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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.

In a closely watched copyright lawsuit, the Second Circuit reversed the District Court’s finding of “fair use” and upheld Fox News’ claim that the TVEyes service infringed its copyrights. This decision has broad implications for the manner in which video clips and text summaries are used in today’s fast-paced and interconnected digital media.

Illustration of scissors on video player, symbolizing video editing icon/clipsIn brief, TVEyes operates a comprehensive subscription-based media-monitoring service that (i) records essentially all television broadcasts on 1,400 channels on a 24/7 basis, (ii) copies the closed-captioned content that accompanies the recorded broadcasts, and (iii) uses that content to make a text-searchable database. TVEyes subscribers can run searches that return a list of video clips containing the searched terms. Each clip runs for 10 minutes and begins shortly before the search term appears in the clip. Thus, a TVEyes’ subscriber can search for a particular product, political candidate, hot-button issue (e.g., the NRA), etc. and retrieve all clips that mention the product, individual or issue that is the subject of the search.

Fox News sued TVEyes for direct copyright infringement based upon its copying and distributing Fox’s copyrighted content without a license. Because the recorded broadcasts were indisputably copyrighted and unlicensed, TVEyes’ defense turned on application of the four-factor “fair use” defense codified in Section 107 of the Copyright Act. Under this test, the following factors are considered individually and collectively in determining if the use is fair: (i) the purpose and character of the use, (ii) the nature of the copyrighted work, (iii) the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and (iv) the effect of the use upon the potential market for the copyrighted work.

The first factor typically turns on whether the challenged use somehow transforms the copyrighted work. In a ruling that met with sharp disagreement in a concurring opinion, the majority ruled that the TVEyes service was “at least somewhat transformative” because it enabled its clients (i) to view all Fox programming over the prior 32-day period that concerned the topic of their search without needing to watch Fox on a 24/7 basis for the entire period, and (ii) to watch the video clips at a time and place that was convenient for them, and not when they aired on Fox. Unfortunately for TVEyes, this is the only fair use factor found to work in its favor.

After noting that the second factor (“the nature of the copyrighted work”) rarely plays a significant role in fair use determinations, the Second Circuit ruled that it played “no significant role here.” The Second Circuit then turned to the third and fourth factors.

The Court ruled that the third factor – the amount of the copyrighted work used – “clearly favored” Fox because TVEyes made available “virtually the entirety of the Fox programming that TVEyes viewers want to see and hear.” The Court reasoned that “given the brevity of the average news segment on a particular topic” providing TVEyes users with ten-minute clips likely conveyed to them “the entirety of the message conveyed by Fox to authorized viewers of the original.” The Second Circuit contrasted this to Google’s actions – which were found to constitute fair use – in Authors Guild v. Google, Inc., 804 F.3d 202 (2d Cir. 2015) (“Google Books”). In that case, Google made unlicensed text-searchable copies of millions of books for which searches retrieved “snippets” of the books containing the search terms. Unlike TVEyes’ 10-minute video clips, these “snippets,” according to the Second Circuit, “abbreviated to ensure that it would be nearly impossible for a user to see a meaningful exposition of what the author originally intended to convey to readers.”

Finally, after reaffirming that the fourth fair use factor is the single most important element of the fair use analysis, the Court found that Fox had the “much stronger point.” This factor focuses on whether the challenged work constitutes a competing substitute for the original or its derivative so as to deprive the copyright owner of significant revenues that, instead, flow to the unauthorized copier. The Second Circuit found that TVEyes’ service undercut Fox’s ability to profit from developing and licensing searchable access to its copyrighted broadcasts to third parties. In making this finding, the Court pointed to TVEyes’ success as evidence that the market for searchable clips was worth millions of dollars before concluding that TVEyes was usurping a market that properly belonged to Fox.

The Second Circuit remanded the case to the District Court with instructions to enjoin TVEyes from making available to clients the ability to watch the 10-minute clips retrieved from TVEyes’ client search requests. Significantly, Fox did not challenge and the injunction does not apply to TVEyes’ search database. As such, there may remain an opportunity for TVEyes to combine its database with a retrieval and access component that does not flunk the third and fourth fair use factors. To accomplish this, TVEyes would likely need to construct a system far more like the one that did pass fair use muster in Google Books. However, because the “snippets” approved in Google Books were radically different from the 10-minute clips upon which TVEyes built its business, whether TVEyes would have the interest and ability to pursue such a redesign is far from clear.

Law concept: circuit board with copyright icon, 3d render

In response to the numerous allegations of pervasive sexual harassment in the entertainment industry, SAG-AFTRA, the union representing performers, recently adopted a “Code of Conduct” for handling sexual harassment claims against producers.  As the representative of performers across the country, it is only natural that SAG-AFTRA would seek to address the sexual harassment scandal that has pervaded the industry. The opening of this new front against sexual harassment may provide support for more performers to come forward and bring claims against producers.

Casting call - actors waiting at a casting sessionThe Code of Conduct provides a resource for performers to assist them in filing civil and criminal complaints against their employers, as well as processing claims under the collective bargaining agreements (CBA) between SAG-AFTRA and the Producer’s Alliance.  It also ominously claims that the union is “willing to use the union’s enforcement powers to protect our members, including directing them not to work for employers who will not keep them safe.”

SAG-AFTRA, as a labor union, has certain powers and limitations in advancing the interests of its members.  In terms of legal claims, the union can point performers in the right direction, or possibly pay for legal counsel (which is not mentioned in the Code), but it is unlikely that it could directly bring sexual harassment claims in court on behalf of members. Unions are typically bound by the grievance and arbitration procedures contained in their CBAs. In addition, the union is also subject to conflicts in terms of member-on-member sexual harassment, which could lead to inaction or delays on behalf of the accuser. Finally, like most unions, SAG-AFTRA is bound by a no-strike clause in its CBAs, which would likely limit its ability to carry through on its threat to direct members not to work for certain employers.

The jury has spoken. After a saga worth of Homer, Comic-Con is a valid trademark.

The battle began when, the organizers of San Diego Comic-Con (SDCC), the 50-year old grandaddy of fan conventions, sued the producers of Salt Lake Comic Con for infringement. As we previously reported, the defendants struck back by asserting that comic con (no hyphen) had become a generic descriptor for comic book conventions, citing the scores of events around the country that describe themselves the same way.

The case took a curious turn when the trial judge issued a gag order against the defendants prohibiting them from taking their case to social media, bringing First Amendment issues into what was otherwise a straightforward trademark case. The Salt Lake crew challenged this order by seeking a writ of mandamus from the Circuit Court, which agreed with them and vacated the order.

The case went to trial in early December, with a verdict in favor of the San Diego Comic-Con. The jury found both that the plaintiff’s mark is valid and also that it was infringed. It determined, however, that the infringement was not willful, and awarded only $20,000 in damages rather than the $12 million demanded by the plaintiffs. Nevertheless, armed with a finding of validity, SDCC could be emboldened to take action against other comic book conventions.

The defendants, meanwhile, have not laid down their weapons. They’ve announced an intention to appeal the verdict and are also pursuing an petition before the US Patent and Trademark Office to cancel the rival mark.

 

In another controversial move, the FCC has approved by a 3-2 vote the adoption of the ATSC 3.0 standard for broadcast TV, known as Next Gen TV. This IP-based standard will permit over-the-air broadcasters to offer Ultra High Definition signals and improve mobile transmission. Sounds good, right? Opponents cite two concerns.

Copyright: scanrail / 123RF Stock Photo

Using Next Gen TV, broadcasters will be able to track individualized viewing data to deliver targeted ads. This is a red flag for consumer and privacy advocates. Using language that sounds more sinister than was likely intended, one executive for Sinclair Broadcast Group praised the new standard’s ability to gather“perfect data” about consumers. “We’ll know where you are, who you are, and what you’re doing—just like you do now, just like everybody does now, the Internet does….”

The second big objection is that the change will impose unnecessary costs on consumers. Current televisions cannot receive Next Gen signals. The FCC imposed a five-year transition period during which broadcasters must simulcast using both the current and new standards. If they abandon the current standard after that period, broadcast consumers will be forced to buy new equipment.

My partner Nancy Yaffe has just posted a blog with disturbing implications for California entertainment lawyers. As young practitioners we  all were taught that every agreement with a person providing services on a film or TV show must include a provision that the results and proceeds of the person’s services are a “work made for hire” under copyright law.  This language is as important for entertainment lawyers as the Prime Directive is for Capt. Kirk on Star Trek. It now appears that the California EDD takes the position that the presence of those four words in a contract creates a presumption that the service provider is an employee, not a contractor. The Department will take this position even if none of the other indicia of employment are present, and regardless of the plain intent and structure of the Copyright Act.

Law concept: circuit board with copyright icon, 3d render

Producers can still obtain copyright ownership using assignment language, but this has drawbacks, including that the assignor can terminate the assignment after 35 years. This presents producers with a difficult choice. Proceed as usual and run the risk of being assessed for back taxes and penalties, or engage all cast and crew as employees, with the inconvenience and cost that can entail.

Read Nancy’s enlightening blog here.

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Former American icon Bill Cosby has been accused of sexually assaulting at least sixty women over five decades, according to Time Magazine.  But the Carsey-Werner Company, which produced Cosby’s hit sitcom “The Cosby Show”, claims the program still has “inherent entertainment value” that the British Broadcasting Corporation (BBC) wrongfully capitalized when it used eight clips and music from the show in its documentary “Bill Cosby – Fall of an American Icon.”  Carsey-Werner filed for copyright infringement in the U.S. District Court for the Central District of California last Friday.

Of the documentary’s one hour of running time, Carsey-Werner alleges that 234 seconds, or 6.5%, of the content derives from “The Cosby Show,” which the BBC had no permission to use.  But permission is not necessary if the use was fair.  When determining fair use, the court considers 1) whether the unlicensed use of the original work transformed the material taken by using it for a different purpose; 2) the nature of the copyrighted work; 3) the amount and substantiality of the work taken; and 4) the effect of the use on the potential market for the original work.

As to the first factor, use of material for purposes of criticism and comment is recognized by statute as transformative and fair.  Carsey-Werner could argue the documentary pertains to Bill Cosby and offers no comment or criticism of “The Cosby Show,” but the BBC could claim the program is arguably what made Cosby a household name and, ironically, branded him as “America’s Dad.”

The second factor tends to be the least important in the analysis since most copyrighted works are inherently original, but this prong would favor Carsey-Werner as fictional works like “The Cosby Show” are judged to be more original than factual ones such as an autobiography or news report.

The third factor comes down to whether the BBC used more of “The Cosby Show” than what was reasonable to adequately document Cosby’s descent.  Carsey-Werner claims if the BBC wanted to draw “The Cosby Show” to the viewers’ attention, it could have done so without using copyrighted material, but the BBC could argue its use of less than four minutes of show content scattered throughout the documentary was more than reasonable given the pivotal role the program played in building Cosby’s legacy.

The fourth factor requires Carsey-Werner to prove the BBC’s documentary served as a market substitute of the “The Cosby Show,” which will be a tall hill to climb given that the market for the program has arguably been irreversibly damaged amidst Cosby’s scandal.  Plus, the BBC can contend the market for light-hearted sitcoms is entirely different than that for sobering documentaries.

The BBC has yet to file a formal response to the matter but could pursue a shortcut to dismissal since the documentary was never broadcast or made publicly available online in the United States.  The documentary aired just twice in June of 2017 and has not been broadcast since.

We blogged recently about criminal proceedings brought by the LA City Attorney against numerous defendants accused of operating pay-for-play casting workshops in which actors allegedly paid for the opportunity to audition in front of casting directors. These cases are working thei

Man in handcuffs covering face
Copyright: ratru / 123RF Stock Photo

r way through the justice system, as some defendants pled guilty. Two more casting directors have taken guilty pleas, while some twenty-five are still awaiting trial.

Read more about it in the Deadline Hollywood story here.

Drug cartels are notorious for murder and extortion, but the family of the late drug lord Pablo Escobar has unleashed the scariest weapon of all–trademark litigation.

Escobar, Inc. has a longstanding grudge against the Netflix series Narcos, which dramatizes the late drug lord’s life. In a creative and brazen move, Escobar filed trademark registrations for the marks NARCOS and CARTEL WARS, and has threatened the producers, Narco Productions, LLC (“NPL”) with litigation if they won’t play ball. Escobar’s brother, Roberto De Jesus Escobar Gaviria, has been quoted to say he will “close their little show” if Netflix doesn’t cough up $1 billion to settle the infringement claims.

In a letter from its counsel, NPL responded that the Escobar claims are fraudulent. They assert that the specimens of use in commerce submitted in support of the Escobar trademark application were in fact taken from or copies of Netflix’s own advertising for its video game Narcos: Cartel Wars. Another red flag noted by NPL counsel was that Escobar claimed to have used the mark since 1986 in “operating a website” and “game services provided online from a computer network.” This despite that fact that the consumer internet did not exist in 1986, and was certainly incapable of streaming video games. There is also a question whether NARCOS is registrable at all, since the term is purely descriptive of anyone involved in drug cartels.

Perhaps coincidentally, the show Narcos was also in the news when its location scout was murdered in rural Mexico on September 11. Asked whether anyone at Escobar, Inc. had knowledge of the circumstances, the company’s president responded only “no comment.” Gaviria has been quoted, however, challenging the right of any production to film in Colombia regarding the Medellin cartel without authorization from Escobar, Inc., and recommending that Netflix hire hitmen to provide security to its crew.