Joshua Bornstein writes:

U.S. Supreme Court building in Washington, DCPresident Trump’s recent nomination of Judge Brett Kavanaugh to fill Justice Kennedy’s seat on the United States Supreme Court has caused some concern about his potential impact on the future of copyright law. This is because Judge Kavanaugh could be joining the ranks of Justices Roberts, Thomas, and Gorsuch who are all noted skeptics of the doctrine known as “Chevron deference.” How this may impact copyright law requires a brief review of history.

In 1803, the United States Supreme Court held in Marbury v. Madison that it is was the role of the judiciary “to say what the law is.” In other words, Congress writes the law and judges determine what the law means whenever the law, as written, is ambiguous. In 1984, however, the Supreme Court loosened that rule in Chevron USA Inc. v. Natural Resources Defense Council by holding that courts should defer to administrative agencies that interpret the statutes that grant them their authority when the intent of Congress is ambiguous and where the interpretation is reasonable or permissible. Put differently, sometimes, the executive branch gets “to say what the law is” and judges should defer to those agencies so long as their interpretation makes sense. The deference courts give to administrative agencies is known as “Chevron deference.” How the Supreme Court approaches “Chevron deference” could affect the ongoing battle between cable companies and Internet-based streaming services.

A recent line of copyright cases has involved the issue of whether companies that stream content over the Internet fall within the meaning of a “cable system” under copyright law. Section 111 of the 1976 Copyright Act defines a “cable system” as any “facility” that retransmits shows “by wires, cables…or other communication channels.” What “other communication channels” Congress intended to include within the definition of a “cable system,” however, is seemingly ambiguous. The issue, then, is who gets to decide “what the law is” in the face of this ambiguity.

If a company is considered a “cable system,” then it is afforded certain rights. Specifically, a cable system is eligible for a so-called “compulsory license” that allows it to retransmit “a performance or display of a work” that had originally been broadcasted by someone else without having to get the consent of the copyright holder. To do this, the cable system need only pay a statutory fee to the Copyright Office.

After the cable system pays the fee and complies with other regulations, it is protected from infringement liability. In addition, the royalty payments cable companies pay through compulsory licenses are much smaller than what they would have to pay if they were forced to negotiate with individual content owners to obtain licenses. Simply put, it’s good to be a “cable system.”

In 2014, the Supreme Court decided a case called American Broadcasting Cos. v. Aereo, Inc. Aereo devised a novel means to deliver content over the Internet, which was to lease an individual antenna and DVR to each of its customers. In response to the inevitable infringement lawsuit by the copyright owners, Aereo argued that its retransmissions were not a “public performance” of the copyrighted content (which would constitute copyright infringement) but that it was merely an “equipment provider.”

The Supreme Court ruled that Aereo’s retransmissions were “performing” the broadcasters’ copyrighted material and it was, therefore, infringing. In reaching its decision, the Supreme Court noted Aereo’s “overwhelming likeness to cable companies.” This language – the “overwhelming likeness to cable companies” – opened up a new argument by likening streaming operations to cable companies.

Capitalizing on this, a company called FilmOn, which is an Internet-based television streaming service, sought a compulsory license from the Copyright Office, but was ultimately rejected. A lawsuit ensued and the case went before the Ninth Circuit Court of Appeals. FilmOn argued that “wires, cables…and other communications channels” found in Section 111 should include Internet-based retransmission services. The Ninth Circuit, however, recognized the statutory ambiguity in Section 111 and turned its attention to the Copyright Office’s interpretation for guidance. The Ninth Circuit concluded as follows:

FilmOn and other Internet-based retransmission services are neither clearly eligible nor clearly ineligible for the compulsory license § 111 makes available to “cable systems.” The Copyright Office says they are not eligible. Because the Office’s views are persuasive, and because they are reasonable, we defer to them.

In other words, the Ninth Circuit deferred to the Copyright Office to reach its decision; “Chevron deference” was applied. It is worth noting that the issues raised by FilmOn have been litigated in other circuit courts as well, and could, one day, make its way before the Supreme Court. It is very possible, therefore, that the Supreme Court will not afford the Copyright Office the same type of deference that lower courts have given it, especially because Justices Roberts, Thomas and Gorsuch have been noted skeptics of the doctrine of “Chevron deference.” Adding Judge Kavanaugh to the bench could mean that the Supreme Court may ultimately decide itself, rather than defer to the Copyright Office, whether Internet-based retransmission services fall within the meaning of a “cable system” under Section 111. The outcome of such a ruling could have a momentous impact on the entertainment industry.

Joshua A. Bornstein is an associate in the firm’s Entertainment Department, based in its Los Angeles office.

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Would you punch Johnny Depp in the face for $100,000?  “City of Lies” location manager Gregg “Rocky” Brooks had the chance after Depp allegedly punched Brooks in the ribs twice and demanded he punch Depp back in the face for $100,000.  Brooks declined the offer only to later deliver what could be a much more painful blow – a ten-count lawsuit leveled at Depp and the filmmakers for intentional torts and negligence.

The lawsuit filed last week alleges Brooks, as location manager, was in charge of ensuring the film’s production team was complying with its city permit which allowed filming outside the downtown Barclay Hotel from 7:00 a.m. to 7:00 p.m.  Toward the end of the day on April 13, 2017, the complaint alleges Depp required additional time to complete a scene and Brooks was able to obtain a new filming permit extending the time to 11:00 p.m.  But once it appeared that the additional four hours would not be enough, Brooks claims the film’s director Brad Furman (also a defendant in the suit) instructed Brooks to tell Depp to wrap up.

On his way over to Depp, Brooks contends Depp attacked him and launched into an expletive-laced tirade.  As Brooks tried to explain he had to ensure everyone complied with the city permit, Depp reportedly punched Brooks in the ribs twice and then exclaimed, “I will give you one hundred thousand dollars to punch me in the face right now!”  Brooks declined and says Depp continued to scream until Depp’s bodyguards arrived to restrain him.  Brooks also claims Depp’s breath reeked with alcohol and believes he was drinking and consuming drugs throughout the day on set.

Brooks’ action advances claims against Depp for assault and battery, intentional infliction of emotional distress and negligence.  He also seeks recovery against Furman, the film’s producer Miriam Segal, and the film’s production companies Good Film Productions and Infinitum Nihil for negligent supervision, negligent hiring, hostile work environment, negligent infliction of emotional distress, wrongful termination and retaliation.  Brooks blames Furman for negligently delegating his duty to direct Depp to cease work, placing Brooks in the unenviable role of a messenger with bad news.  Brooks also contends the filmmakers were on notice of Depp’s alleged volatile temper and habitual substance abuse yet retained him in conscious disregard for the safety of other employees.  Brooks finally claims wrongful termination and retaliation based on the allegation that he was terminated the Monday following the alleged altercation after refusing to sign a waiver at Segal’s request releasing the production of all claims Brooks may have against it arising from the incident.

Depp has yet to issue a statement in response to the suit, but Furman has come to his defense telling CBS News “Johnny Depp is a consummate professional” and “always treats the crew and people around him with the utmost respect.”  He added, “movies can be stressful, and non-events often become exaggerated.”

How “exaggerated” this incident was remains to be seen.

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The Court of Appeals of Georgia last week reversed the dismissal of a lawsuit for negligence and loss of consortium against Snapchat, Inc. alleging the social media giant’s controversial “speed filter” was a proximate cause of an accident that nearly took the plaintiff’s life.

The lawsuit alleges that on September 10, 2015, then 18-year-old Crystal McGee began accelerating in her father’s Mercedes on a highway outside Atlanta.  One of the three passengers in the vehicle, Heather McCarty, a co-worker of McGee’s, said she noticed McGee holding her phone as she drove and asked her to slow down.  McGee allegedly responded that she would decelerate once she reached 100 miles per hour to post her speed on Snapchat using the speed filter, which is a stylized speedometer that superimposes a tracked speed on a user’s picture to share with other Snapchat users.  Shortly after reaching 100 mph, the lawsuit claims McGee’s vehicle slammed into another car attempting to merge onto the highway.  Wentworth Maynard, then 21 years old, was a passenger in that car and suffered permanent brain damage.

Maynard and his wife sued Snapchat for negligence and loss of consortium.  They claimed Snapchat’s speed filter facilitated McGee’s reckless driving and that Snapchat knew the filter would likely distract drivers but created it anyway without including any warnings or safeguards.  The speed filter was introduced in 2013 and has potentially been linked to other accidents, including a fatal collision in Florida in which young drivers were allegedly using the filter minutes before the crash.

A Snapchat spokesperson issued a statement in response to Maynard’s suit affirming “we actively discourage our community from using the speed filter while driving, including by displaying a ‘Do NOT Snap and Drive’ warning message in the app itself.”  Snapchat also denied all of Maynard’s allegations and argued for dismissal claiming immunity under the Communications Decency Act (CDA).  The CDA shields interactive computer service providers from all liability arising from content created by third parties.

The trial court found the CDA applied and dismissed the suit, but a three-judge panel in the Court of Appeals of Georgia reversed.  Writing for the court, Judge William M. Ray II distinguished cases in which third-party content was said to have caused the harm and found, conversely, that Maynard’s claims stem from Snapchat’s alleged negligent creation of the filter and the foreseeable misuse of that filter by a third party – not from any third-party content.  Indeed, Ray noted no third-party content was ever posted in this case as McGee was unable to “snap” her speed before the accident occurred.

The case will now return to the trial court where the parties will litigate the merits of Maynard’s claims, which will likely be hotly contested.  McGee sued Maynard’s lawyers for defamation in April of 2017 alleging her phone was in her purse when the accident occurred and that she was never using Snapchat as Maynard’s suit contends.

Alarm bells rather than wedding bells are ringing in the insular but passionate world of romance novels as authors and publishers grapple with the question whether an author can claim exclusive rights to use “cocky” in book titles.

It started in early May, 2018. A self-published author named Faleena Hopkins obtained a registration for “cocky” as the the trademark for “a series of downloadable e-books in the field of romance.” Hopkins’s tomes include such titles as  Cocky Cowboy and Cocky Senator. Registration in hand, she sent cease-and-desist emails to other authors who had published books similarly titled.  Hopkins also reported the alleged infringements to Amazon, which removed a number of the titles from its Kindle e-book store.

Some of these authors  responded by re-titling their books. Jamila Jasper, for example, changed the title of her book from Cocky Cowboy to The Cockiest Cowboy to Have Ever Cocked. Hopkins’s campaign, not surprisingly, aroused intense emotions, and not only in the Twitterverse. Kevin Kneupper, an author and retired lawyer, filed a petition with the US Patent & Trademark Office (PTO) to cancel Hopkins’s registration. He is being supported in this by the Romance Writers of America (RWA), a nonprofit trade association. The RWA contacted Amazon to resume selling other writers’ Cocky titles, with some success.

Sniggering aside, this case actually raises a real trademark issue. Hopkins’s claim is, of course, that Cocky has been established as her brand–readers seeing Cocky in the title of a romance novel will identify it as one of her books. Her detractors claim that the word is simply descriptive of a particular subgenre of romance novels. For example, readers with a taste for historical “bodice-rippers” are guided by the cover and the title to their favored format. Likewise, lovers of medical romances will look for books with “doctor” in the title. So a reader who obtains fulfillment seeing a heroine break through the hero’s arrogant front would be aroused by a “cocky” title.

Whether a descriptive term can be protected as a trademark generally turns on the term’s “secondary meaning,” which is the extent to which an ordinary consumer would associate the term with a particular source. For example, one could argue that Star Wars is descriptive of a genre of space opera, but the term has unquestionably established secondary meaning. Secondary meaning is a factual question, usually established through consumer survey results. Hopkins’s challenge will be to establish that romance readers think of Cocky books as Hopkins books. The resolution is in the hands of the PTO.

 

 

John Simson writes:

The House of Representatives unanimously passed the Music Modernization Act last week by a vote of 415-0! Imagine our divided Congress passing anything with no opposition. This is actually not uncommon with music industry issues when the interests of both the major user companies and major owner companies align so there is little or no opposition.

U.S. Capitol Building, Washington, D.C.What exactly is the Music Modernization Act? The House version is the combination of three separate bills, two of which have been percolating for several years: The CLASSICS Act and the AMP Act. The CLASSICS Act will “fix” a major loophole in U.S. Copyright Law, the protection of pre-1972 recordings; the AMP Act will fix a smaller loophole in the Copyright Law as to how Music Producers, Remixers and Engineers get paid by SoundExchange. (We will discuss the specifics of these two parts of the bill in another post). The third piece of the MMA, its main driver and the reason why it is so critical to the music industry going forward is an overhaul of Section 115 of the U.S. Copyright Act, the compulsory license for the use of compositions. For those unfamiliar with copyright law, a “compulsory license” means that a user such as a record company can license a composition by paying the owner a license fee that is determined by statue without the necessity of negotiating directly with the owner. The reproduction of compositions on records and CDs is a compulsory license, referred to as a “mechanical license.”

A Brief History In Time

Over a decade ago, before Spotify, Apple, Tidal and most other on-demand services were operational, the Recording Industry Association of American (RIAA) and the National Music Publishers Association (NMPA) reached an agreement: for a nominal payment by the record companies to the publishers, the publishers would allow the development of on-demand services and wait and see to determine what fees should be charged for this new kind of service. Most important in this deal: the publishers received recognition that this use would be treated as a mechanical license, even though this does not necessarily follow from the nature of on-demand streaming. It is certainly true that a user of these services does have temporary reproductions on their devices, sometimes called tethered downloads because they are tethered to your subscription. On the other hand, were you to cancel your subscription, these reproductions disappear. They are also limited in that you cannot legally make copies of them as you would for a permanent download. However, this new recognition of a mechanical right in an on-demand stream was not accompanied by any major change in the section 115 Compulsory License that governs such mechanical reproductions.

What resulted was a disaster. Trying to shoehorn a new streaming mechanical into a 1909 law that was created for the reproduction of piano rolls, essentially one song at a time licensing, did not work. The 1909 law had adapted adequately to the transition from piano rolls to 78’s to LP’s and other limited media, with a limit of 15-20 compositions unless a box set where it might balloon to 60-80 titles. But the application of the law to on-demand streaming services that needed to license 30 million songs was impossible.

For streaming services, the task was daunting to obtain all of these licenses one at a time. The music industry had also undergone a fundamental change. For all past distributions of recordings, the record company stood as the gateway to the payment whether from retail establishments or from digital download services like iTunes. The record label would receive payment for the recordings as well as the for the compositions on behalf of music publishers and then pass through the publishing monies to the appropriate publishers or their representatives based upon the Section 115 licenses or other similar licenses they had negotiated. But this practice ended with on-demand streaming mechanicals. Record companies in their licenses with Spotify and others specifically required the service to license the publishers separately as they realized how great the burden would be to handle the mechanical royalty payments for the streaming services.

A Massive Problem to Solve

Over the years, the Harry Fox Agency (HFA) administered many of the Section 115 mechanical license agreements. Their agreement was a bit easier than the Copyright Office license. The Copyright Office license required monthly accountings while HFA’s was quarterly. But HFA never represented all works so attempting to get full coverage through HFA licenses was spotty at best. Over the years, they quoted 60-70% coverage but frequently couldn’t tell you which of your tracks wasn’t covered. Other services were also created to administer this right but the main problem persisted: there was no industry-wide database to inform a user where to go to get a license and the different services administering licenses were incomplete in their coverage. A user was at grave risk of infringement lawsuits for distributing unlicensed works.

Closeup of earbuds and smartphone

The MMA’s Proposed Solution

Long after the 1909 Act was enacted to govern the reproduction of compositions, another compulsory license for music was passed in 1995: the Digital Performance in Sound Recordings Act (DPRA). The DPRA provided a new license for non-interactive webcasters, satellite and cable services to stream sound recordings. This license provided that any service that wanted to stream could do so if they followed certain rules and provided payments and data. Section 114 of the Copyright Act which created this new compulsory license was also distinct from Section 115 in one major way: while Section 115 requires notice to the publisher 30 days in advance of distribution, Section 114 had no notice requirement at all. Any non-interactive service could stream any commercially released sound recording without prospect of being sued by the owner of the recording if the service provided data of what they were streaming and made payments based upon the terms of their license. The organization that was created to administer the Section 114 license is SoundExchange. (In full disclosure, I assisted in the development of SoundExchange at the RIAA in 2000 and served as its Executive Director from 2001-2010.)

In recognizing that Section 115 needed an overhaul to survive in the digital age, both users and owners got together and created a proposal to essentially mirror the Section 114 provisions removing the requirement of notice to publishers in advance of distribution: the result is that if this law passes, on-demand services can simply pay and provide data and be immune from lawsuits. Another “problem” with the current section 115 is that if a songwriter/publisher does not register their work with the Copyright Office AND an on-demand service sends a notice to the Copyright Office that they can’t find that songwriter/publisher, the service owes the songwriter/publisher NOTHING until they finally register their work. While the service has to pay a filing fee to the Copyright Office of roughly ten cents ($.10), the songwriter/publisher gets nothing! The updated law will fix that. Now, the on-demand service provider pays the new collecting society, to be created by the MMA for everything, and content owners claim against what is paid into the society.

One major striking difference between Section 114 and the proposed MMA is that there is very little language in Section 114 about the collecting society that could be formed by content owners. Section 114 did provide an anti-trust exemption to allow all content owners to create an “agent” or multiple agents to negotiate compulsory license voluntary rates with users, participate in Copyright Royalty Board (CRB) proceedings to set rates if voluntary negotiations failed and to collect and distribute payments to those entitled to royalties. Initially, the collective under Section 114 was subject to Copyright Office regulation but that role now falls under the auspices of the CRB.

Statutory language in the proposed MMA not only authorizes the creation of a new collecting society but sets forth in great detail many aspects of the organization’s structure, including the composition of the Board, composition of various committees, retention periods for undistributed royalties and much, much more. Where SoundExchange grew somewhat organically, this new collective is being created by statute.

Some outside groups have pushed back against the composition of the Board that would be created by the MMA to govern the collecting society. They don’t like that it is overwhelmingly controlled by music publishers with very few seats given to songwriters. They point to the SoundExchange Board which is an equal board between recording artists and record label representatives as evidence that this new organization needs more songwriter members; but they fail to point out that mechanical royalties unlike performance royalties, have always been paid directly to music publishers who recoup advances from these royalties and then split the money with their songwriters. Given this historical backdrop and practice, this is essentially a land grab by songwriters. (It should also be pointed out that songwriters seem to have no problem affiliating with BMI which has no songwriters on its Board of Directors!)

One issue that should be fixed in the MMA concerns “black box” money: those royalties collected that can’t be distributed, either due to the failure of a publisher or self-published songwriter to register with the new collective or due to bad data being supplied by the user. Currently, the legislation provides a three-year holding period and then a distribution proportionate to the overall market share of copyright owners. SoundExchange’s early experience with black box money is illustrative and leads to the conclusion that the new collective should wait at least five years to flush its undistributed royalties. It will take time for songwriters and independent publishers to get up to speed, to try and find their repertoire which may be poorly reported. It will take time for older songwriters and publishers to learn about these new developments. Congress may be passing new legislation which affects rights but Congress typically doesn’t expend any money to educate the community about these new rights and how they may be exercised.

Hopefully, the on-demand services that want this new legislation so badly that they are willing to pay the costs of running the collective, will highlight the changes on their services. While these services are primarily consumer-facing, it would be highly appropriate for them to send messages to songwriters and music publishers telling them about the new regime and how to ensure they are collecting their rightful share.

Hearings on the bill have begun in the Senate Judiciary Committee.

The MMA is a long overdue fix to the problems of Section 115 and while it won’t cure all of them it is an important step in the right direction.

John Simson is counsel in the firm’s Entertainment Department, based in its Washington, D.C. office.

By: Self-portrait by the depicted Macaca nigra female; rotated and cropped by David Slater. [Public domain], via Wikimedia Commons
The Ninth Circuit dropped the curtain last week on nearly three years of litigation waged by People for Ethical Treatment of Animals (PETA) against wildlife photographer David Slater in the infamous “Monkey Selfie” case by declaring that monkeys do not have standing to sue for copyright infringement.

In 2011, Slater left his camera unattended on the island of Sulawesi, Indonesia when a crested macaque named Naruto grabbed the camera and took several photographs of himself.  A few years later, Slater published the pictures online and drew the ire of PETA, which filed a complaint in 2015.  PETA alleged Slater infringed Naruto’s copyrights in the photos and claimed it could adequately defend Naruto’s rights as the macaque’s “next friend.”  The law allows “next friends” to sue on behalf of others if the individual they represent lacks capacity to prosecute his or her own case.

The district court dismissed the action on the grounds that monkeys do not have standing to sue under the Copyright Act.  PETA appealed, but after participating in oral argument, entered into a settlement agreement with Slater whereby PETA would withdraw its appeal in exchange for Slater donating a portion of the profits earned from the pictures to charities that protect crested macaques in Indonesia.  Nevertheless, Naruto was not named a party to the settlement and the Ninth Circuit did not take kindly to PETA resolving the matter without its “next friend.”

“In the wake of PETA’s proposed dismissal, Naruto is left without an advocate, his supposed ‘friend’ having abandoned Naruto’s substantive claims in what appears to be an effort to prevent the publication of a decision adverse to PETA’s institutional interests,” wrote Judge Carlos Bea who sarcastically added that Naruto should consider suing PETA for breach of fiduciary duty.  “Puzzling, while representing to the world that ‘animals are not ours to eat, wear, experiment on, use for entertainment, or abuse in any other way’ PETA seems to employ Naruto as an unwitting pawn in its ideological goals,” Bea argued.

Notwithstanding the settlement agreement, the Ninth Circuit issued an opinion.  It found Naruto, as the alleged owner of the photographs, technically had Article III standing since he suffered a concrete and particularized economic harm that could be redressed by the court.  However, the Ninth Circuit found the Copyright Act only authorizes humans and legal entities to sue for infringement since it does not expressly permit otherwise.  The court also reasoned the Act’s language referencing an author’s “children,” “grandchildren,” and “widow/widower” implies humanity as animals cannot marry or produce heirs entitled to property by law.

Jeff Kerr, general counsel for PETA, disagrees.  “Naruto should be considered the author and copyright owner, and he shouldn’t be treated differently from any other creator simply because he happens to not be human,” Kerr said in an interview with Time.

PETA has not yet decided whether it will appeal the ruling to the United States Supreme Court.  As for Naruto, he could not be reached for comment.

The post below was first posted by my colleague Jeff Polsky on the Fox Rothschild California Employment Law blog. We are reprinting it here because the recent California Supreme Court decision that it describes will have tremendous impact on the way many producers do business.

It’s common practice for producers to engage cast and crew as independent contractors rather than as employees. This will now be far more problematic, at least in California. Anyone who engages personnel in this state should read this blog and take a hard look at their hiring practices.

Jeff Polsky writes:

Determining whether a California worker is an independent contractor or an employee has always been difficult. Judges deciding the issue have complained that the test used by California courts “provides nothing remotely close to a clear answer.” Then there was the nail salon that was told by one state agency that its workers were employees and by another that they were independent contractors. So there’s no question that the law in this area has been messy.

On Monday, it got considerably messier. That’s when the California Supreme Court issued its decision in Dynamex Operations West, Inc. v. Superior Court. For years — even decades — judges, government agencies, and lawyers have interpreted the law to say that the key to distinguishing between employees and independent contractors was whether the company had the right to control the manner and means by which the worker accomplished the desired result. So if drivers for a gig-economy car service decided what days to work, when to start work on a particular day, where to work, what to wear, when to take breaks and for how long, and when to quit for the day, there was an excellent chance that they’d be considered independent contractors,

Under the California Wage Orders, which guarantee employees a minimum wage, maximum hours, overtime compensation, meal and rest breaks, and more, that is no longer the case. Now, according to the California Supreme Court, companies must meet a three-prong test to establish independent contractor status (“the ABC test”).

  • A) The company must not be able to control or direct what the worker does, either by contract or in actual practice. This is similar to the test used in the past.
  • B) The worker must perform tasks outside of the hiring entity’s usual course of business. So if you’re a driver for a ride service, a delivery person for a delivery service, or a seamstress for a clothing company, you can’t be an independent contractor no matter how little control the company has over you.
  • C) The worker must be engaged in an independently established trade, occupation, or business. It’s not enough that the company doesn’t prohibit the worker from having his own business or working for others. Instead, the court will look at factors such as whether the business is incorporated or licensed, whether it’s advertised, and whether it offers services to the public or other potential customers.

It is the employers burden to satisfy all three prongs to establish that the worker is an independent contractor. If it fails to establish one, the worker is entitled to be treated as an employee under the Wage Orders. (The Wage Orders themselves are not particularly helpful in this regard. For example, they circularly define “employee” as ” any person employed by an employer.”)

The Court spent 80+ pages explaining its rationale. Nowhere in that lengthy analysis was any recognition of the upheaval this opinion will cause. Millions of workers in the state that were considered independent contractors will now be deemed employees. This will require employers who have done everything they could to follow the law as it was then understood to reevaluate the nature of the relationship with many of their workers and either modify the relationship or provide them the pay and treatment required by the Wage Orders. They also face litigation, including potential class actions, from workers complaining that they were misclassified. And since this case only addresses the wage order definition, they need to apply different standards (which can lead to different conclusions) in deciding how to characterize workers for purposes such as workers compensation and payroll taxes. As I said, a messy situation just got messier.

Laurie Baddon writes:

It has been a tough couple of weeks for Sinclair Broadcast Group, Inc. First, news broke that its anchors were required to read an identical script cautioning viewers about “fake news” and questioning the integrity of media organizations. Now, reports claim that Sinclair’s employee agreements may make it too expensive for these anchors to quit due to liquidated damages provisions in their contracts. While we have not reviewed the alleged Sinclair employee agreements, the news raises some important issues for employers to keep in mind when creating employment agreements, especially in California.

Some reports indicate that the Sinclair agreements allegedly require employees to pay as much as 40% of their annual compensation to the company in liquidated damages for leaving before the term of their contract expires. While employers may protect themselves from the costs associated with an employee voluntarily leaving their employment prior to the expiration of the contract term, it is rare for liquidated damages to be so high. When employment agreements include liquidated damages for an employee voluntarily quitting prior to the expiration of the contract term, the parties will agree on an amount related to the employer’s cost to recruit and train a replacement. Requiring an employee to pay 40% of their annual compensation in liquidated damages is steep and sounds more like a penalty, which courts would likely disfavor.

The agreements also allegedly contain a clause that Sinclair may fire an anchor who suffers a disability. At first glance, without more context, this looks to be problematic as well. Although it is not unheard of for employee agreements for high-level executives (or in this case for anchors) to include a clause that the employment relationship may be terminated due to the employee being “permanently” or “totally” disabled; this usually means that the employee is unable to perform the essential functions of the position, even with reasonable accommodations, for a specified period, such as 90 consecutive days or 180 days in any 365-day period. Nevertheless, it is extremely important that employers consult with counsel and are cautious when including these clauses to not conflict with state and federal law.

Additionally, the Sinclair agreements allegedly contain non-compete clauses. While non-competes may be enforceable in other states, they are likely to be void in California. This should serve as a reminder of how imperative it is for employers to tailor agreements and policies to the specific jurisdictions in which employees work.

It is important to keep in mind that the issues raised by the Sinclair agreements are rare. The vast majority of employees in California will likely never see an employment agreement like the Sinclair agreements because most employees are “at-will” meaning they can terminate their employment for any reason at any time just as the employer can terminate the employment relationship for any non-discriminatory reason at any time.

In any event, with Sinclair looking to acquire some additional 215 stations across the country, there may be a whole lot more new employees reviewing, scrutinizing, and publicizing the Sinclair agreements. It will be interesting to see how much push back Sinclair will get.

Laurie Baddon is an associate in the firm’s Labor & Employment Department, based in its Los Angeles office.

After Netflix negotiated mega raises for the main actors of its hit program “Stranger Things” in March of this year, short-film producer Charlie Kessler wants a piece of the pie.  Kessler filed an action in Los Angeles County Superior Court last week for breach of an implied contract against “Stranger Things” creators Matt and Ross Duffer who he claims heard his pitch for a science fiction show at a film festival in 2014 and ran with it without his consent and without providing him just compensation.

Watching streaming television with a cup of tea with inscription "Just One More Episode"“Stranger Things” debuted in July of 2016 and received eighteen Emmy nominations last year.  According to The Hollywood Reporter, Netflix is now paying lead actors Winona Ryder (Joyce Byers) and David Harbour (Jim Hopper) a whopping $350,000 per episode, and up to $250,000 an episode for its young adult stars.

Kessler alleges he discussed the short film he created entitled “Montauk” with the Duffer brothers at the Tribeca Films Festival in 2014, which is a science fiction work set in Montauk, New York.  Montauk is home to an abandoned military base that is rumored to be haunted.  Kessler contends the Duffer brothers misappropriated the concept of “Montauk” to produce “Stranger Things” without Kessler’s permission. Kessler also alleges “Stranger Things” was originally titled “The Montauk Project” and took place in New York, but was later renamed and set in the fictional town of Hawkins, Indiana. The Duffers’ attorney Alex Kohner issued a statement that the Duffers never saw “Montauk” and never discussed a project with Kessler. Kohner called Kessler’s complaint “completely meritless” and “an attempt to profit from other people’s creative and hard work.”

Although purely abstract ideas cannot be copyrighted, California does afford some protection to show pitches through contract law. To prevail, a plaintiff must establish that he or she prepared the work being pitched, disclosed it to the defendant, and had a reasonable expectation of payment in exchange for pitching the work which can be implied from the circumstances.

Whether Kessler will be able to demonstrate these elements remains to be seen. The Duffers’ response to the complaint will be due in early May. Kessler seeks monetary damages, injunctive relief, and punitive sanctions.

The digitization of content is forcing courts to take a fresh look at basic copyright concepts. The Disney v. Redbox case that I’ve recently blogged on addressed whether a digital download code is a “copy” of a work. Now a New York District Court has taken up the meaning of “display” in a case that could have big consequences for the way news outlets do business.

A photographer named Justin Goldman snapped a candid photo of New England Patriots quarterback Tom Brady with Boston Celtics general manager Danny Ainge. Goldman posted the photo on Snapchat, whence it went viral, including on Twitter. The defendant news outlets, including Breitbart, Time and the Boston Globe, embedded the tweets together with the photo in stories concerning whether Brady was assisting the Celtics to recruit a player named Kevin Durant. Goldman sued for copyright infringement. The defendants moved for summary judgment on the ground that they had merely linked to an image hosted on Twitter’s servers and did not themselves maintain copies.

Judge Katherine Forrest rejected this position. In her view, the location of the server on which an image is stored is merely a technical distinction that is not relevant to whether the copyright owner’s display right was infringed. Judge Forrest acknowledged that this view is contrary to the position of the 9th Circuit, but held that it is supported by Supreme Court precedent and the language and legislative history of the Copyright Act.

This decision does not necessarily mark the end of the road for the news organizations, however, In response to their plea that a loss would “cause a tremendous chilling effect on the core functionality of the web,” the judge stressed that they still have strong affirmative defenses. A fair use argument is always available, particularly to straight news organizations. The judge also raised the possibility that Goldman had released the photo into the public domain by posting it to Snapchat in the first place.

There’s a certain logic to Judge Forrest’s conclusion that the viewer’s experience of a photo is the same whether the defendant has copied it to its own server or linked to someone else’s. On the other hand, a central feature of Twitter and other social media platforms is that posts can be readily shared. The ecosystems of these platforms could be seriously disrupted if every shared post is regarded as a new publication for copyright purposes. Courts and possibly Congress will be working for the next several years to draw the appropriate lines.