Building a House for your Career--Not for Profit, Copyright and Martha Graham

Building an arts career and establising a corporation, LLC, or other entity around it is like building a house to protect your creations and your rights. Yet, what happens when the house staff has turned you out and stripped you of your rights? This is the Martha Graham story.

Some of you may have heard of the ongoing dispute in the dance world over the past few years. What you may not know is that the outcome of the dispute has significant implications for your not-for-profit organization. So you thought you were savvy in creating a not-for-profit corporation to further your artistic endeavors, but do you realize that depending on how you structure your relationship with this entity you may find yourself without any rights over your artistic creations? To learn more on the topic, read Olivera's article on the Martha Graham case

Olivera Medenica

Sixth Circuit Imposes Strict Liability for Digital Sampling

In a recent Sixth Circuit decision (Bridgeport Music, Inc. v. Dimension Films, 2004 US App. Lexis 18810) the court ruled that any unlicensed sample of a copyrighted sound recording will automatically amount to copyright infringement, regardless of whether the sound is recognizable to the average listener. In Bridgeport, the Defendants had taken a sample of Plaintiff’s music which amounted to two seconds of a guitar solo. Defendants repeatedly inserted this sample into their own works by lowering the pitch of the music and extending it into a sixteen beat looped segment. Although the lower court had ruled that the resulting music was not recognizable as Plaintiff’s guitar solo, the Sixth Circuit imposed a new form of strict-liability infringement. According to the Bridgeport court, the sheer fact that Defendant had taken Plaintiff’s actual sound recording amounted to copyright infringement. In sharp contrast to New York courts, the Sixth Circuit did not undertake an analysis of whether the taken music sample was sufficiently original to warrant copyright protection and did not deem it necessary to determine whether the resulting sample was substantially similar to the original sample.


Olivera Medenica

Keep your Company Warm with SOX--Private Company Finance and the Sarbanes Oxley Act of 2002

Passed in the wake of the Enron and WorldCom debacles, the Sarbanes-Oxley Act of 2002 (“SOX”) is considered by many to be the most significant legislative change in securities regulation since the Securities Act of 1934. While most SOX provisions apply only to public companies, there are a variety of reasons private companies should become familiar with SOX’s requirements and consider voluntarily complying with the new legislation. The following are some of the more salient reasons for private company compliance:

• Venture capital investors, insurer and lenders may demand compliance due to the heightened scrutiny directed at all companies in regard to corporate governance.
• Implementation of corporate governance standards prior to an IPO may help facilitate the process of going public. While both the Nasdaq and NYSE allow for a grace period in implementing SOX requirements, rules relating to the independence of the board of directors and prohibition against loans to executive officers take effect immediately.
• Potential acquirers are likely to view companies with established governance standards more positively given the ease with which such companies can be assimilate and the shared corporate culture such standards engender.
• Several SOX provisions already apply to private companies, such as the prohibition on the destruction of documents with the intent to impede or obstruct a federal investigation and enhanced penalties for securities fraud and other white-collar crimes.

Although none are legally mandated, private companies should complying with the following SOX requirements before going public:

• Independence of the Board of Directors. The NYSE and Nasdaq have recently adopted rules mandating that companies listed on their exchanges have a majority of their board of directors be independent. Nasdaq guidelines provide that a director is not independent if he or she has been employed by the company or its subsidiaries during the current year or any of the past three years, received more than $60,000 from the company in any of the past three years or has a family member who has served as an executive officer during the past three years.
• Audit Committee. Private companies considering an IPO should prepare for such eventuality by electing an independent audit committee, one or more of whose members are experienced in preparing, auditing, analyzing or evaluating the financial statements of entities similar to the company at issue. Additionally, new SOX and exchange rules require that more stringent independence guidelines be applied to audit committees than even the board of directors. Under Section 301 of SOX, for example, no audit committee member may accept any consultancy, advisory or other compensatory fee from an issuer, except for fees in connection with serving on the committee itself.
• Compensation Committee. The NYSE now requires board of directors to establish a compensation committee to set and approve compensation for executive officers of the issuer. Nasdaq’s rules do not require a separate committee to address compensation decisions, but does require those decisions to be made either by the independent members of the board of directors or by a committee of independent directors.

Cover Songs of a Famous Deceased Musician for a Kids DVD--Copyrights, Sync Licenses, and the Right of Publicity

Question:
If I wanted to use the music of a dead musician (let's call him John Doe) for a commercial DVD/video, I would need to get permission for synchronization rights from John Doe's music publisher's company. I wouldn't use the original recordings. I would record my own versions of John Doe's songs. Let's say that the DVD/video will be called ''John Doe for Kids''. There would be no photos of John Doe on the jacket nor any use of his trademarks. Do I need to get permission for this? From whom? Is his name a trademark?

Answer
Before even reaching the trademark issues in this matter, the most important rights you are looking at are 1) the right of publicity; and 2) the copyright to the song. I will try to address these briefly.
Copyright: First, the songs as compositions are copyrighted (i.e. melody, and lyrics). Secondly the songs are copyrighted as sound recordings (i.e., John Doe's actual recorded song as it sounds on CD’s for sale). To use these songs in the manner you mentioned, whereby you record “covers” of the song, ordinarily it would be a relatively simple matter. You could simply get a “compulsory” license from a licensing agency such as Harry Fox for a set rate, without asking anyone for the rights. This means that if I want to record a cover of a famous “Beatles” track I could under the right circumstances.

However, “compulsory” licenses do not apply to use of the song in movies/DVD’s/video. Use of songs in movies and the like require a special license called a “sync” license (i.e., to sync the music with the image). This will require you to get clearance from the copyright holder for the song “composition” (i.e., the lyrics and melody), NOT the sound recording (i.e., John Doe's actual recorded song as it sounds on CD’s for sale).

Right of Publicity: Celebrities and ordinary people have a right to control the use of their names, likeness and images. It is not a defense to infringing this right to say that you only used a person’s name. In fact in many states the right of a dead person to control these things has been recognized. Again, you will most likely have to clear the rights here as well from the party that holds them (e.g., John Doe’s estate). For more information on the right of publicity feel free to read an article that I wrote.



Kaiser Wahab