Advantages and Pitfalls on Most Favored Nations Clause in Profit Participation Agreements

One of the key points that comes up from time to time, is in profit participation or back end compensation, whether one should negotiate for what is known as most favored nations clause.

It is tempting to seek a provision requiring the participant to be treated on the same basis as some other participant, especially the producer, thereby assuring a particular level of treatment for the participant while avoiding lengthy negotiations.  However, there are pitfalls to this approach.  Certain participants, particularly producers, may have cross-collateralization provisions, abandonment provisions, and over budget penalty provisions.

In each instance, by relying upon the definition of another participant, the party may be subjected to undesirable reductions in his profit participation.

As such, it is recommended to carefully assess all dynamics before deciding to negotiate most favored nations clause in profit participation agreements.

Article by Dorisa Shahmirzai, Esq.

Founding Entertainment Attorney at IP Law Click

Garcia v. Google

 

Can an actor claim copyrights for her performance?

 

In a recent ninth circuit ruling, the court held that yes, an actor can have an independent copyright ownership for her performance. Plaintiff was cast in a minor role in an adventure film with the working title “Desert Warrior.” The film never materialized.  But plaintiff’s scene was used, in an anti-Islamic film titled “Innocence of Muslims.” The film was uploaded to YouTube.com and her brief performance was dubbed over.  She sued Youtube for removal of the film and claimed that her copyrights were infringed.

 

In order for copyrights to exist, the work must meet two requirements: 1) it must have a modicum of creativity and 2) it must be fixed in a tangible medium of expression. 

 

Citing Stanislavski and Sanford Meisner, the Court noted that an actor’s contribution to a performances is not merely a reflection of the written page (Otherwise, “every shmuck . . . is an actor because everyone . . . knows how to read.” Sanford Meisner & Dennis Longwell, Sanford Meisner on Acting 178 (1987).), but is also of sufficient originality to establish authorship. The court found that an actor’s performance is an “original work” and that it is embodied in a tangible medium, the film.  Regardless of the fact that someone else made the recording, she had a copyright interest “in her performance.”

 

The court also held that she had an independent copyright ownership. The court reasoned that if she was a co-author of the film, she couldn’t stop other co-authors from exploiting it. Finally, although she hadn’t signed a contract, the court found that her oral or implied consent to use of her “copyright” was invalid due to the misrepresentations made to her. The court also held that she wasn’t an employee, hence preventing labeling of her performance from being a work made for hire.

Article by Dorisa Shahmirzai, Esq.

Founding Entertainment Attorney at IP Law Click

Vesting of Contingent Compensation in Pay or Played Television Director Agreement: What is 20/60/10/10 Formula?

 

IP Law Click, an Entertainment and IP Law Firm 

One of the issues in negotiating director agreements in television is whether contingent compensation provision applies in situations where a director is pay or played off a film.  The question becomes will the director be entitled to any portion of the negotiated contingent compensation since she has been terminated and is no longer with the project.  The director would argue that she was fired from the project without cause and wasn’t allowed to render services.  In some situations, the termination may have occurred halfway or more through the production and the studio may very well plan to use some if not all of the footage directed by the director which arguably entitle the director to back end participation or contingent compensation.

The studio’s position is likely to be that to the extent the director has been terminated prior to the completion of her services, she should not be entitled to any back end participation.  The studio would argue that even if the director didn’t breach, and her termination was purely on the basis of creative differences, the studio believed it needed to improve the quality of the movie and that any payment beyond the guaranteed fee is inappropriate.

Often times, parties agree to a schedule in which negotiated contingent compensation will be payable.  This is the so-called vesting schedule.  Studios almost always refuse to entertain a vesting schedule at all unless the director was replaced after the principal photography began.

A few common methods of vesting contingent compensation exist.  One of them is payable pursuant to what’s known as the 20/60/10/10 formula (which is used for director’s fixed compensation).

  • 20 percent of the fee is payable in weekly installments during the eight-week period preceding principal photography.
  • 60 percent of the fee is paid in equal weekly installments over the period of principal photography.
  • 10 percent is paid upon completion of the director’s last cut of the film.
  • 10 percent is paid  upon delivery to the studio of the answer print.

The payment schedule is commonly referred to as 20-60-10-10 payment plan by industry insiders.

Article by Dorisa Shahmirzai, Esq.

Founding Entertainment Attorney at IP Law Click

http://www.iplawclick.com

 

What is a Work for Hire Agreement?

 

 If you are commissioning someone to work on a project for you, are not a traditional employer, and yet want to retain all rights to the work created, it becomes important to understand “work for hire” agreements.  

In a general employer employee relationship, the employer owns all rights to the work created by employee.   In cases where freelance work is involved, the general rule is that the person who actually creates the work is the legally recognized author of the work.  “Work for hire” is an exception to that rule.  According to copyright law in the United States as well as some other copyright jurisdictions, if a work is “made for hire,” the employer as opposed to the employee is considered the legal author.  A work will be considered “made for hire” so long as the following conditions are met: 1) before commencement of work, 2) all parties agree in writing to the Work for Hire designation, and 3) the work meets statutory requirements. 

By just calling something a “work for hire” in an agreement does not make it so, unless it falls within these specified categories of works. Works created by independent contractors, such as consultants or freelance artists, the “work for hire” doctrine only applies to certain types of works under federal law, and these works do not necessarily include software or logos.  A “work for hire” is defined in the Copyright Act (15 U.S.C. § 101) as “a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas.”  The statute very narrowly defines works created by independent contractors that can constitute “work for hire.”  While some software programs may be considered an “audiovisual work,” other software programs would not.  And whether a graphic logo is covered or not could depend on how it is used.  

 

Thanks so much for your time and I hope that you found this information useful.
Sincerely,
Article by Dorisa Shahmirzai, Esq.
Founder of IP Law Click

 

Referrals to our team are appreciated.  For a 30 minute free consultation with one of our experienced attorneys, please contact us at (818) 334-5204 ext. 101 (888) 843-9357 ext. 101 or visit us at www.iplawclick.com

Why license video games?

Licensing is when a copyright owner gives permission for someone else to do something normally restricted by copyright law. Copyright protects artistic and literary expression.  It covers a broad variety of creative expression from email, to websites, to video games. Generally speaking, the underlying code of a video game is protected as a literary work, and the artwork and sound are protected as an audiovisual work. While the work (video game) does not have to be registered to be covered by copyright law, there are advantages to registration.

A copyright gives the creator ownership of the video game. As the legally recognized owner of the game, the owner can initiate licensing contracts to distribute and sell his own work. Licenses must be executed in compliance with various laws and drafted to ensure that the developer’s rights and interests are protected. Both video game companies and independent developers will need to safeguard their intellectual property through copyrights and licensing to prevent misuse of their product. A licensing agreement will contain provisions such as:

• The duration of the licensing agreement;

• How the product can be used;

• Prohibitions or restrictions regarding the use of the product;

• Warranties and liability clauses;

• Indemnification; and

• Sublicensing rights.

The Copyright Office has consistently believed that a single registration is sufficient to protect the copyright in a computer program and related screen displays, including video games, without a separate registration for the screen displays or a specific reference to them on the application for the computer program. The completed video games licenses are generally good for seven to ten years. Console licensing cannot be avoided. The publisher must pay a royalty to the console manufacturer for releasing a game on their system.

Who holds the copyright?

Generally, this can be a number of people: the author/creator, the author/creator’s relatives or next of kin, or someone else to whom the author/creator gave the rights. However, in the case of video games, usually the publisher (assuming the game is mass-produced) holds the copyright and, therefore, the licensing rights. The publisher retains the rights to decide where and how the game may be distributed, including in restaurants or stores. 

What would constitute copyright infringement?

The End User Agreement can be terminated by the licensor, or by the user himself if he violates the terms agreed upon. Some EUA terms are enforceable, but only on a contract basis, so if violated, it is possible only fines will apply, and the user’s right to use the software will most likely be revoked. Some EUA terms may connect to copyright, so violation of those terms would constitute copyright infringement. It’s possible to go to jail for certain types of copyright infringement. Additional injunctions, costs, damages, and/or attorney’s fees might be applied. The Copyright Law of the United States, Chapter 5, discusses specific remedies for copyright infringement.

The terms and limitations of a video game’s usage can vary greatly depending on who owns the property. The copyright holders retain licensing rights, and they determine whether or not they want their video games to be displayed in establishments like restaurants and arcades. Their licensing agreement will outline the limitations on how the game can be used/played/displayed. If the licensing agreement is violated, then the user is subject to penalties having to do with both violation of contractual obligations, as well as copyright infringement.  In order to legally display video games in restaurants, the owner must agree to and abide by the terms of the licensing contract.

By Dorisa Shahmirzai, Esq.

 

 

 

 

 

Patent Expirations Creating Opportunities for Biotech M&A

Large pharmaceutical companies with expired patents are looking for products to supplement their research and development efforts.  Hot areas appear to be in oncology names and autoimmune areas.  Although large pharmaceutical companies are facing one of the worst dilemmas with respect to patent expirations, they also have access to cash, which creates great opportunity for promising biotech companies.  Volume of mergers and acquisitions in biotechnology has reached $25 billion.  This number has been highest since 2008 when deal volumes surged to $54 billion because of Roche’s takeover of Genentech.

There has been an increased interest in taking over for hepatitis C companies such as Inhibitex.  There was an $11 billion sale to Gilead Sciences Inc.  Inhibitex and Gilead both drew several other bidders in the auction process, which highlights the interest in this area with buyers willing to pay hefty premiums for assets.  Big pharmaceutical companies prefer commercial-stage assets, rather than clinical trial-stage drugs, which carry regulatory approval risk.   This means that companies tend to pursue multi-billion dollar transaction rather than smaller deals.

So what does all this mean? If your company has great patents and falls within the hot areas, it may be wise to discuss merger deals with pharmaceutical companies with money and looking to bid.

Article by Dorisa Shahmirzai, Esq.

Founder and Tech Transaction/IP Attorney at IP Law Click

 

How to Protect Your IP Rights?

There are four main areas of intellectual property that any company or individual must protect because it is so easy to do so and can save you a great deal of money and time on litigation.

Copyrights
Copyrights are defined as tangible form of expression. Copyright law requires that there be a modicum of creativity and that such creation be a in a tangible medium such as recording, paper, online. As soon as such work is created, you have copyrights. However, it is important that you register such work with the Copyright office in order to have a broader scope of protection and to get higher statutory damages in the event someone infringes on your work.

In order for the party to infringe on your work, the work has to be protectable, and there must be substantial similarity between the two works. Substantial similarity is a term of art that is defined by case law as to how in each specific case, the court determined there to be such similarity to constitute an infringement. The defendant may still win if they can succeed in proving a defense.

What to do to protect your work?
1. Register it.
2. Sign the right agreements with people involved in the creation process to assure you own copyrights to the material.

Trademarks
A trademark is anything you use to identify and distinguish your goods and services from competitive goods and services. For example, McDonald’s name and golden arches is a clear identification of McDonald’s that gives it a competitive edge. One of the ways to assure protection against others using your mark is to establish priority in use. You can do this by registering your mark with the USPTO. That

way everyone is put on notice that you own the trademark. You can also allege a higher damages in the event of infringement by registering your mark. Finally, in cases of concurrent use of the mark by two holders, the one who has registered wins.

However, what constitutes a trademark can be tricky. Generic terms are not protectable. Merely suggestive of a quality or characteristic maybe protectable (i.e., Sure Deodorant is protectable.) Descriptive terms are protectable only if the public uses them to distinguish your goods or services. The most protectable trade

What to do to protect your work?
1. Register it.
2. Assure proper agreements are in placed to assure you own the trademarks.

Patents
An invention only needs to be novel, useful, and non-obvious to be patentable.

What to do to protect your patents?
Businesses should have all knowledge employees assign all inventions to the business. Otherwise, employee owns the invention unless he is hired to invent.

Licensing agreements allow companies to make profits off the patents.

Trade Secrets
Trade secret is is a formula, practice, instrument, pattern, design, process, or compilation of data and information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers. Trade secrets are often violated, when an employee leaves the company and starts using the company trade secrets for a business venture that directly competes with the former business.

In order to prevail in a trade secret case, plaintiff must timely prove (1) a trade secret existed, (2) defendant learned it through a confidential relationship or improper means, (3) defendant used or disclosed or will inevitably disclose it without plaintiff’s authorization, and (4) defendant profited from or plaintiff was damaged by defendant’s use or disclosure.

What to do to protect your company’s trade secrets?
Even though there is an implied agreement that trade secrets are not to be disclosed by employees, having proper non competition and confidential agreements assures that this promise is honored.

Conclusion
Trademarks: Make sure your proposed mark is protectable and not owned by anyone else. Protect valuable marks with a federal trademark registration.

Copyrights: Get the author’s written agreement that you own the copyright. Put a copyright notice on everything that might be copyrightable. Register if it might be important.

Patents: Get everyone’s written agreement that you own all patent rights. Quickly file inexpensive provisional applications.

Trade Secrets: Get everyone’s written agreement that you own everything and that they should keep your information confidential.mark is fanciful or arbitrary in that it has no relationship to the product or services. For example, Apple computers, Exxon gasoline, or Camel cigarettes are highly protectable.

Article by Dorisa Shahmirzai, Esq.

Founder of IP Law Click

Basic Copyright Law: What is a fair use?

A fair use is any copying of copyrighted material for a limited and “transformative” purpose such as to comment upon, criticize or parody a copyrighted work.  This type of use is allowed without permission from the copyright owner. If your use qualifies under the definition above, then your use would not be considered an illegal infringement.

So the million-dollar question is what is “transformative” use? Mind you that millions of dollars in legal fees have been spent in order to define what qualifies as a fair use. Courts vary in their decisions with respect to what defines fair use and only general definitions exit. Basically, judges and lawmakers who created the fair use exception wanted it–like free speech–to have a broad meaning that could be open to interpretation.

Most fair use analysis has been in two categories:

1. Parody

A parody is a work that ridicules a generally well-known work, by imitating it in satirical fashion. Unlike other forms of fair use, a fairly extensive use of the original work is permitted in parody because by its nature it demands some taking from the original work.

2. Comment and Criticism

If you are commenting upon or critiquing a copyrighted work, fair use allows you to reproduce some of the work to achieve your purposes. Examples of fair use include commentary, criticism, news reporting, research, teaching, library archiving and scholarship. The public policy behind this principle is that the public benefits from your review.

Article by Dorisa Shahmirzai, Esq. Founder of IP Law Click

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Harry Potter Plagiarism Case

A British judge has allowed a lawsuit to go forward that alleges that J.K. Rowling plagiarized “Harry Potter” from the author of an obscure fantasy book, “Willy the Wizard.” However, the judge described the plaintiff’s chances of success as “improbable” and ordered them to post cash security before future hearings are held.

 

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