have violated Adele’s rights under copyright law, it is still possible to be sued by an artist under the Lanham Act, which was created to cover trademark infringements, for right of publicity, and for unfair trade practices. A trademark is a word, symbol, or phrase, while a publicity right is an individual’s image and likeness. Thus, if an artist attempted to sue a politician for using his song, the artist would argue that the politician’s use of the musician’s name, as tied to the song and thus the campaign, would cause dilution or confusion of the artist’s mark. Further, the musician could assert that under the right of publicity, the artist has not consented to his image or likeness being associated with a political campaign. Lastly, the artist could declare that the politician’s use of his song led to a false endorsement of the candidate by the artist. In Adele’s case, the statement revoking permission of use of her songs may prevent future use of her music by campaigns due to BMI’s allowance of artists to opt out of the blanket political license. However, it is unlikely that Adele would have much footing to pursue legal action against the President for any use prior to her public statement. Additionally, it is improbable that merely playing a song at a campaign would indicate an endorsement of the politician by the artist. Adele’s public statement that she did not grant the Trump Campaign permission to use her music expressly indicated to a reasonable person that she in fact did not endorse the candidate through permitting the use of the songs.

In the end, if a campaign wants to ensure that it will avoid all legal action for the use of an artist’s music at a political event, it is not enough for the candidate to merely obtain the required licenses; the campaign must acquire approval from every artist for every song that it seeks to feature. This current necessity contradicts a key purpose of blanket licenses and PROs, which were created to reduce the transaction costs of negotiating personally with every artist for the use of their songs. Further, federal consent decrees bar PROs from discriminating between similarly situated licensees and if there appears to be a pattern of music being denied only to a specific political party, the PROs may be subject to litigation themselves. While it is understandable that musicians may not want to be tied to polarizing political views, this unspoken policy is not sustainable in the long run. It is possible, as well as probable, that if the pattern of threatening legal action continues, artists will end up losing out on licensing fees and publicity from events that draw hundreds to thousands of people as campaigns turn to more available alternatives such as creating their own music specifically for these events. This is the future that the music industry must consider in its pursuit of this new permission-focused methodology.

#SaveOurStages: Small Venues Suffer Amid the Economic Shutdown

As COVID-19 swept across the globe, countries took swift action in order to quell the effects of the virus. In the United States, legislation was quickly passed that offered relief to small businesses spanning several industries as many were forced to close with no timeline on when they would be able to reopen. Now, in the second half of 2020, as many states have initiated reopening strategies to send employees back to work and consumers back into the market, one industry in particular has remained shut off from these plans. The independent venues that lend their stage to your local theatre group, your best friend’s high school cover band, or your favorite comedy show, have to face the devastating reality that they will be the last to open their doors. These independent venues are the launch pad for globally successful artists like Taylor Swift, Luke Combs, and Willie Nelson, who all began their careers singing on small stages. The venues that host these up and coming entertainers foster a city’s culture while promoting the next generation of artists. In addition to the value they bring to the arts community, independent venues generate revenue for neighboring businesses. A Chicago impact report estimated that for every $1 spent on a ticket, a total of $12 in economic activity was generated. The estimated direct annual economic impact these small venues bring to their local communities is almost $10 billion. However, due to the necessity of maintaining close proximity between audience members and between those on stage, venues are included only in the last stages of most states’ reopening plans. This puts them on track to reopen in 2021 or until there is a vaccine.

The unique differences that small independent venues share compared to other types of small businesses amplify the effects of the economic shutdown. Not only are venues unable to generate revenue during the closure, but they also must refund previous ticket revenue from cancelled shows. Secondly, due to the national routing of most tours, this industry is unlikely to recover until the country as a whole has opened to one-hundred percent capacity. Further, most venues are unable to open at partial capacity since rents, utilities, payroll, taxes, insurance and artist pay are not available on a sliding scale to reflect the volume the venue is allowed to host. Thus, most small venues would lose more money by reopening at a reduced capacity than they would by remaining completely closed. Because these small businesses were the first to shut down at the start of the pandemic, many have already permanently closed, while others are struggling to manage their fixed costs with no income stream.

In order to properly address the different circumstances that venues face and “to fight for the survival of independent venues, their employees, artists, fans and their communities” the National Independent Venue Association (NIVA) was created on April 17, 2020. The group debuted with over 450 members from 43 states, and now boasts more than 2,000 members in all 50 states including the 9:30 Club in D.C., First Avenue in Minneapolis, Chicago Independent Venue League, World Café Live in Philadelphia, Pabst Theater Group in Milwaukee, Red River Cultural District in Austin, and Exit/In in Nashville. Over 600 artists are supporting NIVA’s request for federal relief from Congress under the hashtag #SaveOurStages. Artists such as Mavis Staples, Joni Mitchell, Kacey Musgraves, Coldplay, Willie Nelson, Billie Ellish, Miranda Lambert, Wyclef Jean, Bon Iver, Tiffany Haddish, and Jeff Foxworthy have joined a letter asking Congress to honor NIVA’s request for financial assistance and to remind Congress that “[e]ntertainment is America’s largest economic export, with songs written and produced by American artists sung in every place on the globe.” Many of the signees are artists who started their careers performing in small venues.

There are three main pieces of legislation currently proposed in Congress that NIVA supports for providing the necessary relief to small venues for the remainder of the economic shutdown. First, the RESTART Act (S. 3814) led by Senators Todd Young (R-IN) and Michael Bennet (D-CO) and (H.R. 7481) led by Representatives Michael Kelly and Jared Golden. The RESTART Act finances the equivalent of six months’ worth of payroll, benefits and fixed operating costs, allows for flexible use of loan proceeds and loan forgiveness with no minimums on the percentage dedicated to any one expense. It expands eligibility to ensure access for small businesses that have many part-time employees, allows up to 90% loan forgiveness for businesses with fewer than 500 Full Time Equivalent Employees (FTEs) and high revenue loss, and implements a 7-year payback schedule wherein principal payments are not required for two years and interest payments are not due for the first 12 months.

Second, the Save Our Stages Act (S. 4258) is led by Senators John Cornyn (R-TX) and Amy Klobuchar (D-MN) and (H.R. 7806) led by Representatives Peter Welch (D-VT) and Roger Williams (R-TX). This bill establishes a $10 billion grant program for live venue operators, promoters, producers and talent representatives. Eligible recipients must have fewer than 500 FTEs, not be publicly traded companies, and not own or operate venues in more than 1 country or more than 10 states. Each recipient is eligible for a grant no greater than 45% of gross revenue from 2019 or $12 million, whichever is less. Grant funding may be used for expenses incurred between March 1, 2020 and ending on December 31, 2020. A recipient is eligible for a supplemental grant equal to 50% of the initial grant if the entity is still experiencing 80% or greater revenue loss on December 1, 2020. Grant funding may be used for payroll and benefits, rent, utilities, mortgage interest payments, interest payments, insurance, PPE, existing loans, payments to 1099 employees, and other ordinary and necessary business expenses.

Lastly, NIVA supports the Entertainment New Credit Opportunity for Relief & Economic Sustainability (ENCORES) Act (H.R. 7735) introduced by Representatives Ron Kind (D-WI) and Mike Kelly (R-PA). This bill will provide a tax credit for 50% of the value for refunded tickets to businesses with up to 500 full-time equivalent employees that promote, produce, or manage live concerts, comedy shows, non-professional sporting events, and live theatrical productions.

Although the passage of any one of these bills may provide small venues with enough funding to temporarily cover their immediate fixed costs, there is no government legislation that can fully substitute or replicate the value of an active venue in a community. While venues are closed, local artists do not have the ability to hone their craft in front of a live audience and neighboring small businesses are losing out on the additional revenue that venues generate by hosting a live performance. Patrons attend shows to experience things that money cannot buy—wonder, laughter, euphoria, and all of the emotions that arise from relating to another human being. The actual work of running a small venue that provides a stage for another individual to share their art has moral value in itself. These costs cannot be quantified, but they are still present. When considering appropriate relief bills and when to reopen small venues, Congress and local governments must consider both the monetary and non-monetary costs to their decisions. For more information on NIVA and how to support small venues, visit http://www.nivassoc.org.

DMCA Safe Harbor in Danger

Copyright law is an ever-developing subject matter, especially as technology continues to advance, as it seems, exponentially. One of the major progressions in this area of law was the creation of the Digital Millennium Copyright Act in 1998 (referred to herein as the “DMCA”). The intention of the DMCA was to limit copyright infringement liability for online service providers (“OSPs”) in certain circumstances.

The most crucial aspect of the DMCA was the establishment of the safe harbor provisions in Section 512. Under the DMCA safe harbor provisions, OSPs are protected from monetary damages and copyright liability for the infringing activities of their users if the OSP meets certain requirements set out in the Copyright Act. 17 U.S.C. § 512. Of note, the DMCA safe harbor provisions provide that the copyright owner may demand removal of the infringing content from the OSP by filing a takedown notice. Id. at § 512(c)(3). The OSP must then respond and typically remove the allegedly infringing material. Id. at §§ 512(b)(2)(E), (c)(1)(C), (d)(3), (g).

This copyright liability safe harbor has been one of the key contributors to the growth and expansion of OSPs and has, in turn, allowed the Internet to act as a conduit for creativity and innovation. On the other hand, copyright owners and many other parties in the entertainment industry have found that the whole notice and takedown procedure has, in effect, generated a type of “Whack-A-Mole” where infringing material continues to resurface after the initial takedown.

The issues with Section 512 of the DMCA are nothing new to those actively involved with protecting copyrights. These safe harbor provisions have been the cause of significant controversy since they were adopted in 2000 and have been the focus of many court decisions in the last two decades. To say the least, the Copyright Office recognized that “the operation of copyright liability in the online environment has tremendous legal, social, economic, and technological implications.” U.S. Copyright Office, Section 512 of Title 17: A Report of the Registrar of Copyrights (May, 2020). It should come as no surprise to anyone in the legal industry that the effectiveness of the DMCA and the controversies surrounding the safe harbor provisions have come under extreme scrutiny.

With the evolving nature and growth of both technology and copyright law, the Copyright Office conducted an extensive study spanning several years and concerning, among other aspects of copyright law, the DMCA. The intention of this study was to “assist Congress with evaluating ways to update the Copyright Act for the 21st century.” Id.

Included in this study was a comprehensive analysis of Section 512 of the DMCA, the safe harbor provisions. The study culminated with the construction of a 198-page Report created by the Copyright Office highlighting its conclusion regarding the current landscape of the DMCA safe harbor provisions: Congress’s intended balancing act of “providing important legal certainty for OSPs” in order to help the Internet prosper while still “protecting the legitimate interests of authors and other rights holders” against infringement “has been tilted askew.” Id.

The study conducted by the Copyright Office was quite encompassing and as the Report’s Executive Summary states, the study “resulted in two notices of inquiry, tens of thousands of written responses, nine empirical studies, and public roundtables in New York, San Francisco, and Washington, DC.” Id. Essentially, the Copyright Office wanted to hear from the different parties affected by the DMCA safe harbor provisions and whether those parties believed the safe harbor provisions effectively balanced the interests of OSPs and rights holders.

In conducting the study, the Copyright Right office did not lose sight of the guiding principles for both copyright law and the DMCA. These principles include: (1) creating meaningful online protection for rights holders against infringement; (2) providing legal certainty and protection for many OSPs that act in good faith so as to benefit the many OSP stakeholders, including society as a whole; (3) incorporating balanced legislation along with motivation for OSPs and rights holders to cooperate in the online market; (4) understanding that solutions are limited due to the inaccessibility of the data used in the operation of the safe harbor provisions; and, (5) development of a policy that balances the different interests among those involved in the entertainment industry. Id.

With these guiding principles at the forefront, the Copyright Office examined the judicial interpretations of the safe harbor provisions and subsequently made recommendations regarding numerous areas of the DMCA. Specifically, the Copyright Office recognized several different areas where the current safe harbor provisions do not align with Congress’s initial intent to balance the interests of both OSPs and rights holders. These areas include OSP eligibility requirements, repeat infringer policies, knowledge requirements for OSPs, takedown notices and knowing misrepresentation, standard and non-standard takedown notice requirements, time frames, subpoenas, and injunctions. Id. The Copyright Office makes further recommendations regarding non-statutory and alternative stakeholder proposals.

The Copyright Office clarified that the objective of the Report was not to propose any extensive changes to the DMCA or safe harbor provisions. Instead, the recommendations are merely directing Congress’s attention to reexamine certain areas where Congress may want to “fine-tune” the operation of the DMCA and safe harbor provisions so as to coincide with Congress’s intention of balancing the competing interests. Further, the Copyright Office explicitly rejected making any recommendations to reevaluate the proper balance of interests in the modern environment or to develop measures beyond the current safe harbor provisions, and instead left those decisions to Congress.

Although the Copyright Office does not suggest any wholesale changes, the study and corresponding Report may shake up the online environment as it stands today. Rights holders may view this study and Report as a large step in the right direction toward creating the adequate balance between providing legal certainty to OSPs while still protecting rights holders from copyright infringement. Alternatively, OSPs will be concerned that they will lose some of the protections that have developed and which have helped advance the Internet and creative innovation. Irrespective of a party’s position on the pendulum, this study and Report will create some noise on Capitol Hill and spark lobbying efforts, along with a close examination by Congress.

Reclaiming Rights

The dynamic nature of copyright law as applied to the music and broader entertainment industries has created consistent controversy. Notably, the music industry has always pondered whether a sound recording could be classified as a “work made for hire,” or whether the rights to a sound recording are administered pursuant to an assignment. The distinction is of extreme importance because of termination rights provided by Section 203 of the Copyright Act.

Several musicians have recently filed a lawsuit against UMG Recordings (“UMG”) claiming the record label giant “routinely and systematically” refuses to honor termination notices. Waite v. Umg Recordings, Inc., No. 19-cv-1091 (LAK), 2020 U.S. Dist. LEXIS 56198 (S.D.N.Y. Mar. 31, 2020). See also Johansen v. Sony Music Entm’t Inc., 2020 U.S. Dist. LEXIS 56675 (S.D.N.Y. Mar. 31, 2020) (A similar lawsuit brought against Sony Music Entertainment earlier this year). See Johansen v. Sony Music Entm’t Inc., 2020 U.S. Dist. LEXIS 56675 (S.D.N.Y. Mar. 31, 2020).

In March of this year, the Southern District of New York allowed the suit against UMG to move past the motion to dismiss stage. Id. The claims center along two lines: (1) copyright infringement and (2) copyright authorship and ownership, specifically whether the works in question are and, more generally, whether a sound recording can be a work made for hire.

Copyright protection vests when a work is fixed into a tangible medium of expression for more than temporary duration. 17 U.S.C. § 201(a). The author(s) of such a work are provided with copyright ownership and any corresponding rights.

If a work is classified as a work for hire, the legal author who obtains copyright ownership of the work is the employer or party for whom the work is created. Id. at § 201(b). A work for hire arises when a work is “prepared by an employee within the scope of his or her employment” or if the parties agree in writing to the work for hire status of the work and the work is “specially ordered or commissioned for use” as one of the nine works specifically enumerated in the Copyright Act. Id. at § 101.

Copyright law allows the author(s) of a work to transfer copyright ownership and any of the corresponding rights by a conveyance. Id. at § 201(d). Notwithstanding, Section 203(a) of the Copyright Act provides an author with the right to terminate any such transfer of rights. These termination rights vest thirty-five (35) years after the original grant of rights. Id. at § 203(a)(3). Upon termination, any interest in the work reverts back to the author. However, this termination right does not apply to any work made for hire.

Congress’s intent in creating the right of termination in the case of a copyright assignment was to allow artists who generally have little bargaining power in relation to publishers and record labels a “second bite at the apple.” Many artists have used the right of termination to reclaim rights to their musical compositions and/or sound recordings and, effectively, renegotiate more favorable royalty and compensation deals. Due to the long wait time (thirty-five (35) years from the original grant of rights), these termination rights have become very powerful and have even reached other areas of entertainment, such as the film industry. See Horror Inc. v. Miller, 335 F. Supp. 3d 273 (D. Conn. 2018); Horror Inc. v. Miller, appeal pending, No. 18-3123 (argued Feb. 13, 2020).

Recording agreements have long included language that sound recordings are works made for hire. As such, record labels, as alleged in plaintiffs’ complaint, have consistently responded to termination notices taking the position that sound recordings are works made for hire, and thus, musicians do not have any right of termination. In Waite, UMG made several arguments for dismissal of the lawsuit, including those based on “work made for hire” provisions in recording agreements, statute of limitations, and errors and omissions in the termination notices. No. 19-cv-1091 (LAK) (S.D.N.Y. Mar. 31, 2020).

The court did not feel obligated to resolve at the motion to dismiss stage whether the recording agreements created work for hire status of the sound recordings. The court reached this conclusion because UMG only argued that the work for hire contractual language “is relevant to the question of when the statute of limitations began to run on plaintiffs’ claims.” Id. In turn, the main issue resolved by the court was whether the infringement claim was barred by the three-year statutory period.

UMG argued that the three-year statutory period began to run when the recording agreements were signed because the work for hire language put the musicians on notice of a copyright authorship or ownership dispute, and therefore, the plaintiffs’ claims are time barred whether or not the sound recordings are works made for hire. Id. After noting that the issue is a close call, the court recognized that copyright authorship is relevant to the plaintiffs’ claims, but “the gravamen of plaintiffs’ claim is defendant’s refusal to recognize their termination rights,” not copyright ownership. Id.

The court then noted “it is impossible for there to be a legally cognizable infringement claim until a termination right vests, a valid and timely termination notice is sent, is ignored, and the copyright’s grantee continues to distribute the work.” Id. Ultimately, the Southern District of New York held that the plaintiffs’ suit is not time barred because finding that the three-year statue of limitations begins to run from the time the recording agreement is entered into would be inconsistent with termination rights and limiting termination rights because of the artist’s failure to bring a claim within three years of signing a recording agreement would frustrate Congress’s intent in creating the right itself. The court further quickly rejected UMG’s argument that errors and omissions in the termination notices render them invalid, although this holding is case specific.

Alternatively, plaintiffs’ sought declaratory judgment that sound recordings cannot be considered works made for hire under the Copyright Act and relating to issues of breach of contract. The court rejected plaintiffs’ claims for declaratory judgment leaving the question of whether a sound recording could be a work made for hire to another day.

The most chilling conclusion the court reached may be related to artist loan-out companies. The court held that a grant of rights may only be terminated if the author executed such a grant. Therefore, “third parties to a contract and loan-out companies, which ‘loan’ out an artist’s services to employers and enter into contracts on behalf of the artist, do not have a termination right under the statute.” Id. In this light, the court unambiguously stated that the plaintiffs are precluded from “terminating the copyrights granted by third parties.” Id. This holding may have some serious implications as musicians may have to choose between immediate tax advantages or copyright benefits such as termination rights. Even so, the court avoids any discussion relating to a situation in which an artist terminates a grant of rights to a third party or loan-out company. This newly created issue is also left to another day.

The issues purported in Waite have been decades in the making and do not appear to be going anywhere anytime soon. Although the holdings of the Southern District of New York seem to be a major victory for authors as it relates to termination rights, the parties involved will likely push the issues to receive appellate review. How this case will affect the music and entertainment industries is yet to be determined, but the magnitude of the court’s holdings will be far from avoidable.

Social Media Rights—Who Has ‘Em?

Social media users have continually been warned to be cautious when posting content on to platforms. The creative community is particularly concerned with what rights, if any, are given to a social media website when a user shares a post. This caution rings especially true when it comes to appropriating images posted on social media accounts. One question has loomed: does posting an image online provide a party with the right to use the image in a different forum? In April of this year, one federal court in New York provided a frightening answer to this question, but has recently balked at its original conclusion.

The issue related to a picture posted on Instagram by professional photographer, Stephanie Sinclair. Sinclair is most prominently known for her work regarding gender and human rights issues around the world. As a professional photographer, she maintains both a public website and Instagram account used to showcase her photographs.

The photograph in question is titled “Child, Bride, Mother/Child Marriage in Guatemala” and was posted by Sinclair to her “public” Instagram account. Sinclair v. Ziff Davis, LLC, No. 18-CV-790 (KMW) (S.D.N.Y. Apr. 13, 2020). Mashable, Inc. (“Mashable”), an entertainment and media platform, then contacted Sinclair to obtain a license in order to use the photograph in an article about female photographers that it was publishing and posting to its website. Id.

Despite Sinclair rejecting to provide a license for use of the photograph, Mashable went ahead and published the article with the photograph embedded—a process by which a website coder “incorporate[s] content, such as an image, that is located on a third-party’s server, into the coder’s website.” Id. Using this technical process of embedding the image, Mashable used the copy of the image Sinclair posted to Instagram in its published article.

It is important to briefly discuss some of Instagram’s relevant services. Through a service called “application programming interface” (“API”), Instagram “enable[s] users to access and share content posted by other users whose accounts are set to ‘public’ mode.” Id. In light of this service and other Instagram policies, users can embed publicly-posted “Instagram posts in their website.” Id.

Additionally, Instagram relies on a Terms of Use agreement signed by users when they create an account on the platform. Of note, these Terms of Use state that, “by posting content to Instagram, the user ‘grant[s] to Instagram a non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide license to the Content that you post on or through [Instagram], subject to [Instagram’s] Privacy Policy.’” Id. Further, users must designate their account as either “private” or “public” when registering with the social media platform. The API service combined with the Terms of Use agreement are very important to the issue in the case and the court’s corresponding analysis.

Essentially, Mashable used the API service to embed into its article a copy of the photograph Sinclair posted to her “public” Instagram account. In turn, Sinclair issued a take down demand and subsequently brought a copyright infringement lawsuit against Mashable and the owner of Mashable, Ziff Davis, LLC (“Ziff Davis”), when Mashable refused.

Sinclair advanced numerous arguments, all of which were rejected by the court. First, Sinclair argued that Mashable must obtain a license directly from the copyright owner in order to use the image. Sinclair, No. 18-CV-790 (KMW) (S.D.N.Y. Apr. 13, 2020). In other words, Mashable should not have been able to obtain or rely on a sublicense from Instagram for use of the photograph. The court rejected this argument finding that each right, Sinclair’s right to license the photograph and Instagram’s right to sublicense the photograph, were independent rights. Id. Thus, Mashable was within its right to obtain and rely on a sublicense from Instagram.

The court further rejected Sinclair’s several other arguments, which included claims that: the court could not take “judicial notice of the meaning of Instagram’s agreements and policies because they are complex and subject to different interpretations;” “the agreements between Instagram and Plaintiff cannot confer a right to use the Photograph upon Mashable because Mashable is not an intended beneficiary of any of the agreements;” and, “it is unfair for Instagram to force a professional photographer like Plaintiff [Sinclair] to choose between ‘remain[ing] in “private mode” on one of the most popular public photo sharing platforms in the world,’ and granting Instagram a right to sublicense her photographs to users like Mashable.” Id.

Being that Instagram has dominated the photograph and video sharing market, the court recognized the difficulty a user such as Sinclair has when deciding to share photographs on either a “private” or “public” account on Instagram. Even so, the court found that Sinclair made her decision when she posted the photograph to her “public” Instagram account. As such, the court held Sinclair to the agreements she made and granted a motion to dismiss concluding that “because Plaintiff [Sinclair] uploaded the Photograph to Instagram and designated it as ‘public,’ she agreed to allow Mashable, as Instagram’s sublicensee, to embed the Photograph in its website.” Id.

Although the court had reached such an alarming conclusion, the chills sent through the creative community can rest for now. In June of this year, the same court relied on the opinion of another New York federal court, McGucken v. Newsweek LLC, 19-CV-9617, 2020 U.S. Dist. LEXIS 96126, 2020 WL 2836427 (S.D.N.Y. June 1, 2020), and granted Sinclair’s motion for reconsideration finding that Sinclair’s “copyright claim against Mashable cannot be dismissed on the basis of Mashable’s sublicense defense on the record presently before the Court.” Sinclair v. Ziff Davis, LLC, No. 18-CV-790 (KMW) (S.D.N.Y. June 24, 2020).

The court confirmed part of its original opinion holding that Sinclair, by agreeing to Instagram’s Terms of Use, provided Instagram with the power to grant Mashable, an API user, a sublicense to embed the image she posted to her “public” Instagram account. However, the court backtracked from its original holding by finding that the “pleadings contain insufficient evidence that Instagram exercised its right to grant a sublicense to Mashable.” Id.

The court, by relying on McGucken, then concluded that Instagram’s Platform Policy, which provides that the “API enables users to embed publicly-posted content in their websites,” is open to multiple interpretations. Id. Thus, it is plausible that Instagram did not explicitly grant a sublicense for the use of the embedded image on Mashable’s website. Ultimately, the court held that although Instagram’s Platform Policy may be interpreted as granting “API users the right to use the API to embed the public content of other Instagram users,” the terms themselves are insufficient to dismiss Sinclair’s copyright infringement claim at the motion to dismiss stage of litigation. Id.

Social media users and the creative community alike can take a sigh of relief after the New York federal court’s reconsideration opinion. As it stands at the moment, media platforms and other users of content posted to Instagram cannot escape copyright infringement claims on the basis that Instagram’s user terms provide a sublicense for embedded images.

Major League Baseball 2020 Season Negotiations

When the global Covid-19 crisis crushed the United States, the sports and entertainment industries were not immune to the devastating effects. Many sports leagues shocked the world as they began to postpone games and eventually entire seasons. As Major League Baseball (hereinafter referred to as “League” or “MLB”) was in the midst of Spring Training and preparing for another successful baseball season, the League was required to make this tough decision and forgo millions, if not billions, of dollars in revenue. A season that is typically filled with sunshine, nice weather, and high hopes was full of gloom, tears, and heavy hearts.

After a several month hiatus, MLB began its 2020 season with exhibition games beginning on July 18th and regular season games beginning on July 23rd. This new season, however, was preceded by long, intense negotiations between the Major League Baseball Players Union (“MLBPA” or “Union”) and the League, which eventually ended in an impasse and MLB implementing the newly designed 2020 baseball season.

Pursuant to Paragraph 11 of the uniform player contract, MLB Commissioner Rob Manfred could have suspended player deals in the event of a national emergency declaration. In order to avoid such an occurrence, the MLBPA and MLB reached an agreement regarding how the 2020 season would be handled soon after the season was suspended in mid March. This agreement concerned many of the issues that the League would eventually face in navigating a safe return to baseball, including resuming play, season scheduling, player service time, player pay, arbitration matters, and salary cap and luxury tax issues.

Of particular importance was the doomsday scenario, a situation in which the 2020 season would be cancelled entirely. The Union and players insisted on receiving full service time regardless of whether a season was played. This would allow players to earn a year of service toward free agency, arbitration, etc. The League eventually conceded on this point with a requirement that certain prerequisites be met, such as a player accruing a full year of service in 2019.

The MLBPA and MLB were also particularly concerned about player compensation. Every day in which the season was not played, the League was losing millions of dollars. In turn, the agreement provided that players would be compensated on a prorated basis. While the players agreed not to sue the League or file grievances against the League for full salaries in the event the season is cancelled entirely, the teams advanced some $170 million for player salaries. If the entire season had been lost, this money alone would have been disbursed to the players to pay for salaries. Alternatively, since the money was advanced and the season is now under way, the money will be factored into player paychecks.

Most importantly, this agreement required both the Union and League to work together in good faith to complete as much of a 2020 baseball season and postseason as economically possible. The agreement further provided three stipulations in order to begin the 2020 season. These stipulations were: (1) no restrictions on gatherings that would prevent teams from playing in home stadiums; (2) no travel restrictions; and, (3) a determination that playing would not expose players, fans, or staff to health risks.

Notwithstanding the foregoing, MLB Commissioner Rob Manfred could have overridden such stipulations and considered playing the 2020 season at neutral sites and without fans. Ultimately, the agreement provided the League with the right to implement a schedule if a subsequent agreement between the Union and League regarding the 2020 season could not be reached. For a detailed explanation on this agreement see ESPN, MLB, MLBPA agree on stipulations for return of 2020 season (Mar. 27, 2020) https://www.espn.com/mlb/story/_/id/28962850/mlb-mlbpa-agree-stipulations-return-2020-season; Jeff Passan and Kiley McDaniel, What the MLB deal with players means for 2020 season and beyond, ESPN (Mar. 28, 2020) https://www.espn.com/mlb/story/_/id/28964249/what-mlb-deal-players-means-2020-season-beyond.

The negotiations between the League and the Union leading up to the implementation of the 2020 season contained some of the most hostile exchanges between the parties in recent history. At one point, the hostility grew so rampant that MLB Commissioner Rob Manfred said he was not positive whether a season would take place this year. As expected, this was met with inimical responses by both players and representatives from the Union.

In the face of strong adversity, both sides were starkly concerned with player compensation. The League held the position that it was not feasible to pay the players a full pro-rata salary without fans in the stands. Alternatively, the Union was adamant that it would not accept another pay reduction.

MLB offered the players its first proposal for a 2020 season near the end of May. This offer consisted of an 82-game season with sliding scale player compensation and a 14-team postseason in 2020. Under the sliding scale arrangement, the higher the player salary, the lower percentage of salary the player would receive in compensation. Essentially, the sliding scale compensation was a nonstarter for the Union.

Less than a week later, the Union responded to the League with a counter offer. Under the Union’s proposal, the season would consist of 114 games, a 14-team postseason for two (2) years, full prorated player compensation, a salary advance, and other stipulations with the intention of boosting revenues. Without hesitation, the League rejected the Union’s proposal. For starters, the League was insistent that the regular season end in September and the World Series conclude in late October. The Union’s 114-game regular season alone would have lasted all the way until to the end of October.

With the respective offers being worlds apart on many of the key issues, the League progressed forward with another offer, albeit with certain concessions. This time the League proposed a 76-game season, but with the players receiving 75% of the prorated salaries. The Union did not wait long to stamp a big NO on MLB’s proposal.

The following day, the Union presented the League with its second counterproposal. This time, the Union proposed an 89-game season, a 16-team postseason in both 2020 and 2021, and full-prorated salaries. Under this offer, the regular season would last no later than October 10th. MLB unequivocally rejected the Union’s proposal. The minor concessions from both parties exemplified how far they were from striking a deal, and the hostility only grew stronger.

On June 13th, the League made a third proposal to the Union: a 72-game regular season and 16-team postseason, with player compensation maxing at 80% of the full-prorated salaries. With the Union’s rejection of this offer, the bargaining had reached a pinnacle. In response to the even shorter season and instead of making a counterproposal, the Union asked MLB to set a schedule for the 2020 season as was its right under the original March agreement. The Union believed the negotiations reached an impasse and any further dialogue would be futile. This set the stage for the League to implement a much shorter season (the League maintained through negotiations it would be around 48-54 games), and made it all but certain that the Union would respond with filing a grievance against the League for bad faith negotiating and breaching the parties earlier agreement. See Jeff Passan, MLB players reject latest offer, ask league to set 2020 season schedule, ESPN (Jun. 13, 2020) https://www.espn.com/mlb/story/_/id/29307988/mlb-players-reject-latest-offer-ask-league-set-2020-season-schedule.

The League instead decided to make one last proposal. With the labor contentions at a peak, the League conceded on full-prorated player salaries. However, the League also reduced the number of games to 60 and remained steadfast at a 16-team postseason for one (1) season. The Union responded with a counterproposal of its own: a 70-game season, 16 team postseason for 2020 and 2021, and full-prorated player salaries.

The League said it would not respond to the Union’s counterproposal, as it will not play more than 60 games. Days later, the MLBPA rejected the offer leaving MLB Commissioner Rob Manfred to impose a season on the players and implement a 2020 schedule. See ESPN News Services, MLB commissioner Rob Manfred quickly rejects union’s 70-game proposal, ESPN (Jun. 18, 2020) https://www.espn.com/mlb/story/_/id/29329357/union-proposes-70-game-plan-mlb-sources-say. For a detailed timeline of the negotiations see ESPN.com Staff, MLB 2020 season proposal timeline: Owners’ offers and union counteroffers, ESPN (Jun. 19, 2020) https://www.espn.com/mlb/story/_/id/29290117/mlb-deal-line-owners-offers-union-counteroffers.

That same day, MLB owners unanimously voted to proceed with a 2020 season and provided Manfred with the power to unilaterally implement a schedule. The season imposed by the League includes a 60-game regular season, the normal 10-team postseason structure, and full-prorated player salaries, but without any of the other revenue increasing ideas proposed by either party. See Jeff Passan, MLBPA, owners clear final hurdles; players set to report to camps July 1, ESPN https://www.espn.com/mlb/story/_/id/29354014/sources-mlbpa-agrees-report-july-1-discussing-health-safety-protocols.

The implementation of the 2020 season followed months of animosity and failed negotiations between the Union and League. The one bright spot in the end is that both sides agreed to the implementation of the season and so baseball returned. However, the Union is expected to file a grievance against the League for not employing as full a season as possible, a requirement under the parties’ original agreement. In turn, the League will respond with a grievance against the Union for bad faith negotiation as it relates to player salaries.

In the midst of the intense back and forth between the League and Union, both parties are fully aware that they are in for one wild and unprecedented baseball season, one that is shorter than ever before. The only thing certain in these unusual circumstances is “three strikes and you’re out at the old ball game.” One can only wonder whether a successful 2020 campaign can cool the tension between the MLBPA and MLB, or if the relationship has reached a boiling point that will inevitably spill over into labor negotiations to replace the current Collective Bargaining Agreement that is set to expire in December of 2021.

Sherlock Litigation

The estate of Sir Arthur Conan Doyle filed a lawsuit against Netflix and other plaintiffs, alleging that the streaming service’s upcoming film violates the estate’s copyright by portraying Sherlock Holmes as friendly and respectful to women.

“Enola Holmes,” is scheduled to be released on Netflix sometime in September, centers around the adventures of Holmes’s teenage sister and is based off the book series “Elona” by Nancy Springer, a co-plaintiff in the suit. Both the film and the novels upon which they are based draw from the original works, the bulk of which falls outside of the 95-year window for copyright protection in the U.S. and are in the public domain. Conan Doyle’s final 10 stories, however, remain under copyright until 2023.

The estate argues, however, that the film and Springer’s portrayal of Holmes as a warm, empathic character violates the copyright, as this character development is an exclusive feature of the final 10 Sherlock Holmes stories. Citing Conan Doyle’s loss of his son and brother, in addition to his experience grappling with the atrocities of World War I, the estate claims these events caused the author to experience an artistic shift that required he make Holmes more empathic.

“When Conan Doyle came back to Holmes in the Copyrighted Stories between 1923 and 1972, it was no longer enough that the Holmes character was the most brilliant rational and analytical mind. Holmes needed to be human,” the complaint alleges. “He became capable of friendship. He could express emotion. He began to respect women.”

Holmes’ emotional overhaul from the purely rational, steely-eyed detective to a dependable, brilliant friend, the estate suggests, is unique to the copyrighted works, and both the book series and the upcoming Netflix film infringe on the copyrighted works by demonstrating that Sherlock Holmes is capable of forming friendships. Holmes’ friendship with Watson and his emotional interest in his sister are cited by the estate as evidence of infringement.

“Nowhere in the public domain stories does Holmes express such emotion about the well-being of his companion John Watson,” the estate claims. “This friendship was not created by Springer in the Enola Holmes Mysteries. It was created in the Copyrighted Stories and copied by Springer.”

The estate of Arthur Conan Doyle has a history of ardently attempting to rights in Sherlock Holmes. In 2014, the 7th Circuit Court of Appeals found in favor of editor Leslie Klinger, who sought to publish a modern anthology series about the famous detective, finding that most of the Sherlock Holmes novels were no longer under copyright, thus no license was required for use of the material.

Here, the court rejected the estate’s appeal to extend the copyright further, barely hiding its disdain for the estate’s argument that a copyright should be extended so as to include later works wherein its “complex” characters are fully realized and developed. “We cannot find any basis in statute or case law for extending a copyright beyond its expiration. When a story falls into the public domain, story elements—including characters covered by the expired copyright—become fair game for follow-on authors, as held in Silverman v. CBS Inc.; Klinger v. Conan Doyle Estate, Ltd. 755 F.3d 496,499 (7th Cir. 2014); Silverman v. CBS Inc., 870 F.2d 40, 49–51 (2d Cir.1989).

The copyrights on the derivative works, corresponding to the copyrights on the 10 last Sherlock Holmes stories, were not extended by the incremental additions of originality in the derivative works, the court found, while further doubling down on its dislike of the estate’s distinction between “flat” and “round” characters. Klinger, 755 F.3d 496 at 502.

“What this has to do with copyright law eludes us,” the court states. “There are the early Holmes and Watson stories, and the late ones, and features of Holmes and Watson are depicted in the late stories that are not found in the early ones. … Only in the late stories for example do we learn that Holmes’s attitude toward dogs has changed — he has grown to like them — and that Watson has been married twice. These additional features, being (we may assume) ‘original’ in the generous sense that the word bears in copyright law, are protected by the unexpired copyrights on the late stories.” Id.

“The Doyle estate tells us that ‘no workable standard exists to protect the Ten Stories’ incremental character development apart from protecting the completed characters.’ But that would be true only if the early and the late Holmes, and the early and the late Watson, were indistinguishable — and in that case there would be no incremental originality to justify copyright protection of the ‘rounded’ characters … in the later works.” Id.

Yet in the present case against Netflix, it is unclear what degree the Netflix adaptation and the novels upon which they are based draw from the original features versus the copyrighted final 10 stories. This, along with what degree of character change is considered incremental to the original will likely be points at issue in this upcoming litigation.

Similarly 2015, Conan Doyle Estate raised a comparable argument against Miramax, alleging that the film “Mr. Holmes,” starring Ian McKellen, infringed on the remaining 10 stories because of its emotional portrayal of Sherlock Holmes. This case was settled out of court and eventually dismissed.

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