Dark Horse Copyright Case

Katy Perry Escapes Dark Horse Copyright Verdict

I am unashamed to admit that Katy Perry is, without a doubt, my favorite pop singer. I don’t really know why.  I listened to classic rock and heavy metal as a kid.  My affection for Katy and her music horrifies my kids.  And my wife.  And many of my friends . . .  But I embrace it and roar out loud when her music plays. So, this Dark Horse/Joyful Noise copyright infringement battle was on my radar from the very beginning. 

What Happened?

Christian rapper Flame sued Katy Perry for allegedly sampling a short series of notes from his song, Joyful Noise, in her song Dark Horse. Flame's legal team argued that Dark Horse contained an ostinato (set of eight beats) that included half a dozen similar elements to Joyful Noise.  It was just these 8 notes that were at issue and nothing more from the respective songs.  In the first court case, the jury agreed with Flame and he was to receive $2.78 million in compensation from Katy Perry, her collaborators, and Capitol Records. Neither side disputed that the songs as a whole were different, or that the overall melody was different. 

For some background, here is a side-by-side comparison of the ostinato in question: https://www.youtube.com/watch?v=QPtynHTDlC0.

When the trial court verdict was handed down, there was some shock and surprise in the music world. Under the standard interpretation of copyright law, no one can copyright a simple short series of notes. Otherwise, music creation would become a minefield, stifling the music industry's creativity. Can you imagine the complications of trying to write a song and then trawling through the last 70+ years of music to make sure that you did not accidentally sample a couple of notes from a song? Then if you find you did have similar notes, having to pay royalties to a reasonably large portion of artists to use a few beats in your song? It seems prohibitive. The complication arising from this judgment could be wide-reaching and not only almost halt music production, and send music prices soaring, but exponentially increase time to market. 

Katy Perry fought the initial verdict and won. Fortunately, appeals like this are ruled on by a panel of judges, not a jury; this meant that the judgment was based purely on copyright law and whether the facts actually supported such a conclusion, rather than relying on the individual opinions of lay people. The judge overturned the initial verdict on the basis that you cannot, in fact, copyright a few musical notes. This was precisely what the music industry had been arguing since the first verdict was handed down. 

Apparently at the trial, Katy Perry's lawyer even played upwards of a half a dozen songs that all resembled the ostinato at issue during the trial where only one of them was from the Katy Perry song in order to show the prevalence of this particular series of notes over time. Some were even from famous pieces of classical music but it was to no avail. 

Fortunately, the judge who overturned the initial verdict concluded that the ostinato was not original and that it was not enough music to qualify as a new work of art to be protected by the copyright laws.

Related: Taylor Swift, Big Machine and Audible: The Battle Over Copyright Control

What Does Copyright Law Say?

Copyright law is seemingly simple - you cannot copy someone's work of authorship, which can be written words, photographs, sound recordings or performances, among a few other things. A piece of music falls under a couple of these categories. It falls under a work of authorship as a written piece of music (i.e. the notes on the page that someone comes up with), you have the audio recording of the song itself, and you've also got the stage performance. 

I can't take a Katy Perry song and sing it myself on stage for profit or in a commercial setting. I'm not hiding the fact that I didn't write it. I'm saying, 'Hey, I'm covering Katy Perry.’ Absent permission from her, that is copyright infringement.  You may be thinking, but what about cover bands? A cover band typically has to get permission from a licensing group to play other people's music. Even groups such as church worship bands get blanket licenses in order to perform other people’s works.  Otherwise, it's copyright infringement. And the right of performance is one of the exclusive rights granted by copyright law. 

However, it starts to get murky when we introduce ‘fair use.’ The question that arises is, how much can I take from the original author so that it will qualify as non-infringing or as fair use? Fair use states that if you take a nominal part of someone's work of authorship and use that, it's a defense to copyright infringement. 

Copyrights also have a limited lifetime. They expire and go into the public domain at a certain point after the creation of the original work. For example, the work of Mozart, and all classical composers, is now public domain. I can perform Mozart without getting prior permission. In general terms, Copyright law states that a copyright is valid for the artist's lifetime, plus 70 years. 

For my contemporaries, you may remember a similar issue in 1990, where Queen sued Vanilla Ice for using their unmistakable intro to Under Pressure in his equally famous Ice Ice Baby. In that case, Vanilla Ice eventually bought the rights to the intro melody from Queen, saying it was cheaper to purchase the rights then fight Queen in court. Here is the sample on both https://www.youtube.com/watch?v=ncHVW_WavSk.

Related: TikTok, Tick-Tock. Can You Claim Copyright on a Dance Move?

My Judgement

In my mind, this is undoubtedly the correct result. Yes, those melodic lines are similar but the full songs are entirely different and can in no way be confused. The appeals judge made the right decision and I think that the jury simply got confused by the arguments made by a good plaintiff's attorney. 


Market Intelligence and Brand Management

Market Intelligence and Brand Management

By Craig Neugeboren & Scott Papich

Scott and I met on a random ski day up in Eldora through a mutual friend, who is always looking to introduce people with common interests and personalities. He knew about Scott's business as well as mine, and he's like, "Hey, you guys should talk because you're both focused on the outdoor industries." I actually think he was sitting in between us on a chair lift when that conversation happened.  Boy, I long for those shoulder to shoulder days again . . . 

Hey, Scott, what do you do? Hey, Craig, what do you do? I'm like, "Oh, trademarks and branding." He's like, "Oh, I deal with brands too. How do you deal with it?" So, we got chatting.

We ended up meeting again at the Outdoor Retailer Snow Show and talked about how we might collaborate. Scott does analytics and market intelligence to help a company identify where they should be focusing their marketing efforts, who their customer base is, and other forward-looking aspects relating to business trajectories. Whereas we are assisting clients in protecting the more concrete parts of a brand, it's typically during that company's life cycle when the two of us are usually interfacing with the client.  

We at Neugeboren O’Dowd are always telling our clients that the branding piece of their business is something that they should be thinking about early in their development. Scott's company, Outside Intelligence, gives intelligence to the company's roadmap so that they're not just swatting at flies trying to figure out who their customer base is and where their branding efforts should be focused. 

While Scott is helping build the brand recognition, we at NOD are protecting brand recognition. We do different things, but it's generally on the same timeline. We are both working with clients at an early stage of brand development to make sure companies are on track when they grow their market share. This positioning makes it easier to refer clients to each other and recommend each other's businesses. 

When a client asks for someone that can help interpret their analytics and enhance their marketing - we can send them over to Scott when Scott's clients need to register IP. He refers them to us. There is a little overlap in what we do. How a company uses its trademark is vital to how NOD files the trademark application. For Scott's team, understanding the target market, the customer base, and the product is essential. With this collaboration, we can be a better service provider to our clients by pointing them in the right direction.

Helpful Data

When helping my clients, the most critical data is when you identify a target market with the level of specificity that Scott can provide. This data helps me in the procurement of the trademark and the enforcement of the trademark. To be able to watch out for competitors, really understand who competitors are, and what those companies are doing is essential. 

If we're going to do a clearance search for the company, having competitive information about your client helps to narrow the critical risks out there. This data will help me identify direct competitors and look at those competitors in detail before assisting a client in choosing their brand. With this intelligence, I can make sure we stay away from these competitors. When you can consider those competitors ahead of time, it prevents you from stepping on a direct competitor's toes.

Related: Is it Worth the Hassle to Protect Your Cannabis Brand?

Let me hand it over to Scott to explain a little more about what he does and how market intelligence can improve your brand.

Scott Papich - Outside Intelligence:

Brands want actionable data that they can use to strategize against the competition and to improve their sales and profitability. Not all companies invest in access to market data, and those that do, many do not harvest enough value out of their data.

Companies want to know: What is the actual size of our market? What's the real potential revenue we should be planning for? What are the actual retail selling prices of the products, and the overall categories we're selling? How does that compare with competing products from other brands? Who are the top three brands in our market, and how exactly does the market-share break down? And how much is each point of market-share worth, in both retail and wholesale dollars? You can determine the real answers when you have solid market data with a little experienced interpretation and logical analysis. 

Brands and businesses want to take care of the customers they already know about, target the customers they are reaching out to, and find the customers that fit their brand. This customer acquisition goal holds for business to consumer (B2C), direct to consumer (D2C), and business to business (B2B) companies. 

Brands often make assumptions about who the top two or three brands are that they compete with, or what the top-selling products are within their competitive space. Many brands think that because their products sell in a particular pattern over the course of months and seasons, the entire market sells that way. But such is not always the case. Decision-makers have plenty of anecdotal info, so they think they know how consumers behave, but it's eye-opening to see the real data. Once you see how your sales fit within the total market, and how you compare versus your competitors, you uncover opportunities.

Breaking Down Your Data

After seeing real patterns and anomalies in the market data, new questions arise. What's making this happen, and what's driving that trend? Why do customers spend their money on this and not on that? Why does this pattern concentrate in one month when the year before it happened in another month? Why did consumers switch brands during a particular month or season? The answers to these questions help brands make marketing decisions, product decisions, selling decisions, distribution decisions -- decisions essential to gaining market share. 

Example: a well-known sports apparel brand had no idea that it had lost its number one market share position until it examined 3rd party market data. The data was laid out in a graph showing how brand sales compared over time. The client brand assumed that, because their sales were flat, probably all consumers were simply buying fewer gloves. However, the market data raised questions around specific styles or items within the category and price points. 

What ensued was a thorough review of that brand's glove category. They brought in and tore apart a dozen different products from competitors to better understand what they could improve. They studied the data for price points and consumer purchasing seasonality. They looked at competitors' marketing, and then their marketing. In short, the market data told the company where to dig deeper for useful intelligence, and the resulting insights revealed why some consumers preferred competing brands. The client brand was able to attack all fronts utilizing fresh strategies that ultimately came out of the market data. Over the course of approximately 14 months, they were able to regain their number one market share position, increasing retail sales by $2 million.

Without the initial market data analysis, the company would not have known even to ask the right questions, let alone that they had unknowingly lost market share in the first place. 

Clients that NOD is working with on intellectual property are often at a stage in their development as a company, where they haven't yet dug into market data. However, there's a significant opportunity there if they decide to take the plunge. The number one question for the brands and companies at that stage is, how big is the market they're trying to serve? Many of Craig's clients are outdoor brands that work in apparel and soft goods. They don't know how many target consumers are out there. By walking through a sporting goods store or a mountaineering store or a cycling store, they get a sense for what the average prices might be, but they don't know what the actual data is -- how big the market is, what products consumers are buying, and which brands they gravitate to.

Brands need to know the seasonality of their product categories because there's a whole schedule of design, development, production, shipping, and selling at the wholesale level that needs to happen to meet consumers where and when they are ready to buy. More established brands need this information, and most invest in it. If you look at sports apparel brands in the US, the top three are worth $10 to $20 billion a year in retail sales. 

Five Top Reasons Why You Should Get Data Smart

  • You learn where you should be focusing more of your attention and resources to gain market share, which almost always leads to higher revenue and stronger profitability. 
  • You learn where to make the tough strategic decisions -- you can make deliberate decisions to either improve on certain products and categories or to intentionally not focus there. Some companies want to grow in every category that they operate in, but that doesn't necessarily make a company more profitable. Often, the strongest, most unique, and valuable brands decide what to do well and then become the best.
  • Market analysis helps you focus on the consumers’ perception of your marketing. You can better understand who your real customers are, and what they respond to, what price points have the most volume, and where the transactions are happening. Consumers vote with their dollars, and every brand does better when they understand consumer behavior. 
  • Data helps you make smarter decisions on where you're going to distribute, and what retail partners you decide work with.
  • Data helps brands figure out what they're missing out on. A great example is an apparel brand that saw its sales increase by 50-75% every year during the holiday season, and they thought they were capturing all the opportunity that was out there. But they didn't understand that their competitors were routinely increasing sales by 200-400% every holiday season. The example brand didn't know that they were losing significant market share during the months of November and December, every single year. Some deeper analysis helped them make some obvious decisions about packaging and messaging to consumers about their product.

About Outside Intelligence

We help brands interpret data, whether that is internal financial data or market data available through several various data providers. We help clients go through that data and interpret it so that they can ask the right questions, gain insights, and focus on strategies. Outside Intelligence helps brands, marketing managers, product people, salespeople, and executives look at data so that they can ask relevant and timely questions and ultimately figure out how to influence what happens in the data going forward. 

 

Related: The Right Team


We’re Not Just Your Outside Law Firm. We’re Your Chief IP Officer

We’re Not Just Your Outside Law Firm. We’re Your Chief IP Officer

Why is it essential to have an IP firm working alongside your company from the start and also as it grows? Companies do not realize how ubiquitous IP issues can be and how simple maintenance and upkeep can help streamline bigger processes.  Seemingly non-IP milestones during a company lifecycle, such as acquisitions, licensing, and international expansion, almost always involve aspects relating to some form of Intellectual Property. Proactive planning in your IP processes can eliminate headaches and extra work down the road. Without it, corporations often find themselves rushing to put out fires that could damage their reputation, their firm's value, and even some form of liquidation event. 

Many companies do not understand just how far-reaching IP is. For example, it often starts with an employee/human resources issue concerning ownership and assignment obligations or trade secret responsibilities. Further along, it becomes a technology-heavy issue relating to your research and development organization and associated product development efforts. Later, it implicates third party interactions such as joint development agreements and licensing.  And all along the way, the branding and marketing of your products implicate their own IP issues.  

During mergers, acquisitions, and other technology transfer events, IP and particularly, patent ownership problems regularly present themselves. I regularly work with large corporate clients that acquire smaller companies, and each time, the transfer of ownership of both US-based and global trademarks and patent applications has been a primary administrative concern during the transaction. In the US, it is not a hugely challenging process because we control and are intimately familiar with the laws and paperwork involved, but the same rules do not apply to global transfers and the laws of each individual country in the mix.

In many foreign jurisdictions, the paperwork, legalization, and document formalization requirements can be exceptionally onerous. The Japanese patent office, in particular, will not accept a generalized merger document as an assignment. Many countries require “legalized” documents for recording, which often require signatures and “gold seals” from the US State Department or a foreign embassy.  If you do not have the right materials and processes put in place during that foreign IP transfer transaction, or the wrong owner is still listed in a national patent and trademark office because it wasn’t corrected along the way, it can be particularly challenging to correct after the fact.  Or at least time consuming, which is usually not a luxury during an acquisition.

We regularly see, particularly within merger or acquisition paperwork, a small paragraph buried in the broader document that says, 'All patents or trademarks are hereby transferred from one company to the other,' and this often does not fly for international ownership transfers. When we record new assignments and change the ownership for those pieces of property, the better practice is to provide a separate document that shows the transfer happened or at least have each specific piece of property itemized on the schedule. When that document is just a paragraph and not separate and distinct from the overall acquisition transaction, we have to create a whole new document or have a foreign associate do the same to comply with local rules.

With new documents come new signature requirements, and many times the corporate leadership has already changed, so getting them re-executed becomes a problem or impossible. If we had been alongside to offer advice from the start, we would have assisted the acquiring company in writing the correct documentation from the get-go. 

Related: Is Your Startup Making These Mistakes With Your IP?

We routinely receive panicked last-minute calls where a company is about to receive investment money or is undergoing a diligence activity. And oftentimes, we aren’t even made aware that an acquisition is taking place until the deal is done, or more commonly, when someone realizes that the “merger document” did not include the proper provisions to make the actual recordation of the new owner simple or even effective.  At that point, we are asked to scramble to file the documentation and make it right.

Short Shelf-Life

Aside from the paperwork hassles identified above, IP rights have short shelf lives, and if you do not take action within a particular time frame, you can lose your rights. For patents, in particular, there are critical dates that must be adhered to after certain events happen in a company's life. After your idea has been in the public domain for more than a year, it can generally be used by anybody without any recourse. All of your hard work, all of your company value that may be based on one patent application, will be lost forever.

Luckily, the trademark world is a little more forgiving and allows you to file even after you have been using the trademark for a while. However, in trademark law, your rights are determined by who first used the mark. So even though you might have used it early, if you haven't filed it, it creates a messy situation to try and recover rights if someone else applies for the same thing.  What should have been solely an administrative event is now a quasi-litigation and usually adversarial in nature, adding exponentially to the cost.

Having an IP specialist on board in an advisory role to educate your company on filing dates, get those dates on a calendar, and make sure everyone is aware of how these processes work, has proven to be extremely valuable to our clients over the years, even if just to course correct to avoid these seemingly small administrative issues. 

For that reason, we often offer to sit in on client board meetings and other early strategic sessions for no cost so that we can help you steer clear of these issues.

Related: Protecting Your Intellectual Property Operating, Employment, and Founders' Agreements

My Top Three IP Paperwork Tips to Know

  • Do not put your IP, patent, or trademark applications on the back burner. Doing the paperwork early does not have to be expensive. 
  • If you're undergoing an acquisition, either being acquired or you plan to purchase another company or its IP assets, that is an excellent point to get us involved so we can help you create cleaner paperwork. It's that simple. 
  • If you are in the early stages of developing technology or brands, let us help create processes for you so that you can capture the right information and not get into a scenario where you're potentially losing rights.

 

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Living a White Collar Quarantine? - Pay it Forward!

Last week the New York Times published a piece titled “White Collar Quarantine” that struck me as something many in Boulder are experiencing, myself included. I’ve had conversations over the last few weeks about this dynamic. Conversations about how in a town where the true extent of our affluence is often forgotten, and in a company where our day to work process barely flinched, the stay at home orders seem more like an extended staycation.  My neighbor told me that it felt like God gave us a time out. I’ll be the first to admit it has been nice at times. Mixed feelings for sure. Part fear, part blessing, and part guilt. Two weeks ago, I couldn’t find toilet paper, but I was able to buy free-range pork chops and Kobe beef for a backyard bar-b-que.  I’m the poster child for the White Collar Quarantine. Not so much for the restaurant and other small business workers who aren’t able to so easily continue to work or for which their businesses were ordered to shut down. Many volunteer opportunities have shut down too in light of the ordered limitations on gatherings.  How do we pay it forward for these folks?

Love Local - Help Save Your Favorites

This pandemic is unprecedented and scary for sure.  Unprecedented not just in its effects but in the speed at which it shifted our lives, the economy, and our perceptions about the future.  Three weeks ago, our firm was discussing how strong our first quarter financials were looking and anticipating the same trajectory for the foreseeable future.  As a law firm, our numbers will somewhat lag the near-instantaneous nature of this slowdown, and we won’t be able to see the financial impact for some months (scary in itself).  In the meantime, it is hard to sit in our comfy homes with nearly every amenity available at the click of a mouse while so much of our community is on the front lines or still trying to scrape by to serve the rest of us.  So while our balance sheet is still in decent shape, our firm announced our own “mini-stimulus” for our staff. No strings attached, but it was done with the stated preference to use it to help support those restaurants and businesses in our communities that they would hate to see go out of business.   At the end of this article is a list of the establishments that came to mind across our team, but there are many, many more, and there are many local efforts to do the same. Many of these businesses are close to our main office in Boulder, but many others are in each of our neighboring communities.

Some Silver Linings and a Note to Our Clients

In this dark cloud of the COVID-19 crisis, there has been another more personal silver lining for our practice; remote working has given us a glimpse of each other’s everyday lives.  While all are equipped to work remotely, many of our team members do not have dedicated office space in their homes. I have met my team’s families, kids, pets, seen into their home lives, and perhaps even learned a little more about what motivates them and excites them - just by using video calls.  Perhaps the now forbidden nature of in-person contact has enticed us all to want that more, and I find myself reaching out on video more than I might have done in a typical day to day setting.  

I have found it refreshing to be able to work remotely more, step away from my desk when I need to, plan my hours, and plot tasks in a way that fosters creativity in a different way. At Neugeboren O’Dowd, we have never had prescribed hours, have always been 100% remote-capable, and implemented unlimited time off several years ago.  As long as tasks are handled, we can work in ways that suit us from day to day. However, right now, because being remote is mandated, I sense a growing ease that working from home is a viable scenario for more people.

We, as a team, have accomplished the same amount of work over the last few weeks from home as we would have sitting in an office building.  I am seriously starting to wonder if - when the pandemic is over - companies will re-evaluate the need for office space, or at least re-evaluate the extent needed.

Related article: My Brush With Big-Law Burnout 

Embracing Technology

Our entire staff has always been enabled to work remotely; it is, and always has been, part of our firm’s ethos. We have always embraced technology and made sure that our team members have everything they need to complete their tasks successfully from the comfort of their homes or on the road.

As Intellectual Property specialists, we deal with technology, branding, and marketing companies as clients, so everyone we work with is very used to electronic communications and are savvy with technology. We have clients and associates in other states and other countries, so we have always depended on the electronic world to communicate with them. When we engage new clients, we tell them that we are 100% electronic, as much as we can be. We joke that if you get something in the physical mail from us, it's either because it's an original document that you need to keep safe, or something's gone wrong!

The technology that we use for our remote work has morphed over the years and upgraded and changed over time. Still, we have always had the ability to work remotely via a laptop or desktop computer. We have encryption and network security in place to allow each of our team members to securely and quickly log in to our servers and to access our system.  

We are not a huge firm, so we do not utilize applications such as Slack or Microsoft Teams; these apps are too big a hammer for the number of people we have and would only create more work and inefficiencies for our staff. We are, however, very communicative. Because our office is relatively small, we typically did not use Zoom, Google Hangouts or UberConference to talk to each other too much, until now. Just this past week, we had our first office Zoom meeting with everybody on the screen - everybody logged on, no one had problems, and it worked well.  If the Coronavirus has proven anything, it is the need to learn technology and embrace remote working for almost every business. 

During this pandemic, nothing has changed for our clients or us in terms of the work we do. We are fully functional and our docketing and other systems are 100% online and accessible.  Aside from some “can I get a bigger monitor” requests, switching to remote work was a matter of flipping a switch and locking the office doors on our way out. Kudos to Bernadette Barrett, Rene Roskam, and RMTT for keeping things up to date and processes in place to make it so seamless.

Related article: What Lawyers and Clients Need to Know About the Use of Artificial Intelligence 

Not every firm was able to make this transition so easily, so here are a few suggestions to make this scenario  more routine:

Tips To A Successful Remote Work Life

  • It is helpful to create physical boundaries for your workspace. I think it's important to have a way to physically distinguish work from play and home, and make sure the rest of the folks in your household respect that. Treat it like work, at least for certain designated hours of the day.
  • Physically, you have to take care of yourself, exercise, and eat well. If you can’t go to the gym, bring the gym to you - get some weights or take a walk outside. 
  • Continue to have interpersonal relationships. If you are a leader in a company, reach out to your team to say hi and check in on how they are doing and see how you can help. 
  • Take care of yourself; shower, shave, comb your hair, put on a nice shirt. Just make yourself feel like you're working.
  • Reach out to clients and check-in, show them you are thinking about them, and let them know you are still fully functional, and can help them in some way. Now is the time to be more personal with your clients and maybe forego the business talk.
  • Embrace technology. If you're someone who is maybe a little bit afraid of that or timid of it, this is the perfect time to lean in and make sure you understand how to use it. It's an opportunity for folks who may not be as comfortable with technology to thrive and learn to be an expert.

Love Local

During this time, it is even more critical to support your local businesses, and our team here at NOD would like to give a shout out to our local favorites and go-to places that we want to see for years to come.  All of these are doing takeout or delivery orders still or will sell a gift card for use later. Especially if you find yourself in a white collar quarantine, visit your own local spot and help pay it forward a bit!

North Side Tavern - Broomfield

Early Bird Restaurant - Westminster

The Hungry Toad - Boulder

Truman’s Barber Shop - Boulder

Nepal Cuisine - Boulder

Gondolier Italian Eatery - Boulder

Caffe Sole - Boulder

Rebecca’s Apothecary - Boulder

Sushi Zanmai - Boulder

New Moon Bakery & Cafe - Nederland

Ruthie’s Boardwalk Social - Boulder

Cacciatore at Heller’s Kitchen - Fort Collins

Falafel King - Boulder

One Boulder Fitness - Boulder

Ted’s Montana Grill - Westminster

Big Mac and Little Lus - Westminster

Zoe’s Kitchen - Boulder

Cyclhops and Oskar Blues - Longmont/Lyons

Cannon Mine Coffee - Lafayette

Upslope Brewing Company - Boulder

Front Range Brewing Company - Lafayette

Southern Sun/Under The Sun - Boulder

Ozo Coffee - Boulder

Picas - Boulder

The Dugout Grill - Erie

Panang Thai Cuisine - Lafayette

Beleza Coffee - Boulder

Little Brazil - Lakewood

CrossFit Profectus - Broomfield

Mod Market - Boulder

Busaba Thai - Louisville

Boss Lady Pizza - Boulder

My Ramen & Izakaya - Boulder

Village Coffee Shop - Boulder

 

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Taylor Swift, Big Machine and Audible: The Battle over Copyright Control

Taylor Swift, Big Machine and Audible: The Battle over Copyright Control

It's an intriguing tale that has garnered a tremendous amount of public attention. A beloved young singer named Taylor Swift is in an epic battle to wrest control of her music back from the intriguingly named Big Machine, now owned by the famed manager, Scooter Braun. 

Emotions have run high as Swift and her fans mourn the loss of her music and berate Braun and company for their heartlessness. With Swift's encouragement, some fans began doxxing Braun and others, while Braun says he has received threats from Taylor Swift fans. Big Machine has even put out a statement suggesting that Swift has gone too far with her public battle. 

Drama aside, though, this is a straight-up copyright issue. 

Braun quietly bought Big Machine and the rights to Swift's first six albums last year. Swift was furious and has waged a very public battle with Braun over those rights. 

Who Owns the Copyright?

Swift did initially own the copyright to her works. Ownership of a copyright, of course, always goes to the author of the copyrighted work, in this case the music itself and the performance rights surrounding those works. 

That is until the author chooses to sell or assign those rights. This is precisely what Swift did, just like many up and coming artists in search of the career support that a big label can provide. 

Even when she was in a good position with Big Machine, Swift would not have been able to perform her works at a concert, or even at a birthday party without the permission of the true copyright owner, Big Machine. They owned the copyright, and she would be performing those copyrighted works. She's admittedly beholden to the owner of the copyright for the duration of that agreement.

The fact that Swift is no longer happy with the deal she signed does not make that contract go away. 

Related: Eminem, Meet the Supreme Court of the United States

The Right to Hold (and to Sell) 

Copyrights aren’t just about the right to copy a work of art or a song. There are quite a few “exclusive” rights assigned to the general umbrella of copyright law. These include: 

  • The right to reproduce or the right to make copies of a protected work.
  • Distribution rights or the right to sell or otherwise distribute copies to the public. These could be books or recordings, for example.  
  • The right to create derivative works or adaptations, which includes the right to prepare new works based on the protected work.
  • The right to perform and display the work. These include the right to perform protected work, such as a play or a song, or to display a work of art. 

The copyright holder can choose to sell all or part of any of these rights to someone else, which is essentially what Swift did. Copyright law also allows the copyright holder to license these rights to someone else for a fee. 

Every time anyone performs or uses a Swift song from one of the six albums he owns, Braun and Big Machine presumably earn a licensing fee. 

Related: Yes, You Need a Registered Copyright

Rights and Revenue

There are two critical copyrights in the music industry. The first is songwriting copyright, which belongs to whoever wrote the music and lyrics. This right generally covers the revenue received from:

  • Performance royalties for live performances of the song 
  • Mechanical license royalties which are fees paid for every copy made of the song 
  • Synchronization fees for synching the song to a movie for example 

The second piece is the sound recording copyright, which includes: 

  • Digital and physical record sales revenue 
  • Master-use license fees if, for example, the song is used in a movie. 

We don't know the exact details of Swift's contract, but it is likely that in return for signing away her copyright, she received promotion and recording benefits from Big Machine. When Scooter Braun arrived and bought out Big Machine, and along with it, the rights to Swift's music, the singer decided she didn't like the contract anymore. Hindsight is 20/20, but unfortunately for Swift, that is not how copyright law works. According to news reports Swift hasn’t ever challenged the legitimacy of the contract she signed.  She just wanted to renegotiate the terms after the fact.

Swift’s Options

Swift does have some recourse. According to the singer, her original contract with Big Machine allows her to begin re-recording songs from her first five albums starting in November of next year. Essentially this means she can re-record her songs, presumably with some unique twist to them, and then release those new recordings to compete with the original recordings now owned by Braun. Of course, this could create a whole new set of problems, including some confusion among her fanbase. 

Understand What You're Selling

The lesson here? Know what your rights are, and know exactly what you are signing away. Just because it doesn't seem right that a popular recording artist like Taylor Swift does not own the right to her songs, it doesn't negate a valid contract. 

Understand What You're Buying

In another example, the seven major book publishers who recently launched a copyright infringement case against Amazon's Audible service knew exactly what rights they signed away.  

HarperCollins Publishers, Penguin Random House, Hachette Book Group, Simon & Schuster, and Macmillan Publishers, all members of the American Association of Publishers (AAP) filed the suit in reaction to Audible Captions, a machine learning tool that adds computer-generated text to some of its audiobooks. The project, launched in partnership with U.S. high schools, would allow listeners to read the generated text alongside the narration. 

Text is Text

However, according to the publishers and authors whose works are affected, Audible is purportedly basing their new service on their prior license, which only relates to the ability to “perform” the audiobooks of these works. This type of license is separate from the licenses offered for printed books and eBooks and was limited in scope to this type of use. 

Since Audible only secured the license for voice recording and playback, the publishers are contesting their use under the existing license. On the other hand, because AI was generating the text on the fly, Audible seemed to suggest that it was more similar to audio than to print. 

After arguing that this was a contractual rather than a copyright dispute and attempting to have the case thrown out of court, Audible recently announced that it had settled the suit. 

In fact, Audible capitulated. According to the AAP, Audible will seek permission from any AAP Members in good standing with the AAP before adding Audible Captions to their works. 

Both the Taylor Swift and Audible cases are at heart, straightforward copyright disputes. However, both illustrate the critical importance of understanding all of the rights that fall under copyright law. This is crucial information for both sellers and buyers. 


Wells Fargo Was Ordered To Pay USAA $200 Million But They Might Only Be The First Of Many

This fall, a jury ordered Wells Fargo to pay USAA $200 million for infringing on patents relating to mobile image capture technology. Judging by even more recent "Wells Fargo must pay a fine" news, their patent issues may be the least of their concerns, but it will not likely be the end of the story here. 

In one sense, this is a very typical patent case. A company owns IP, and another company is infringing it. The owner wants compensation.

What makes this case unique is how ubiquitous the technology involved is. And that means the case has enormous financial and business ramifications for any companies currently using it. 

Revolutionizing Mobile Bank Deposits

Mobile image capture technology was developed a while ago and was the leading edge in terms of where the developers of that technology thought commercial aspects of it could go. And they were right. It was basic image recognition technology that was able to take a picture of something, in this case, a check, and translate that into data to electronically deposit that check. 

Today, virtually every smartphone banking app uses this technology. You never have to go to a bank. It's brilliant. Each of my kids uses it, so it must be cool.

This technology quickly went from obscurity to an absolute necessity for a bank to even compete for customers. But the rush to get on board with this technology may have caused others to bypass even nominal due diligence. No one seemed to investigate to see whether the technology was patented, and if what they were doing with it, was proper. It is a common phenomenon with a lot of upstart, fast-growing technology companies.

Collaboration, Trade Secrets and Lawsuits

Another interesting aspect of this case is that USAA had collaboratively developed that technology with another company called Mitek over twenty years ago. During the course of that relationship, USAA alleged trade secret misappropriation against Mitek and Mitek originally counter sued USAA based on the use of the Mitek technology. While that caused its own back and forth in the courts, the parties eventually settled, and USAA ended up with the patent rights. 

Related: Pitfalls to Avoid When Collaborating on Intellectual Property

As soon as USAA established ownership, they began to litigate. After all, they are a banking company, and that technology is crucial to that industry.

The Risk for Banks and Banking Companies

Fast forward a few years, and this presents a considerable risk for patent damages because, one, every bank is using it. Every single bank. That risk is exacerbated because damages are usually calculated on a transactional basis for this type of technology. Every time someone uses it, it's another act that counts toward a damages calculation. 

There are millions of these transactions every day. Even if the value of using that technology is only pennies per transaction, it adds up. $200 million was a jury verdict awarded to USAA. That's one bank. So how many banks are there in this country or around the world using this technology? The implications are enormous. 

The good news for these banks is that USAA doesn’t seem to be trying to corner the market and be the only bank that can use this functionality. Instead, they want other companies to license it from them. Behind the scenes, they've been engaged in what they describe as reasonable licensing negotiations with other banks so that they can get some royalties from the use of the technology while not outright prohibiting others from utilizing it.

USAA did send cease-and-desist letters to Wells Fargo and other banks offering to license the technology, but when those were ignored, they decided to sue Wells Fargo. This is likely because it is a big bank with many damages attached due to the volume of the transactions they do. 

Litigation is expensive, and often these cases are settled before they ever get to court. But Wells Fargo didn't back down, and USAA took it to a jury trial. And that jury awarded USAA $200 million. It's difficult to know for sure why Wells Fargo chose to fight. They may have believed in good faith that they had not infringed on USAA's patents. Since it is one of the bigger banks, unwinding the technology would have been complicated. 

On the other hand, a non-infringement finding would have changed the landscape for everyone. And in that case, if all the other banks used the same technology that Wells Fargo uses, there's a good argument to say that no one else would be infringing either. 

Instead, it blew up for everybody. It would be interesting to see if there was any behind the scenes collaboration between Wells Fargo and other big banks that received cease and desists, to come up with a joint defense. It would have benefitted everybody if that technology was found invalid, or it was found not to cover the products they were using.

Related: Software Patents: "That's Where All the Action Is" 

The Case for Negotiation

There is strong evidence to show that USAA was not in it to truly exclude others, although that's one of the rights they have with an issued patent.

If you've got a patent that legitimately covers such critical core technology to an industry, there's probably a result valuable to you that doesn't also offend everybody. So you might be able to request a nominal, reasonable royalty. This might have been the test case for everyone involved, including USAA. 

They may have decided they needed to prove the patent was valid and was infringed upon. 

I believe we can now expect everybody else to fall in line and avoid litigating this again. They are all using the same product. It might also be possible to design around it, and this is something some users may be attempting. But this may even drag out for a while with the other potential infringers, and that is a risky move given the size of the settlement against Wells Fargo. 

If my client were bank number two on USAA's list, I'd mitigate the risk and encourage them to negotiate.  

Leaving the result to a jury isn’t always worth the financial or business risk, as Wells Fargo discovered.


Trademarking College Athletes: Making Money While Bowling in College

Trademarking College Athletes: Making Money While Bowling in College

A historic rule change by the National College Athletic Association (NCAA) will create a brand-new playing field for student-athletes by giving them control over the profits they generate.  

Sound crazy?  Or is it brilliant? It's probably a little of both. And as the father of a college athlete, I’m more than a little intrigued.  I’m also concerned that it will encourage our students to focus less on their education, despite the underlying unfairness that the rule change is addressing in the current system.

In September 2019, California passed a law that effectively allows student-athletes to profit from endorsements and the use of their likeness. Over two dozen states are considering similar legislation, including most recently Colorado. This impending patchwork of regulations has put pressure on the NCAA to reconsider its prohibition on student-athletes profiting from their fame and notoriety. 

Although they have not yet announced concrete changes, the NCAA has signaled that it is beginning the process and will likely allow its student-athletes to own their IP and profit from it at some point in the near future. 

Part of the reasoning behind the prior prohibition on allowing athletes to profit from their fame was to emphasize the student part of the student-athlete.  The no-profit rule was designed to avoid the athlete entering into the professional realm while they are still pursuing a degree. The intent was that everything should be done so as to favor their education and athletics should provide an opportunity for that education, not an alternative to that education.

In the past, profits from a student athlete's likeness belonged to their school. For Division 1 athletes in high profile sports such as football and basketball, that translates to a lot of money and a full ride to the college for every athlete on that team. In fact there are only six sports where all the scholarships are full ride. These so-called head-count sports are football, men and women's basketball, and women's gymnastics, volleyball, and tennis. This change is an acknowledgement that these schools are profiting tremendously from these athletes. And even though high profile student-athletes receive scholarships, they don't come anywhere near what schools are making off of their athlete's fame.

But compare that to all of the other less prominent sports like track and field, where the number of scholarships available are much less and often divided among the many members of the team.  For instance, women’s Division 1 track and field programs are allowed to offer 18 scholarships per year. The men’s side only gets 12.6. Divide that by 4-5 years of athletes at the school at any given time and somewhere around 40-50 athletes on the squad (cross country is combined with the track and field athletes) and that works out to around 0.1 tuition scholarships per athlete if everyone on the team is given something.  The math gets worse for other sports. Bowling and Fencing only get 5 scholarships. Even in these sports though, the superstars are usually given much more of the pie so most of the athletes are given nothing in terms of an athletic scholarship, yet still need to commit 20-25 hours a week (if not more) to training, travel and competition. Now the whole, “athletics is an opportunity for an education” doesn’t make as much sense.  And the prospect of making a few extra bucks for all of that work, well that sounds pretty good . . .

College Athletic Scholarship Limits

Cereal Boxes and Scholarships

For athletes in high profile sports, this means they can engage in talent contracts with advertisers to appear on cereal boxes and video games and in magazine articles and social media. They can also accept endorsements and make money off of their own fame, just like any other athlete or celebrity might be able to do. For some of the more well-known student-athletes in high profile sports like football and basketball, this could potentially mean millions of dollars. And athletes who might otherwise be “one and done” with their college career, may just stay in school longer.

Related: What Tom Brady, LeBron James & Ohio State University Can Teach You About Advanced Trademark Laws

The new rules could impact athletes in less high-profile sports as well. My daughter is a Division One runner. She receives little in the way of an athletic scholarship, but she's still subject to all NCAA rules. She puts in that same amount of time for the benefit of the team and the team uses her likeness on its own social media accounts and recruiting collateral.  It would be great if she could have an Instagram account on the side that chronicles her running and her experiences as an athlete, while creating some revenue as well. The current rules prohibit all of that.

There are ingenious ways to monetize social media presence now that could help athletes like my daughter pay for their education. It doesn't have to be about an endorsement from Nike or Gatorade.

Keeping the Focus on Education

The NCAA rules were put in place originally to ensure that student-athletes focused on school, and there is an argument that allowing students to profit will reduce the focus on getting an education. 

This conversation is not necessarily about millions of dollars a year. It could be a few thousand dollars a year for clicks on Instagram or Snapchat. Students could become Instagram influencers just because of what they're doing in a minor sport. That could help pay for college, especially in sports where there's not a full-ride scholarship for every athlete. 

Related: Hashtags, Memes, and Emojis: The Landscape of #IP on Social Media

In the major sports like football and basketball, everyone is on a scholarship. Many other athletes in sports like running and swimming and fencing, however, get nothing. This rule change has significant potential to get these athletes through college debt free (or at least debt reduced) and get a better education, rather than it becoming a job and an alternative to school.

This is because the NCAA does a great job of keeping the focus on the student and not just the athlete. You can’t play if you’re not keeping up academically. There are tutors and organizations available to help ensure student success. Most athletes from lower tier sports are not going professional, so they have more of an incentive to stay in school. These rule changes could help these students with extra income but also help promote their sports. 

A Bit of Madness Before the Genius 

There are likely to be disputes, and as with any other IP owner new to the game, student-athletes will likely make mistakes. It may commercialize college sports more than they are now. And there are likely to be agents and other professionals involved in the process.  Maybe even an IP attorney. Hopefully my daughter knows where to find a good one . . . 

The new NCAA rules are not in place yet. However, the NCAA has essentially declared that they intend to let athletes do this across the three different levels of divisions in NCAA sports. It remains to be seen what they might put in place and how it is rolled out. 

There will probably be a little chaos while rules are tested and everything gets figured out. In the end though, this could be a great move that will help less prominent athletes pay for their schooling and provide an incentive to keep high profile athletes in school. 


A New Plaintiff on the Patent Front: The U.S. Government vs. Gilead

A New Plaintiff on the Patent Front: The U.S. Government vs. Gilead

President Trump has a reputation for unorthodox approaches. His administration's foray into patent enforcement is no exception.  

In November, the Trump Administration launched a lawsuit against pharmaceutical giant Gilead for violating the government's patent that covers the composition behind Truvada, an HIV "miracle" drug that has proved over 96% successful in preventing the onset of AIDs. 

There is nothing unusual about the case in the legal sense. The patent complaint generally offers up the same issues that any patent infringement case would. It was filed in a federal district court. All the stakes are the same.

It is a straightforward patent case except for one thing: the U.S. Government almost never asserts their patents. 

Of course, that was before. This is now.

Unusual Behavior

The Department of Health and Human Services, like many government departments, is heavily involved in research and development. All of these organizations employ inventors, engineers, and scientists who invent things. They normally file patent applications for these inventions, and as a result, the government owns numerous patents. The same applies to other governmental bodies as well. Universities, for example, have the same types of rights. 

Private companies use these government patents all the time, generally with a licensing fee. The unusual part about the Gilead case is that the negotiations for licensing this technology went sour. The government took the step, a very significant step, of enforcing their I.P. rights through a patent litigation lawsuit.

Any party who owns a patent has the discretion as to whether and when to file a lawsuit if someone is infringing upon their patents. None of this is out of the ordinary. What is unusual is that the government has decided to sue a private company. This isn't illegal, nor does it violate some unwritten code. The government just usually prefers not to assert its patents. 

A Perfect Storm 

The Trump administration has been vocal about its focus on prescription drug issues and prices, and they've also decided to focus on the HIV epidemic as well. This case came along and it was like the perfect storm. 

Related: The Politics of Intellectual Property

Gilead had initially marketed Truvada as a treatment for HIV infection. Still, government-sponsored research soon revealed that the drug was extremely effective at thwarting the onset of AIDs in HIV-infected patients. Gilead sold the drug as an AIDs prevention drug but refused to pay a licensing fee for using the government's prior patented technology. 

The government then took Gilead to court for patent infringement. 

The Aftermath

The fallout from the lawsuit could be far-reaching. For Gilead, millions in lost revenue is at stake. The company recently announced it had created a new, improved version of Truvada. Truvada is reaching the end of its protection cycle and will soon face generic competition.

The latest version of the drug could result in nearly twenty more years of protected status for the company and greatly enhance their profits. However, the government is claiming that the new drug also infringes on its patent. 

For people living with HIV, it could be a matter of life or death. The drug costs patients $20,000 per year or $50-$60 per day. This cost causes some patients to reduce their dosage and increase their risk and simply puts Truvada out of reach for many. If the government wins its suit, the drug could become far less costly and far more accessible to the vulnerable community in need of it most. 

It is unlikely that the government is looking for a cash payout from the lawsuit. Another $20,000 in royalties means nothing to a budget the size of the U.S. government. Instead, they may be hoping to force Gilead to reduce the prices of Truvada and the newer spinoff version of the drug. 

There's a massive amount of public pressure now on Gilead to do the right thing. And the lawsuit is generating a lot more attention than might typically be generated by a case like this.

And that is where it gets even more interesting from a socio-political perspective. The communities most affected by the AIDs crisis and who will most benefit if the government wins its fight against Gilead, are, let’s face it, unlikely also to be Trump supporters. His administration isn't getting much credit for this fight. 

In addition to the impact on HIV sufferers and Gilead, this lawsuit could have a huge impact on the entire pharmaceutical industry. There's a new sheriff in town. Pharmaceutical companies may not have as much leverage in patent negotiations as they are used to having. There may also be concern that the government is going to make a habit of this type of lawsuit. Anytime a ground-breaking therapy comes out, it could require companies to do more diligence regarding the rights held by the government. Or it might require a rethinking of the existing philosophy that we don’t need to worry when the government owns the patent, because it won't sue us. 

That's all changed.

Related: If Insulin is Patented, How Did Colorado Cap the Price?  

With the government acting more like a private company would, concerns won't be limited to the pharmaceutical industry. Government research and development is all over the place. So, it could literally be any other industry. Other industry giants are probably looking at this case and considering how wary of the U.S. government patents they should be now. 

The U.S. Government just became a powerful new player on the IP front.