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June 23, 2009

Can a NonProfit Be an Invention Licensor?

iStock_000007651555XSmall.jpgDear Rich, I have a question. I have invented a very useful tool and have a patent pending. Also I have an arrangement with a nonprofit and some principals. The nonprofit will operate the business of selling the tool to generate revenue. The principals provide funding and agree to use their retail outlets for the sales. Can we license a manufacturer to manufacture only and license the nonprofit to sell the product? The short answer to your question is that we're not sure. Yes, I know that the Dear Rich Staff is packed with lawyers, but more information is needed. For example, we're concerned about maintaining your nonprofit tax benefits, and the value of your patent pending status, and we're not sure what you mean when you say you want to "license a manufacturer to manufacture only"? Do you mean versus manufacturing and selling? We're also not sure who controls the rights to the invention, you or the principals? In a situation like this -- when you're mixing investors, inventions, and 501(c) tax issues -- you're best off bringing an attorney to the table
Our three favorite movies featuring patent attorneys
June 19, 2009

Idea to 'Monetize' Large Asset

iStock_000009054748XSmall.jpgDear Rich: There is a company that owns a large asset they have been trying to monetize for some time now. I recently came up with, what I believe is, a process that they can use to to do just that. After speaking with a few trusted friends who are consultants and non-IP lawyers they told me I should figure out how to protect the idea then try to strike a deal with the company. Is there some standard way to proceed in these situations? I have heard everything from contact an IP lawyer, send him two written outlines certified mail etc... to don't talk to the company about the idea over the phone. Thanks for any advice. As David Mamet explained in The Spanish Prisoner, there's no protecting a business idea if somebody is intent on conning you out of it. Start with the most important questions: What do you know about the company and what do you know about the people associated with the company? If they have a dubious reputation -- usually documented by lawsuits (and occasionally by movie scripts) -- save your time and money by moving on to your next big idea. If you do decide to pitch your idea, you can: (1) treat the idea as a trade secret and submit it only after a nondisclosure agreement is signed, (2) seek patent protection or 'patent pending' status (or at least have the idea reviewed by a patent attorney) or (3) submit the idea under the terms of an evaluation agreement in which case if the company later decides to pursue it, they'll grant a license in return for royalties. None of these will stop theft; they all provide remedies if your idea is stolen. 
What If They Won't Answer Your Emails?
Be prepared for the fact that most companies are wary of signing an agreement with someone they don't know -- or they may make you sign an agreement waiving any claims. This doesn't mean you can't trust them; just that they're suspicious of strangers. The best chance for success is to find a person at the company who will speak with you, or find a person who knows someone at the company, or find an agent who represents people in your position. It's only through these people-to-people contacts that any business will get done. There are some suggestions on how to pitch, an evaluation agreement, and an agent agreement in the book, Profit From Your Idea. As for the homemade protective measures like mailing copies to yourself, don't bother unless you enjoy the thrill of getting mail. Finally, the Dear Rich staff understands your desire to speak in current biznez lingo but 'monetizing' is inappropriate slang for making a profit. (Its actual meaning is more specific.) When making a pitch, we recommend plain English.
June 16, 2009

Database Protection and Licenses

conversation.jpgDear Rich: I have a two-part question. Part 1: I'm developing a website whose main feature is an online database that contains (in part) original material written by me. What kinds of notices, user terms and agreements should we have to protect the database and its contents? Part 2: The site publisher is a partnership, but one of the two partners retains copyright to the database and its contents. Should there be a license agreement between the database author-partner and the partnership itself?   This article is a good summary of the legal maneuvers used to protect databases. The most common strategies are to:
  • register the database with the Copyright Office (assuming it is protectible -- see Circular 65)
  • require that users enter into a click wrap arrangement which grants them limited rights and guarantees your rights to go after those who copy data without authorization, and
  • treat the database as a trade secret and require that employees and contractors working on your site enter into nondisclosure agreements.
  • Can You Really Prevent Theft?
    These legal measures provide tools for chasing down thieves and recovering damages. They may discourage theft but none can prevent it. (Websites can be 'scraped' and databases copied.) .  As for getting the proper language for your click wrap, start by looking at click wraps for similar sites, or by checking Steve Fishman's book
    Get a License?
    Yes, the owner of the database should enter into arrangement with the other partners. A license makes sense because you can contribute the database to the partnership and still retain copyright ownership. You may have to determine the value of the license to assess your partnership contributions and partnership taxes. An accountant's help may be necessary. (Check out this Nolo book or software program.) 
    What's the Picture Got to Do With Database Protection?
    We're not sure; the Dear Rich Staff reports that it's from their favorite movie about eavesdroppping and clogged toilets.

    June 12, 2009

    Sports Licensing: Is the System Rigged?

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    Dear Rich: I have a great idea for a sports team related product and have started looking into a patent.  I looked into licensing and can't even believe that it's legal to put the restrictions on that these teams do. I don't want to cheat these universities and professional teams out of their money on these things but they make it impossible to make a new product, not similar to anything they are offering without going through one of their existing suppliers or having an exemplary record of mass producing products similar. WHAT HAPPENED TO THE LITTLE GUY? WHY CAN I ONLY SELL MY IDEA? WHY CAN'T I OBTAIN LICENSING THEN GET INVESTORS ONBOARD? THE SYSTEM IN LICENSED PRODUCTS STINKS AND SHOULD BE ILLEGAL. Ouch ... our ears are ringing.  We understand you're angry, but in the future, you may want to consider the intonation of your query before hitting the "send" button.  Okay, assuming your question is 'Why is it so hard to license products to a university or professional sports franchise?," the short answer is that as a general rule, the bigger the enterprise, the less that the enterprise wants to hear from outsiders, a principle sometimes referred to as "NIH." (As you probably know, sports licensing is a big enterprise .... so big that even reading about it can be expensive.)
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    There is, however, a logic behind the closed-door approach of the sports licensing industry. Like the toy licensing business, sports licensing execs don't want to deal with strangers or companies that can't meet manufacturing numbers, accept legal requirements, or provide quality assurance. This is especially true in a depressed business climate when risk-aversion is the name of the game. (Although that doesn't stop sports-licensing of some crazy concepts -- check out the MLB-licensed "fan" coffins, above.) As you may be aware, the road you are seeking -- attempting to patent your invention, get investors and manufacture the product yourself (can you deal with foreign manufacturers?) -- is littered with unhappiness and bankruptcies. The Dear Rich Staff advises that you reconsider the idea of pitching your invention (hopefully, patented) to an existing manufacturer or agent -- that is a middle entity who already has cachet with the teams. That's the way many 'little guys' get started in the sports licensing world -- by slowly building trust with existing companies. 
    May 28, 2009

    Start a Music Label (or Not)?

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    Dear Rich: Our band is putting out its first CD and we are considering creating a record label to release it. What do you think? What's involved in creating a record label? Do we need a lawyer? I'm so glad you asked. You don't need a lawyer to form a record label and there's not that much involved in creating one, as I'll explain below. The bigger question is why are you doing it. One reason artists create labels is that they feel it gives some legitimacy to their release -- as if to say to the world, "see, somebody has signed us." If that's your prime motivator, don't bother. Your fans won't care and anyone in the music industry will be able to discern that you've just created a fictitious label for your release. However, if you're serious about building a small business around a series of releases (including other artists), then it might make sense to create a label. 
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    Most importantly, and of greatest concern is money. Who will pay for the pressings and artwork? How will you finance promotion? Are you borrowing money to start up? Or are you seeking investments? Will you pay for recording costs? Can you afford to keep going when distributors are late paying you (or worse, go belly up)? All of these things are worth considering before you launch your music mini-empire. (Here's a quick lesson (PDF) on the flow of money in the music business!) If you're still eager to move forward, you'll need a name for your label and you'll want to make sure no other music or entertainment services are using a similar name. (In a future blog entry, we're going to explain how to perform basic trademark searches at the USPTO.) Next, if you're not familiar with basic business startup information, you might want to get a primer. That's because you may need to figure out your business form -- partnership, LLC, corporation -- and file a fictitious business name with your county clerk. You'll need to open a bank account and use an accounting system -- either an Excel Spreadsheet or Quickbooks should do. You may want to affiliate with an independent music distributor (here's a list by state) which may prove challenging, unless you have an artist that is already selling well. And you will need agreements for the distributor, for consignments, and for your artists (including your band). Digital copies of all these agreements are included in my book Music Law, and the Dear Rich staff reports that there other helpful resources for starting a label on the web. One of the more popular books on the subject is Start and Run Your Own Record Label.
    April 21, 2009

    Song Recording in South Africa

    SouthAfrica.gifDear Rich: I am in South Africa (where the copyright act is 21 pages of legal jargon) and my husband and I are looking at recording a Christmas CD of tracks like Have Yourself a Merry Little Christmas, The Christmas Song, Let It Snow, Winter Wonderland, along with public domain carols such as Silent Night, etc. We will probably not even do more that 300 units and we would like to go about it the right way. What would the copyright issues be on non-public domain songs and where does one even begin looking? I'm so glad you asked. Although our blog focuses on U.S. law, the Dear Rich staff is happy to look into international rules (even if it does take three months to answer your query!). In South Africa, as in the U.S., any reproductions of songs on physical media (like CDs) requires that you obtain a compulsory mechanical license. The amount you pay per CD is set by the South African government. The easiest way to get the license appears to be using this form (PDF) which is processed by SAMRO (South African Music Rights Organization). You can find more South African musical resources here
    March 19, 2009

    Can a Co-Writer License at Less Than Market Value?

    musiciansl.jpgDear Rich: If two songwriters collaborate and co-own their copyright in a song, can one writer issue a license for the whole song (assuming she accounts to the other for her share)? What if the other writer believes that the song was licensed for less than the prevailing market rate for that use? Can that writer sue the co-writer for destroying the value of the copyright? I'm so glad you asked. As to your first question, the co-owners share the legal rights to the song (assuming there is no agreement to the contrary). As joint copyright owners, each writer can separately grant permission (a license) for someone to use the song, provided that each writer shares the income with the others. Although each co-owner is entitled to receive money from the song, this doesn't mean that the two writers have to share money from the song equally. One writer may receive 30% of the income and the other may earn 70%. Each writer's share is usually based on the value of their contribution. This is a matter that is agreed on by the two writers. If the writers do not agree and the issue turns into a lawsuit, then a court will decide on the value of each writer's contribution. Courts often start with the presumption that all songwriters contributed equally.

    As to your second question -- whether one writer can sue the other for licensing the song at less than market value -- we believe that it will be difficult to successfully assert this claim. Copyright expert Melville Nimmer reportedly argued that a co-owner has a duty not to "waste" a copyright. (This concept is borrowed from real property law in which a life tenant has a duty not to injure or waste the property.) However, our nation's leading copyright expert does not believe that a co-owner can assert this kind of claim. Even if you could make such a claim, keep in mind that you will have a heavy burden demonstrating that the value of the copyright has been depleted.

    The Dear Rich staff believes there may be one caveat to these rules and that is if one songwriter licenses the first use of a song without the consent of the co-writer. Although copyright law does not explicitly require all writers to consent to the first recording, we believe that this approach is required because after the first recording, this first use triggers the rights of others to record the song under compulsory license rules.

    (P.S. Here are some additional tips for songwriters.)

    February 20, 2009

    Publishing Lyrics at Websites

    funeralmusic.jpgDear Rich: I have a question. I am helping to create a website and one of the components is to provide some advice about songs and music that might be appropriate for funerals. I'd really love to include the lyrics so that folks could peruse them, along with a link to a spot where the piece is being performed. But I am a wee bit worried about spending sleepless nights in jail for including the lyrics -- even though they're all widely available on many sites. We did not intend to offer any commentary, just the bald lyrics. Will I run into a legal problem? I'm so glad you asked. The short answer to your question is that you will be violating the law, but that you probably won't run into problems. Publishing lyrics without authorization is a violation of U.S. Copyright law. Back in the old days (before the year 2000), music publishers went after lyrics websites with a vengeance. Now, unauthorized lyric reproduction is rampant. That doesn't mean that music publishers are tacitly permitting it; they're still sending out DMCA takedown notices and they're even considering going after Google, whose search engine is part of the profit-making machine in which lyrics are used to sell ringtones, affiliate products, and Google Ads. They've also set up a legit alternative -- in April 2007, Yahoo and Gracenote created an online lyrics license service that includes rights to lyrics from some (but not all) of the major music publishers. But that service has yet to click for legitimate lyric licensing the way iTunes has clicked for legitimate downloads. In summary, the Dear Rich staff does not want you to get nasty letters from lawyers but the staff believes that the odds of getting such a letter are slim.
    September 9, 2008

    Can I use a song for my political fundraiser?

    elviscostello.jpgDear Rich: I have a question. I will be having a political fundraiser for a candidate and I want to play "Blame it On Cain" by Elvis Costello before I introduce the main speaker. About 500 to 1000 people will attend. We're not making any money on the event, just taking donations. Do I need to get permission from anyone? I'm so glad you asked. If the venue at which you are holding your fundraiser has an ASCAP license, then no, you probably don't need to get permission. (An ASCAP license covers public performances of songs by ASCAP-songwriters like Declan Patrick MacManus.) If the venue doesn't have a license, or their license doesn't include your type of event, you'll need to obtain an ASCAP license. (Songwriters who are not affiliated with ASCAP are usually affiliated with BMI.) Of course, if you're hosting a national event, you may want to get the okay from the songwriter to avoid any negative post-fundraiser blowback.

    If you do anything other than play the song, you'll need more. For example, if you create a political video using the song, you'll need a sync license. If you use the recorded song as part of an ad campaign, you'll need other permissions, including one from the performers (under a principle known as right of publicity.)  By the way, the fact that your fundraiser is nonprofit or for-profit won't make much difference in terms of your permissions. The Dear Rich staff could go on and on about these rules (we did write the book) but this Slate article says it more succinctly. 

    Got a question for Dear Rich? Send it to dearrichquestion@gmail dot com, and make sure it has the header: "Question."

      

    June 18, 2008

    Can you claim rights to an animal's appearance?

    penguinrich.jpgDear Rich: I have a question. I read about an artist who is trying to get paid by the State of California. They're using his painting of a whale on license plates. I thought all images of animals were in the public domain. I'm interested because I'm a crafts artist and I'd like to replicate certain animal images on jewelry. I'm so glad you asked. I've written about one aspect of your question -- the copyrightability of art that borrows from nature -- in a Nolo article, so check that out. If you're too busy to get through the whole thing, I can summarize it by saying that the natural appearance of birds, bees, flowers, and the like are in the public domain. So if you're making wax candles that look exactly like a corn cob, or animal heads that look exactly like a leopard, you'll have a hard time claiming copyright.

    But if you're going beyond an exact replication of an animal -- for example, painting an inspiring shot of a whale's tail as the animal dives into the water, or creating a whimsical bespectacled penguin that also understands IP law, your original expression is protectable and you can stop others from copying.

    In regard to the whale license plate, the bigger issue seems to be that the artist made a handshake deal with the State of California. (Who knew states had hands?) As readers of the Dear Rich blog know, all arrangements transferring intellectual property should be in writing. Lacking any paperwork, the state's got a weak defense.

    BTW, we almost quoted directly from the Associated Press story on the subject. As you're probably aware, there's no way the The Dear Rich blog is going to move beyond its current obscurity without being publicly chased by a big-time plaintiff (and the AP is a tempting, though unglamorous target). Alas, we decided to hold out for Mr. Right.

    May 7, 2008

    Orphan Works

    suda2.jpgDear Rich: I have a question. I am an illustrator. Is it true that the government is setting up a database of visual arts works? And is it true that any works that you don't place on this register will become "orphan works" that anybody can use without your permission? I'm so glad you asked. The answers to your questions are "maybe," and "not exactly." An orphan work is one that is owned by a hard-to-find copyright owner. For example, in 1975, a child sends a drawing to Elvis Presley. In 2008, a biographer wants to include the drawing in a Presley biography. The problem is that the artist can't be found and the publisher doesn't want to reproduce the image without permission. Two bills have been proposed in Congress that address this issue. The proposed bills would allow the publisher -- after performing a diligent search -- to reproduce the image. If the artist later appears, the publisher would have to pay a reasonable fee for the use. An unlikely crew of special interests favor the House version of the bill, including librarians, free-speech types, copylefties, academics, writers, photographers, and big industry groups like the RIAA (and, of course, Google). Under the House bill, anyone who wants to use a work must (1) document their "good faith" search for the owner, (2) file a "Notice of Use" with the Copyright Office before using the work, (3) provide attribution if they know the name of the creator, and (4) include a special "orphan works" symbol when the work is published.

    Illustrators and artists are concerned about the bill because it would establish a registry of visual arts works. They're worried that if a piece of artwork doesn't show up on a registry search, all rights to that artwork may be lost. First, keep in mind that orphan or not, copyright is always preserved in the work. Second, there's nothing in the law that says that a failure to appear in the registry automatically creates an orphan. For example, even if the drawing of Suda (above) did not appear in a registry, I would still have a hard time claiming it was an orphan ... since the artist and his work are easy to locate on the web (Steve, please don't sue).

    January 7, 2008

    Copyright Fees: 1, Dancing Queen: 0

    leadsinger.jpgDear Rich: I have a question. I sell karaoke machines. Do I have to pay a separate fee to display the lyrics? Or does the fee I paid for the music cover the lyrics, too? I'm so glad you asked. Yes, you will have to get a separate license for the lyrics even if you paid the compulsory license fee for the music. That's because the display of the lyrics on the screen (in conjunction with the music) is considered an audiovisual work and requires a separate permission. That's the word from the Ninth Circuit in Leadsinger, Inc. v BMG Music Publishing (.pdf) (which harmonized California courts with New York karaoke case law). In Leadsinger, the karaoke company argued that displaying the lyrics was a fair use (claiming it taught users how to sing), but that argument didn't fly with the judges who must have been watching this.

    And, to find out how you can license copyrighted materials like this,  see the latest edition of my book Getting Permission: How to License & Clear Copyrighted Materials Online & Off (Nolo).