Andrew Mirsky – Page 4 – Media Tech Law

Did the Richard Prince Fair Use Case Just Swallow Copyright Law? Add Some Blue to the Other Guy’s Photo, Call it Fair Use – Really?

Posted May 14, 2013 by Andrew Mirsky 0

Fair use update: I wrote last year about the fair use case in New York involving photographer Richard Prince, where a federal district court rejected Prince’s claim of fair use of photographer Patrick Cariou’s photos of Rastafarians.

Prince appealed his defeat and late last month won a reversal from the US Court of Appeals for the Second Circuit, in New York. The case may not be all that useful guidance for would-be artists on the limits of fair use – more on this below – but more of a legal scrum over what is (or is not) a “transformative” use of a previously copyrighted artwork. Or more particularly, how much a court should get involved in evaluating whether a later user’s re-use of an earlier artist’s work is “transformative” at all.

Employers Should Not Assume IP Assignments are Valid, and Employees Should Take Care to Protect Previously Created IP

Posted April 29, 2013 by Andrew Mirsky 0

An interesting IP assignment and employment case comes out of Wyoming. Yes, you heard that right, Wyoming. A nice summary of the issue was given by William Lenz and Jessica Rissman Cohen:

It is a common misconception that an employer automatically owns all rights to the patents invented by its employees. The general rule is that, in the absence of an agreement to the contrary, an invention and any patents covering that invention belong to the employee/inventor. (emphasis added)

And that’s why employers often require new employees to sign “Inventions Agreements”, or similar agreements under various names such as “Assignment of Intellectual Property” or “Proprietary Rights Ownership Agreement”, the purpose of all of which is the same: To remove any ambiguity as to ownership of intellectual property created during the employment relationship.

To be clear, this an intellectual property problem unique to patents. Copyrights, for example, are deemed automatically “work made for hire” when created under an employment relationship, even in the absence of an IP assignment agreement such as those mentioned above. Indeed, Section 101 of the Copyright Act expressly defines a “work made for hire” as “a work prepared by an employee within the scope of his or her employment. Although this being the law and lawyers being lawyers, there are cases challenging whether an employee is in fact an “employee”, and by extension challenging whether an individual’s work is a “work made for hire” in the absence of an assignment agreement. Community for Creative Non-Violence v. Reed, 490 U.S. 730 (1989).

Contract Offers: You Receive an Offer, and You Propose Changes to the Offer. What Then?

Posted April 3, 2013 by Andrew Mirsky 0

Here’s an interesting question (at least interesting to me): When does a response to an offer constitute a counteroffer? And if it does constitute a counteroffer, so what? Does that counteroffer make the agreement binding or is it simply a rejection of the original offer? In other words, is the counteroffer simply an offer for an entirely new contract?

This comes up frequently in employment situations, where for example a company might offer a severance package to an employee, and the employee might respond by asking for more money or other different terms. Obviously, if the employee outright rejects the employer’s offer, that’s an easy case where the offer is dead. But often that’s not what happens. Instead, what often happens is that the employer offers a month or so of severance compensation, and the employee responds by asking for health care coverage as well. Or asks for a letter of reference, or a mutual agreement of non-disparagement. Or, for another couple of months of pay.

Liability for Data Loss in the Cloud: Why No One Accepts Liability? Why Carve it Out?

Posted March 21, 2013 by Andrew Mirsky 0

Why is liability for data loss typically carved out or tightly limited in cloud service and IT outsourcing contracts? A common disclaimer in contracts for cloud services (and sometimes plain old IT outsourcing) runs like this:

You agree to take full responsibility for files and data transferred, and to maintain all appropriate backup of files and data stored on our servers. We will not be responsible for any data loss from your account. (From http://techtips.salon.com/liability-loss-data-under-hosting-agreement-2065.html (emphasis added))

What is the Liability from Data Loss?

First, what exactly is the liability – from data loss – that is being disclaimed? What is the risk? For that, we turn to Dan Eash writing in Salon’s “Tech Tips”:

Your site might be corrupted by hackers and spammers because your host didn’t properly secure the servers.
Your host might do weekly backups, but something goes wrong and you lose days of work.
You might have customers in a hosting reseller account who lose data because the host you bought the account from didn’t do regular backups.
You might even have an e-commerce site where new customers make daily purchases. If something goes wrong, how do you restore lost orders and customer details without a current backup?

I would add a 5th scenario: You just don’t know.

Copyright from Beyond the Grave: William Faulkner Sues … Woody Allen?

Posted March 1, 2013 by Andrew Mirsky 0

How can Woody Allen infringe the copyright of William Faulkner, who has been dead since 1962? Wouldn’t Faulkner’s works be in the public domain? Turns out … no, and the case illustrates many aspects of copyright law basics. Whether or not Allen’s 2011 film, Midnight in Paris, actually infringed Faulkner’s copyright.

Copyright has expired for all works published in the United States before 1923. 1923 is significant because in 1998, 75 years after 1923, Congress amended the Copyright Act (the “Sonny Bono Copyright Term Extension Act“) such that no new works would fall into the public domain until 2019. In 2019, public domain for works published in 1923 would kick in, with 1924 next, then 1925 and so on. In other words, as to all works from 1923 and later that had not already fallen in the public domain by 1998, copyrights were extended until at least 2019.

Cookies For Sale? How Websites Obtain Permission to Track and Sell Online User Data

Posted February 19, 2013 by Andrew Mirsky 0

Have you ever wondered how websites get your permission to “install” a cookie on your computer, and then sell the data associated with it? The simple answer… when you accept their terms and conditions, you give them the keys to your data.

There is a marketplace in this country for technology companies, advertisers, media firms and other enterprises to purchase consumers’ cookie “identifiers” and their associated information, allowing those organizations to know where you are, and what you are doing, online. Almost always, this information is used solely for tracking website analytics, sign-in permissions and for other advertising purposes. A cookie is “placed” onto a website user’s computer through the user’s browser, typically by publishers or their third party partners. The cookie then collects information – pages that you visit, sign-in information, profile information, what you click, what purchases you make, what you read, etc. When this data is sold (if it is sold), most of this information is not personally identifiable, but some of it can be.

In this blog, the first of a few on the topic of cookies, I will briefly explain the process of how and when websites get your permission to install cookies on user’s computers, and how they use the resulting data collected.

First of all, what is a cookie? Google has a two nice working definition that we can use:

(https://support.google.com/chrome/bin/answer.py?hl=en&answer=95647&topic=14666&ctx=topic)

SHORT: Guaranteed Payments for LLC Members and Partners

Posted December 12, 2012 by Andrew Mirsky 0

“Guaranteed Payments”: What are They?

Guaranteed payments are exactly that: They are payments that are “guaranteed”. By whom? Well, salary payments are technically “guaranteed” in the sense that there is a contractual obligation to pay a certain amount on a regular basis. But in the partnership context, including LLCs treated as partnerships for tax purposes, guaranteed payments are made to partners or other owners (“members” in the case of an LLC).

Guaranteed Payments: What Significance?

Partners form a partnership, go about building a product or service, and prepare to (hopefully) make money. (See Warren Buffett’s Rule No. 1 of business: “Never Lose Money. Rule No. 2: Never Forget Rule No. 1.”) To get there requires significant investment in time, goods, services and money. Along the way, people actually have to pay rent, buy health insurance, pay for gas and the electric bill, and occasionally eat. Maybe take a day off once in a while.

For partnerships and LLCs, guaranteed payments even-out the unpredictability of earning money from a small business. Put another way, guaranteed payments are profits of the business paid during the course of the business year rather than all at once at the end of the year. To be clear, though, guaranteed payments are not necessarily dependent on profits, and can be paid out the same as other business expenses to reduce profits, subject to certain IRS rules (discussed below). Rather, guaranteed payments may be determined based on forecasted profits, but are not dependent on profits:

SHORT: Restricted Stock: What Makes it “Restricted”?

Posted December 4, 2012 by Andrew Mirsky 0

What is Restricted Stock?

Restricted stock is stock (i.e. actual stock, not options) that is “substantially nonvested”, which in turn means that the stock is subject to – both – a “substantial risk of forfeiture” and the stock is non-transferable. Substantial risk of forfeiture means that the company has a right to repurchase the stock at less than fair market value if the grantee leaves the company or if, as Charles A. Wry, Jr. writes, the grantee “ceases to perform substantial services (or if there is otherwise a failure of a condition related to a purpose of the transfer).” Stock is non-transferable for as long as it may not be transferred free of a substantial risk of forfeiture.

What Significance If Stock is “Restricted”?

Internal Revenue Code Section 83 governs tax consequences of grants of stock and options by companies to employees and nonemployees. As the Journal of Accountancy noted earlier this year,

Under Sec. 83(a), property transferred to an employee as compensation for services is taxable to the employee on the earlier of the date the property is not subject to a substantial risk of forfeiture by the employee or the date it is transferable by the employee.

Thus, the significance of restricted stock is to defer recognition of income received by virtue of the grant of such stock. Once no longer deemed “restricted”, the grant of stock is then subject to income tax payment requirements. Once either of the 2 restricted stock conditions lapses, the stock is no longer “restricted”.

Who Can Receive Restricted Stock?

Employees and non-employees (including contractors, freelancers, vendors, etc.).

How is Restricted Stock Paid For? What Tax Implications – To Grantees? To the Company?

If the stock has value, then the grantee is required to pay fair market value for purchase of the stock (unlike options). Otherwise, the grant of the restricted stock will be deemed taxable compensation. 2 points about this:

(1) Startup Companies. With new companies with startup value, the stock may not yet have value, so the cost to purchase the stock may be negligible.

(2) When Taxable? Even if the grant of restricted stock is taxable compensation, the tax isn’t actually owed by the grantee until the vesting restrictions lapse. At that point, tax is owed as compensation at ordinary income rate. Ordinarily, the company gets a business compensation deduction when the restrictions lapse.

But even that comes with a caveat (Section 83(b) Election): The grantee may elect to recognize income immediately (rather than post-vesting and post-appreciation) at the time of receiving the stock grant, by filing a notice with the IRS of election under Section 83(b) of the Internal Revenue Code. The notice must be filed within 30 days of the grant of restricted stock. If a Section 83(b) election is made, then tax is payable in the tax year the grant is received, based on the fair market value of the underlying stock.

The Journal of Accountancy published earlier this year an excellent discussion of Section 83(b)’s election process, tax benefits and risks as they relate to restricted stock. The first obvious downside is the requirement to pay tax now, but that can be a gamble worth making if expectations are for substantial appreciation of the value of the underlying stock – and thus higher tax owed later. Of course, another downside of electing to pay the tax now is that the stock is still “restricted” for the full holding period and thus subject to forfeiture. So one could end up electing to pay the tax upon grant (rather than later) and still losing the stock through forfeiture with no refund of the tax.

If the grantee makes a Section 83(b) election, the company may take its compensation deduction immediately.

Major (Philosophical) Distinction between Restricted Stock and Options?

With restricted stock, the grantee becomes an actual shareholder immediately (although not for tax purposes unless the grantee makes a Section 83(b) election). The stock is actually issued to the grantee, subject to vesting and company repurchase rights. The grantee is thus a true “shareholder” with all rights of equity owners (voting rights, distribution rights, information rights, etc.).

Copyright of “Public Facts”: Craigslist v. PadMapper (updated)

Posted November 29, 2012 by Andrew Mirsky 0

Craigslist was meant for the common good, or as founder Craig Newmark puts it, “doing well by doing good”. At least, that has been its announced mission since it began as an email distribution among friends. Craigslist kept its mantra through its rise to Silicon Valley stardom, snubbing multi-million dollar buyout offers and fighting attempts to monetize the site along the way.

The physical layout of Craigslist hasn’t changed much over the years. Point your browser in its direction and, like an old friend, you’ll be greeted with the same underlined blue links you’ve known for years. Fans are legion, but so too are critics: Critics see stagnation in this comfort, some of whom have taken matters into their own hands through attempts at innovation. However, as some have already discovered, developing tools to work around (critics would say “enhance”) Craigslist’s simple functionality can invite legal response. Is an early darling of Silicon Valley showing a decidedly uglier side, or is Craigslist still simply looking out for the common good?

This past July, Craigslist filed a lawsuit in the US District Court, Northern District of California, alleging that apartment-hunting site PadMapper and its data exchange partner, 3Taps, unlawfully repurpose Craigslist postings and therefore undermine “the integrity of local Craigslist communities, ultimately harming both Craigslist and its users.” While the complaint parallels Craigslist’s “common good” business model, 3Taps CEO Greg Kidd sees it differently. “We believe Craigslist is acting like a copyright troll,” Kidd recently told AllThingsD. Kidd’s company provides PadMapper an API for data about Craigslist postings that 3Taps gathers via means it claims are not subject to Craigslist’s Terms of Use and that likewise do not violate Craigslist’s copyrights.

This isn’t the first time Craigslist has claimed such violations, including several now-shuttered earlier services built on top of Craigslist’s platform. In July 2010, Newmark took to Q&A site Quora to defend his company’s actions in a case similar to Padmapper’s, saying he did not take issue with sites that do not affect Craigslist’s servers. “Actually, we take issue with only services which consume a lot of bandwidth, it’s that simple,” Newmark wrote.

June 22: Craigslist sends Padmapper a cease and desist letter and blocks PadMapper from pulling CL ads (at least from doing so directly). According to CL’s complaint (filed July 20th), traffic to Padmapper immediately plummeted.

PadMapper claims not to siphon off Craigslist’s servers. Through its partnership with 3Taps, PadMapper accesses a database of Craigslist listings found and organized from search engines including Google and Bing.

July 9: Padmapper re-launches using 3Taps data.

July 20: Craigslist sues 3Taps and Padmapper. CL claims:

Copyright infringement (for the CL site and for CL listings)
Contributory copyright infringement (against 3Taps)
Breach of contract (TOS)
Trademark infringement
Trademark dilution
Unfair trade practices

Perhaps that’s why Craigslist is now requiring users to “expressly grant and assign to Craigslist all rights” to enforce the copyright. Other sites like Yelp! and Facebook only require a non-exclusive license to their users’ content. But even if courts interpret this as a legally binding transfer of copyright to Craigslist, facts, like those in classified listings, often cannot be copyrighted. Therefore, it is possible that details such as an apartment’s price, address and number of bedrooms will not be protected.

This is of course Greg Kidd’s argument. “No Terms of Use can ride roughshod over the fact that there is no copyright in facts,” Kidd says. “Padmapper’s use of exchange posting is not infringing use. It is fair use or free use … of public facts.” According to Kidd, PadMapper could just be the beginning to what could be, “a whole class of use case conflicts if this stands.” Via this interpretation, as Kidd sees it, “a [Craigslist] posting retweeted via Twitter is going to be just as problematic as one through PadMapper.”

This argument inelegantly ignores 2 obstacles under contract and copyright.

Contract

First contract law, by virtue of the binding nature of Craiglist’s TOU as a contract. So, as Craigslist notes in its complaint:

[3Taps and Padmapper] regularly accessed the CL website and affirmatively accepted and agreed to the [TOU] to, among other things, test, design, and/or use the software that allows Defendants to provide their services. Likewise … Defendants regularly accessed the CL website with knowledge of the [TOU] and its prohibitions against copying, aggregating, displaying, distributing, performing and derivative use of the CL website and any content posted on the CL website … and regularly access the CL website and copied, aggregated, displayed, distributed, and made derivative use of the CL website and the content posted therein.

3Taps disagrees: 3Taps cannot be bound by Craigslist’s TOU, since 3Taps never touches Craigslist’s servers to obtain the data it provides via its API. Says Kidd:

The [CL] data in question is indexed by public search engines and is made available in the public domain. One does not have to belong to or even go to Craigslist to find this information on the description, price, and time of availability of a posting. The information is freely available in the public domain and is a fundamental component of transparency of supply and demand and price discovery that are the foundation of free markets.

Craigslist then says that 3Taps’ argument about not directly accessing data from Craigslist is absurd:

3Taps copies all of craigslist’s content – including time stamps and unique craigslist user ID numbers – and makes it available to third parties for use in competing websites or, for whatever other purpose they wish. On information and belief, 3Taps is obtaining this content by improperly accessing craigslist’s website and “scraping” content.

Copyright – Facts and Facts

Kidd’s “public domain” argument – challenging Craigslist’s private ownership of public “facts” – has its own problems. That’s because there are public facts and … there are public facts. For starters, what makes an apartment listing a public fact? Arguably, an apartment listing is a private piece of information uniquely created and formatted by a landlord and Craigslist: How listed, what information is listed, what pricing, etc. Perhaps not the most highly creative of copyright subject matters protected by “original works of authorship fixed in any tangible medium of expression” US Copyright Act (Title 17 US Code), but nonetheless protected by copyright.

No, Craigslist may not be able to protect names and addresses, but it may be able to protect Craigslist’s particular presentation of those names and addresses. And Craigslist makes this very point in its complaint, claiming that 3Taps “displays craigslist’s copyrighted content in virtually identical visual fashion to the manner in which they appear on craigslist.”

August 1: After filing its July suit, Craigslist amends its TOU, telling users they were not permitted to cross-post their sales items anywhere else on the internet:

Clicking ‘continue’ confirms that Craigslist is the exclusive licensee of this content, with the exclusive right to enforce copyrights against anyone copying, republishing, distributing, or preparing derivative works without its consent.

August 5: Craigslist instructs all general search engines to stop indexing CL postings.

August 9: CL amends its TOU – again – to remove “exclusive license” language from its TOS:

Second, Craigslist may be able to rely on copyright arguments similar to those historically made by mapmakers and telephone book publishers, where the compilation of otherwise public facts is itself copyrightable. (See, for example, Feist Publications, Inc. v. Rural Telephone Service Co., 499 US 340 (1991).) This argument, where the unique presentation, design, layout, or formatting give a compiler a copyright edge, still gives scant protection to the component parts, but it can give viability to a legal claim of misappropriation.

Other Arguments – Trademark and Unfair Competition

Craigslist makes other legal arguments, including most notably trademark infringement and dilution claims and California state law unfair competition claims. These are subjects beyond the scope of the present discussion, although they do seem to raise the kinds of issues that the likes of Rockefeller Plaza in New York City deals with: Once a year, every year, the plaza is closed to public access in order to allow its owners to continue to assert their private ownership. Perhaps Craigslist, too, feels some periodic necessity to remind its users that freedom of internet use is not free.

September 24: 3Taps files answer and counterclaim against CL. Counterclaims:

Antitrust
Unfair competition
Interference with economic advantage

From 3Taps antitrust counterclaim complaint:

3taps is not alleging that craigslist acquired its widespread monopoly power improperly – far from it; craigslist should be applauded for bringing online classifieds into the modern age and achieving its initial dominance over various U.S. markets for the “onboarding” (i.e., the process of inputting and uploading factual content on the internet) of user-generated classified ads by those seeking a personal exchange transaction for various goods and services, including apartment rentals, jobs, personal services, general goods, and other sales.

What 3taps is complaining about is how craigslist has maintained (and continues to maintain) its monopoly power in these three related markets. Certainly, craigslist has not maintained this power by competing on the merits. Indeed, for years, craigslist has espoused the classic principles of a monopolist that believed it did not need to compete: a “strategy” of “unbranding,” “demonetizing,” and “uncompeting” —the epitome of a lethargic monopolist. And why not? As an unchallenged monopolist across these various markets, craigslist has generated revenues somewhere between $100-$300 million per year, and that’s without sinking any significant costs into research and development or innovation.

September 24: Craigslist launches its own mapping capability.

Bruce Fryer, an intern with Mirsky & Company, PLLC, contributed to this post.

Update: DC’s Qualified High Tech Company (QHTC) Changes: Nice Benefits to LivingSocial

Posted November 9, 2012 by Andrew Mirsky 0

My colleague Kate Tummarello wrote last year about the District of Columbia’s “New E-Conomy Transformation Act of 2000”, a 2001 law which set up tax benefits encouraging technological innovation. The Act granted tax benefits to “Qualified High Technology Companies” (QHTCs), certain DC-based, for-profit businesses that make most of their revenue from the sale of products and services related to information technology.

Among other incentives, the Act granted to QHTCs tax credits for wages and costs of retraining qualified disadvantaged employees, credits for wages to qualified non-“disadvantaged” employees, exemptions from DC sales and use tax and reduction of DC’s corporate franchise tax rate, and exemption for 5 years from DC’s corporate franchise tax.

In April 2012, DC Mayor Gray proposed expansions of the QHTC program, in his “Social E-Commerce Job Creation Incentive Act of 2012.” The 2012 legislation, enacted in part and still pending in part, would accomplish 3 major things:

Shorts: TheDirty.com Loses CDA Section 230 Protection

Posted November 1, 2012 by Andrew Mirsky 0

Earlier this year a federal district court in Kentucky rejected the efforts of TheDirty.com to invoke Section 230 of the Communications Decency Act (CDA) to dismiss a defamation lawsuit filed against it by a former Cincinnati Bengals cheerleader. The decision is significant because it is an unusual failure of a website populated almost entirely by user-generated and user-generated content to be able to rely on the protections of Section 230 of (CDA).

TheDirty.com is a gossip website, described this way by Eric Robinson on the Citizen Media Law Blog: “In addition to a bit of celebrity gossip and paparazzi-type pictures, the site also invites anyone to post pictures – often revealing, embarrassing, or insulting – of others for comment by users and, sometimes, the site’s proprietor.”

Section 230 of the CDA states that “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” In plain English, Section 230 has been understood – and applied – to mean that most prominent websites cannot be held liable for the defamatory actions of their users, usually regardless of the complacency in and encouragement of those actions.

There have been exceptions, most notably 2 cases cited by the District Court in this case in support of its decision: Fair Housing Council of San Fernando Valley v. Roommates.com and Federal Trade Commission v. Accusearch. The Roommates.com case involved an apartment search site which was denied Section 230 protection because of its deemed proactive participation in the potential discriminatory activity through providing structured search criteria which allowed users to search by race. Accusearch involved a website that sold metadata about individuals’ telephone calls, which information could not be legally sold in violation of various federal laws. The information was still out there, however, and various third parties continued to peddle it, and Accusearch’s site facilitated that. The problem, as Eric Goldman described it, was this:

Abika.com [Accusearch’s subsidiary] apparently was structured as a classic retailer in that it advertised the third party reports, processed customer payments, and delivered the subsequent reports to customers as if the reports were its own (Abika.com even stripped out the third party vendor’s identifying information). So the veneer of Abika.com simply being a passive intermediary between customers and vendors may have been overwhelmed by Abika’s active and overwhelming presence in the transaction.

With TheDirty.com, that problem was analogized to the one of an active solicitor of defamatory content, even if the interactive computer service” provider was not itself the originator of the offending content:

This Court holds that, under the principles of Roommates.com and Accusearch, the defendants here, through the activities of defendant Richie, “specifically encourage development of what is offensive about the content” of “the dirty.com” web site.

An appeal of the decision by TheDirty.com to the 6th Circuit Court of Appeals was rejected, although not on substantive grounds but rather procedurally due to “fail[ure] to demonstrate how a substantial public interest will be imperiled by delaying [the] appeal until after the district court enters a final order.” Jones v. Dirty World Entertainment Recordings, Inc., No. 12-5133 (6th Cir. May 9, 2012).

Please Don’t Take My Privacy (Why Would Anybody Really Want It?)

Posted October 22, 2012 by Andrew Mirsky 0

Legal issues with privacy in social media stem from the nature of social media – an inherently communicative and open medium. A cliché is that in social media there is no expectation of privacy because the very idea of privacy is inconsistent with a “social” medium. Scott McNealy from Sun Microsystems reportedly made this point with his famous aphorism of “You have zero privacy anyway. Get over it.”

But in evidence law, there’s a rule barring assumption of facts not in evidence. In social media, by analogy: Where was it proven that we cannot find privacy in a new communications medium, even one as public as the internet and social media?

Let’s go back to basic principles. Everyone talks about how privacy has to “adapt” to a new technological paradigm. I agree that technology and custom require adaptation by a legal system steeped in common law principles with foundations from the 13th century. But I do not agree that the legal system isn’t up to the task.

All you really need to do is take a wider look at the law.

Privacy writers talk about the law of appropriation in privacy. The law of appropriation varies from state to state, though it is a fairly established aspect of privacy law.

MediaTech Law

By MIRSKY & COMPANY, PLLC