Category: lawyering

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Bar-iversary Thoughts

Tomorrow is my Bar-iversary; that is, it’s the anniversary of my admittance to the California Bar. The day I took my oaths (plural—my school had its own extra one) and simultaneously was admitted to the Southern and Central Federal Districts for the state of California. The day I completed my dream of becoming a lawyer. 

And the day I had to start really being one.
Yikes!

Actually, it hasn’t been anything like I feared. I didn’t have to join some big firm and sell my soul doing god-only-knows-what law to pay my rent, but rather got to practice exactly the law I wanted to right off. I’ll never be able to thank my mentor, Carolyn Wright, enough for that. Even better, I got to represent wonderful creative clients, several of whom are still clients and, now, real friends. 

I like to think that I was a good lawyer right out of the gate, and it’s likely I was, but the reality is that I am a better lawyer now than I was then. No surprise—experience is a great teacher (so is my mentor).

My only regret is that I haven’t had the time to do the scholarly work I would like. Of course, writing papers doesn’t pay and I’m such a research geek that if I get started on that path, I’m going to starve (ha!). Still, I do keep up on the law both on a practical as well as a theoretical level, although more weighted to the first as of late. 

Relatedly, litigation is a time suck. 

Anyway, every year at this time I look back on that moment when I raised my right hand and swore to support the Constitutions of the United States and of the State of California and to be the best lawyer I could be. I think about what a bright-line marker it was in my life and what an achievement it was personally. Moreover, I think about the time since then, being in practice and actually lawyering. As a lawyer, since taking that oath, my achievements have been in the service of my clients, and most happily so. This is what lawyering should be, in my opinion: a service profession. It is definitely how I run my practice and how I intend to lawyer, for as long as I hold the license.

Thank you to each of you who have trusted me with your legal needs over the years. You have given me the career I always wanted and I am honored to serve you. Hopefully I will get to do so for many years to come. 

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Do Better

I feel like humans have lost something fundamental and I blame the internet, particularly social media, for much of it. What has been lost? Decency; thinking of the greater good; putting others first. Doing right, even if it doesn’t directly benefit ourselves. Trying to be better.

For example, it used to be that we were shocked when a pornographic video of a famous person was discovered. We were embarrassed for the (usually) young person who was thus exploited and often that person would fade from public life. Now, people are making porns just to try to get famous.

People (even politicians!) used to have honor, now far too many will lie without a second thought and will sell their votes to the highest bidder, even if it hurts others.

We have become far too greedy and selfish. A quiet proposal is rare–now it has to be instagrammed and scripted and shown off. A first dance can’t just be a moment between new spouses–it must be a choreographed and recorded event. A simple ring as a gesture of the promise is now rejected because it must be better (read: bigger) than our friends’ rings. How sad is that? We can’t just be happy for the happiness of others without comparing ours to theirs (and making sure we “win”).

Why am I bringing this up here? Because it affects your business, and mine. I was reminded of this today when I saw that Unsplash has a photography contest and that Medium is a part of it. I tweeted that it was a terrible idea for photographers, because Unsplash’s terms generally are terrible and even worse for the contest. I warned photographers to stay away and that it hurt all photographers by devaluing photography. Sadly, of course, someone had to tell me how it was good for him so I should essentially shut up.

Sigh.

There is right and wrong. Sometimes, what we want we could get by doing wrong; however, if we choose to do that, we are very likely doing much more harm than we realize, including (as in the case of Unsplash and similar) hurting ourselves in the long run.

I could make more money (a lot more) if I took any case brought to me, asserted claims that were questionably colorable (meaning maybe or maybe not supported by the facts and the law), or defended infringers. I could also work more slowly when I’m billing hourly. I could do all that and have fewer financial worries and drive my dream classic Porsche rather than my significantly cheaper (but much loved!) Miata, but I couldn’t look myself in the mirror.

Why do I make these choices? Because I became a lawyer to help people and, yes, to do good. Yes, everyone is entitled to a defense, but to me representing infringers would be inherently a conflict with the work I do for my copyright creator/owner clients. So, I say “no.” Also, I will never assert a claim for a client if I do not sincerely believe it is legitimate. And I know how hard people work for their money so wouldn’t it be ethically wrong to try and squeeze more out of any hourly client by working more slowly? Yup.

Would I like to make more money? Sure, of course. But not if it requires lowering my ethics and standards.

We’ve been pulled into the muck of trying to be famous rather than trying to do right. We’re trying to be more interesting on social media, rather than quietly making a positive difference in the world.

As we head into the holiday season, I suggest we all take a moment to think about our choices and consider doing better.

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Reminders

I’ve had a couple of cases (or, I should say, cases I had to say “no” to) recently that make me think creatives could use a few reminders.

First, on the bad idea of trying to make your infringement matter into a breach of contract; second, some Don’ts to remember.

 

In other news and speaking of reminders, yes, I’ve been terrible about posting lately. Mea culpa. I have had some cases in litigation that are time-sucks on top of my usual case load, plus I just experienced my first summer as a parental-ish figure (to my BF’s lovely home-from-college-for-the-summer daughter), but, really, I owe you all a better frequency of posts. I’ll try to do better. 🙂

Finally, my office partner Ruth Bader Catzburg just celebrated her second birthday. She is as small and feisty as her namesake.

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Be an Artist

Someone asked me recently why I don’t blog about every copyright case opinion that hits Pacer (Pacer is where all federal cases are listed, fyi). I’ll tell you why: because I need to know all the details about those cases, you don’t. My job is to know the law, yours is to make art. Let’s not confuse these things.

I try to write this blog for artists, especially those who are or may be my clients, but for all creatives generally. That doesn’t mean I’m talking down to my readers, but it does mean I don’t write on the same topics or in the same depth or in the same language as I would if I was writing for my colleagues. Like all professions or trades, lawyers have their own jargon and we have interest in weird (and often weirdly important) things that our clients really should just not bother to think about.

It’s one thing for an artist to stay informed generally on the law as regards her/his/their business, but it’s a whole ‘nother thing to read law blogs and case opinions or to rely on non-lawyers for opinions on legal things. I encourage non-lawyers do the first but highly discourage the others. In fact, I’d go so far as to tell artists to let go of trying to understand business-related law (including copyright) at any level beyond the same way they understand traffic laws. I mean, an artist should know the law enough to know to do this, not that, and basically leave the rest to the lawyers (and to ask the lawyers, privately, for those answers).

Some of you may get your hackles up at that, but I’m not being demeaning here. Rather, just as I should not act as if I know as much as a professional artist about art, although I can do some creative things, artists shouldn’t try to be their own legal advisors (much less lawyers[1]). Humans simply do not know everything and we are (without great study) incapable of knowing multiple professions in equal, or even sufficient, depth.

The internet has done a great disservice to us in this. It’s turned us into believing we can and do know and understand much more than we really do. In reality, it’s shallow information overload. We get exposed to things we never would have before this beast[2]— but the knowledge we actually acquire is at best at a thin depth.

By “sharing” all sorts of data, much of which is highly suspect (but let’s not even go there now), average folk suddenly think they know as much as anyone about almost everything. This can seem to work for us in the short term or on occasion, but it is a dangerous seductress.

For example, my retired-graphic-designer brother recently fixed my father’s air conditioner, thanks to a tutorial on YouTube. Great, except my brother doesn’t really know anything in sufficient depth about how wiring and electricity, not to mention an air conditioner, actually work; so maybe his fix will work in the long run or maybe he’s created a fire hazard. The sad part is he (like all of us) can’t look for what he doesn’t know, and he doesn’t know a lot since he is not a trained air conditioning repairman. But he has a very strong illusion of knowing, the illusion of full competence, at least insofar as this one repair[3].

When I had my last physical, I asked my doc about whether the internet is making his job harder. He said it definitely had. He gets more people coming in thinking they not only know what is wrong, but what the best cure would be, and basically get frustrated that he wants to examine them and instead ask him just to fill out the prescription. Or, they have ignored symptoms until something has become critical because they read online that if they just do a “cleanse” or something, it will pass.

I told him I felt his pain. I get potential clients who tell me what they think the law is, all the time. It sucks to have to say “no” or “you’re wrong” to these people, when what I want to do is help.

Worse yet, too often I read industry online publications that get the law completely wrong and it is clear that they have read something legal that they simply didn’t grok. Perfect example: a major professional photographer’s organization (or perhaps 2) published that photographers could register a copyright anytime, just as long as it was within one month of finding an infringement they’d be able to get statutory damages for that infringement. That is totally NOT the law–it is a mis-reading of the statute and has to do with an inapplicable “pre-registration” provision of the Copyright Act. Still, the bad information is out there and being promoted by what are supposed to be reputable sources.

Now, I get that one of the reasons that people look to the internet to get answers is because usually that information is free. In the case of the law, people think it’s going to cost them a bucket of greenbacks to get answers from an actual lawyer (and for BigLaw lawyers, that is usually the case). Usually, it won’t be that expensive and, more importantly you’ll get the right answer for your particular situation. Even if you spent, say, $350 for an hour of an attorney’s time and expertise, it is very likely you would, in the long run, save much more than that with the personalized and precise advice you would get.

So, here’s my general advice: if you’re an artist, be an artist and let go of trying to do everything. Honor your profession by honoring others, including not trying to get it all for free. Instead of taking a couple of hours to look something up on the internet, and vetting it on several sources, hire a pro and use your freed-up time to make better/more of your art. You’ll end up making more money and your over-stimulated brain will thank you.

As for me, I’ll keep writing about the law and your art and your business, but you’re not going to get in-depth legal analyses (usually) from me here. I don’t want you to get bogged down in the details, like specific code sections and treatises–I want you to know, rather and for example, that you should register your copyrights as soon as possible or not sign a Work For Hire unless you want to give away your copyright.

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[1]By the way, this applies to any profession that isn’t your primary one–you are not a doctor, or an accountant, or a farmer, or economist, etc.

[2]Just think about TV–trying to decide what to watch now is an exhausting process because of all the choices. There is just too much to choose from–how do we know what is best?

[3]He’s going to hate me for using this as an example, but it’s kind of a perfect example. My brother is brilliant in many ways; while it is entirely possible this fix is perfect, there is simply no way for any of us to know because we are not a/c pros.

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What To Do, part 2

So you’ve found a probable infringement and you’ve gathered all the evidence you can (see previous post), now what? You have choices[1]: do nothing, contact the infringer yourself and send an invoice, contact the infringer yourself and send a cease and desist/demand letter, send a DMCA takedown notice to the infringer’s ISP[2], or contact a lawyer.

Of course, I’m going to say “contact a lawyer” is your best option (um, duh!), but I’d like to discuss the other options a bit here, too.

First, I think that doing nothing is not a good option, with one exception: if you are so utterly risk-averse that you can’t bear the slightest chance that you may end up in court over the illegal use of your work, then sit on your hands and seethe, but do nothing. That is, if you do anything else like the options described below, you do run a small (and usually is a very, very small) risk that the other side will file suit against you for declaratory judgment that it did not infringe. This is really rare because copyright infringement is strict liability and so, unless you missed something like a license granted to the infringer, it’s a loser case for the infringer. I had this happen once–the infringer tried to use it to scare off my client. Didn’t work and, not too much later, we negotiated a settlement that my client was quite happy with (plus, my client saved the cost of filing the suit). Still, if you don’t want to face the generally tiny possibility of going to federal court, do nothing.  Otherwise, read on.

Some people suggest sending an invoice to infringers, but I don’t encourage that. It’s likely you will undervalue the infringement and maybe even miss additional claims that will add value to the overall matter, so you sell yourself short. Worse yet, an invoice sent will virtually neverresult in you getting a check for your invoice’s full amount. At best, the invoice will be a start to a negotiation; but, if you’ve already undervalued the matter and then you end up at, say, 50% of that, you’re bleeding money. You also set your price without knowing all the facts and that could bite you if you end up in court later. Nope, invoicing is not a wise idea in most cases[3].

Similarly, I generally don’t encourage creatives to send cease and desist (aka demand) letters of their own drafting because they usually (of course, accidentally) screw them up because of language errors as well as under-valuation. If you don’t know the law, you may  (as mentioned above) miss legitimate claims that add to the value of the matter and you could end up offering to release a $25,000 claim for $5000.

As for language, there are two main areas of concern: misusing legalese and slipping from legitimate demand into extortion. The latter, first: “Pay me $10,000 or I’m going to go public with what a thief you are!” is going to get you in trouble but a demand for $10,000 to settle the claims is not inappropriate if the facts support it.  The line isn’t so obvious sometimes and, since anti-copyright folk scream Extortion! at any demand, you want to be sure you don’t actually cross that line.

Using legal language incorrectly happens often and often it is by people who are very smart but, not being attorneys, they have no clue that using certain words means something different in a legal context (like published in copyright law, for one example). To paraphrase Inego Montoya, “I do not think those words mean what you think…” and that can get you in trouble when the other side lawyers up.

Another error in artist-drafted letters is you can be a doormat: “I’m sorry, I’m sure you didn’t mean to, but you used my work. Would you be willing to pay me $100?” is differently but arguably just as bad as accidentally extorting the infringer. You’re undervaluing the infringement and groveling…ick! Overall, unless you have a form letter drafted by an attorney and you are very confident in evaluating your cases for all the potential claims and their damages, I encourage you to refrain from drafting and sending letters yourself.

Moving on… sending a DMCA takedown notice to the ISP is a tool you can wield, and it will probably get the infringement stopped, but it does nothing about getting you the money you deserve for the illegal exploitation of your work. Usually, I think it is better to notify the actual infringer first (as a part of a demand letter) and then, if it doesn’t remove the work, send the takedown notice. This can be a strategic choice that is worth evaluating with an attorney too as, for example, continued use after notice can be a factor for willfulness. Also, you do want to be sure to send a technically proper notice, if you choose to send one at all.

That brings us to the final option: contacting an attorney. A competent copyright attorney will avoid the issues described above, will evaluate your claim(s) and your opposition’s potential defenses, and will advise you on your best course of action. We have to–there are rules (actually, laws[4]) that demand it of us. So, as opposed to companies[5] that claim to help you with your registrations or infringements, attorneys, once hired, must put your best interests first, including above our own. It’s part of why we have to be licensed–to provide competent counsel to our clients.

While we attorneys can’t take every case that is brought to us, we are required to hold your information confidential even if we don’t take the case so it is worth talking with one of us before you do anything.

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[1]As long as it is still less than three years since you discovered the infringement (in most cases/places), you have options. The statute of limitations is 3 years for infringement and usually that clock starts ticking when you discover the infringement. Don’t wait until the last minute.

[2]DMCA takedown notices do not go to infringers but rather to the ISPs that host the infringement. For example, if I were an infringer of the post office photo I showed in my last post, the author of the photo would send the notice to my host, not me. It gets the work removed and gives the host/ISP a legal protection (safe harbor) against being sued for infringement, but the author could (and arguably should) still go after me as the actual infringer.

[3]An exception may be with an existing client who has used work beyond the scope of a license; then, for a continuing-business-relationship reason, an invoice may be wise.

[4]See, e.g., Cal. Bus. & Prof. Code §6068, including sub-section (g) that says an attorney must not “encourage either the commencement or the continuance of an action or proceeding from any corrupt motive of passion or interest.”

[5]Companies are required to make as much money as they can for their shareholders, first and foremost.

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Don’t Lash Out

I heard about a case recently that made me think about all the people, especially the small artists, who get angry when they find a (potential) infringement and go onto social media to rip the, um, lets just call em badguys. Short answer is, even though you think it will help or at least make you feel better, youd be wrong. In fact, you could be inviting a lawsuit filed by the badguys.

Heres the very generalized skinny on the case (because really, unless you are a geeky lawyer like me, it is a dull read). One business (a kind of review site) publicly published that another business was a copyright infringer and that it had adult movies on its site. That arguably hurt the second business, so that onesued the first for various things that roughly amount to the business version of defamation. The court threw out that suit, under the California Anti-SLAPP law, which which exists so that people cant use the judicial system as a way to silence legitimate speech.

Okay, you may be thinking, the allegedly name-calling business didnt lose so whats the big deal? The big deal was that it wasnt a slam-dunk. Proving that the publication of something (potentially) defamatory was protected speech and that the lawsuit had to be dismissed under Anti-SLAPP wasnt easy. Similar cases have not been dismissed and you don’t want to be one of those.

Lots of people think they have a First Amendment right to say[1] whatever they want about whomever they want. Trouble is, that isnt so. There are limits. You cant defame someone (or a business), for example. And if someone sues you in California[2] for what you said, then, to get the case kicked out, you are going to have to prove that your speech was (1) an exercise of your First Amendment free speech right and (2) that it was made in connection with a public issue or an issue of public interest. Thats a pretty high bar to get over. In fact, youre going to have to show that the subject person (business) was famous/a pubic figure, or that the subject matter of the speech is of great interest to enoughpeople not affected by the case, or that the topic was of general widespread interest. Just because you and your drinking buddies think something is important isnt going to cut it.

After you, as the defendant in the original law suit, prove all that, then the other side (plaintiff in the defamation suit) gets a chance at a save–if it proves that it would probably win, then, even after you proved the above, the case will not be dismissed. See, not so easy.

So, going back to anaggrieved artist who tweets about the evil bastard Joe Doe who stole my illustration and then, worse, follows up with No one should shop at his store because he is a lying thief! well, that artist may be facing a lawsuit for those tweets and one s/he may not win. Think about that second part of the Anti-SLAPP–the potential save for the plaintiff–maybe Joe Doe had an implied license or a legitimate fair use defense that you, as a non-lawyer, didnt know would gut your infringement claim.

Better to sit on your tweeting/social media hands than run the risk of getting sued. Even if you did win, youd have to go through the unpleasantness of litigation. Instead, register your copyrights regularly and, if something gets used without your permission, talk to an attorney about your infringement claim and what your options are.

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[1] And by say I mean speech made in any medium–wrote, recorded, painted, shouted in a public space, etc.

[2] Some other states have similar laws.

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Forming an Entity: The Other Stuff

I wrote recently on some of the copyright considerations related to running your business as an entity. Today, I want to address some of the other things you have to do whenyou decide to form an entity. First, a quick reminder that I am speaking generally here and with California law in mind: each state has its own laws so your mileage may vary, so to speak.

Most creative pros start their businesses as sole proprietorships. As Ive explained before, there are no formalities required to do that, outside of maybe having to register a fictitious business name (DBA) with your county or city. Forming an entity requires filing various papers with the state, but after that is done, are you done? Not by a long shot.

Assuming youve been running your business like a business, you may have things like business banking accounts, credit cards, or insurance policies. When you have a new entity, you are going to have to convert all of these to the new entity. In some (probably most) cases, youre going to have to close existing accounts and open new ones. Youll also have to get new checks printed.

Its particularly important to talk to your insurance provider to get your policies worked out. You dont want to get caught with those proverbial pants down. This may also mean your auto policy, dont forget.

Speaking of your car, did your CPA tell you it would be best to have your company own your car? Then, youll have to transfer it (and yes, we all love the DMV, but do it). What about your other assets? Computers? Cameras? Furniture, etc.? Even if you own these things outright, it would be best to document the transfer of the assets to your new entity. Talk to your CPA before doing any of this to make sure you dont do anything to mess up her/his careful tax planning for you.

You also need to think about your IP licenses. No, not your licenses out (those you sell to other people to permit them to use your work–although you will need to update those moving forward) but the one ones you purchased for things like the software that you use in your business. Some of those will be non-transferable and you will have to purchase new licenses. Dont get angry about it and dont skip this–especially if you issue non-transferable licenses, you should understand this.

You may also have issues with any office/studio space you lease (landlords often will be fine with updating a lease) and definitely youll need to set up new payroll accounts if you have employees, including getting a new EIN number for the entity not to mention new workers comp., etc. Also, if you have a business license with the city (or county) you’ll have to get a new one for the new entity, too.

Finally, you need to learn how to sign documents properly for your entity. You may no longer sign justBetty Smith, but rather must sign as Betty Smith, Managing Member, Smith Creative, LLC, a California LLC, if you formed an LLC; or, if you did the corporation thing, Betty Smith, President, Smith Creative, Inc., a California Corporation. Yes, it’s a pain in the butt but if you don’t sign properly you can personally be liable for things. No, I’m not kidding.

Relatedly, you will need to update all your business paperwork to reflect the new entity–like your licenses you offer clientsand your contracts/estimates/invoices/model releases/etc. Also be careful in the contracts you are offered: make sure they are naming the entity and not you as the party and that there are no “Personal Guarantees” or other clauses that effectively remove the protections of the entity.

Your CPA should provide you with a lot of guidance on the financially related changes you needs to make. An attorney can help you with the rest.

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One Year

Yesterday, July 1, was the first anniversary of Burns the Attorney.
Ive been incredibly lucky. Its been a really good first year.

I have wonderful clients, both new and old, who honor me with their trust. I take very seriously their reliance on me to do my best for them because, in very important ways, it means I help them focus on being creative professionals. Think about it: which would an artist rather do, make new art or chase down people who have used existing art without permission or payment?

That is most of what I do, helping artists with copyright infringement matters. But I do other legal work as well, of course. In the past year, Ive helped clients with contracts and releases, discussed business formations and the effects of community property on clients copyrights, and, well, lots of other things too.

Not everyone gets the opportunity to do what she really loves. I do, and I am so grateful for it.

I want to thank all of my clients and, in advance, all of those who will call on me to help in the future. I intend to be here for some time, serving artists of all sorts.

If you ever need me, you know where to find me.

And thanks.

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WMFH Affects More Than Copyrights

Creative pros have been understandably angry at the words work made for hire (WMFH) for some time. I mean, clients try to sneak that into contracts all the time and it means you, creative pro, have to carefully watch out for it, lest you sign that bad boy and end up making the client the author and owner of what should be your copyrights. So sure, those words tend to raise a creative pros hackles.

But this post isn’t about how your copyrights are affected with a WMFH contract; it’s about other effects of such an agreement.

Now, before I go any further, I’m only talking about California law here. If you are in another state, the rules (probably) aren’t the same. That being said, if you ever work in California or for a company in California, you might want to pay attention.

There is another side to WMFH agreements in the Golden State. If you are a sole proprietor business (that is, not an entity of some kind, like a corporation or an LLC), and someone hires you as an independent contractor, and the signed contract includes a WMFH clause, then you are statutorily an employee and the employer has to follow the laws regarding unemployment, disability, and workers compensation insurance as if you were a regular employee. According to the California Labor Code[1], if a person is hired to create a commissioned work and the parties agree in a signed writing that the work shall be considered a work made for hire, as defined in Section 101 of Title 17 of the United States Code, then, boom, the hired person is a statutory employee. Moreover, the California Unemployment Insurance Code[2] says almost exactly the same thing. Basically, every code that deals with unemployment, disability (including paid family leave) and workers comp has something about WMFH like this.

Anyway, failure by the employer to follow the rules means the employer can be hit with substantial fines and even jail time! Yikes!

“So what?” you may be thinking, “only the state cares but it doesn’t really affect me,” but you’d be wrong. Those are rights to which you are entitled under California law. If you get injured on the project, for example, Workers Comp should pay your medical bills (roughly speaking). Also, the law is unclear[3] about other benefits that employers in California must supply to such employees, so it may be that you, as the employee, are entitled to other things beyond being paid as an employee (including having the employer pay its half of FICA) rather than an independent contractor, like having limits on time/overtime, etc.

If you live and generally work in some other state but come to California for a WMFH project, then you too would likely be considered a statutory employee under California law as well[4], and maybe if the company is here but you aren’t. Also, if you work physically here, your pay would probably be subject to California personal income tax withholding[5].

Most importantly, if you are in California (resident/business) and you hire assistants or other independent contractor workers and you have a WMFH clause in the contract you have these people sign, you also need to know this info. You have to follow these same rules! There are ways to avoid some of these issues (for example, maybe an assignment clause instead of a WMFH), but there are downsides to the other options as well. Talk to an attorney to get the best advice for your particular situation.

Oh, and don’t forget, if you are in California, you really, really must pay your people on time.
[**UPDATE** There is more time to pay now, but it’s still faster than you might think]

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[1] California Labor Code Section 3351.5(c).

[2] California Unemployment Insurance Code Section 686.

[3] The statutes don’t seem to say explicitly one way or the other; a court could possibly make the analogy and apply the same rules to pay, time off, etc.

[4]See http://www.edd.ca.gov/pdf_pub_ctr/de231d.pdf.

[5] Id. (That means, same source as I just cited, for the non-nerdy readers).

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Forming an Entity: Watch for Issues

Most creative professionals start their businesses without doing anything more than accepting the first freelance project offered. That is, they don’t bother to do anything about forming a legal entity like a corporation. That’s fine; if you don’t do anything and you work solo, you are a sole proprietor. After that first project, if you continue doing business, getting projects, cashing checks, you probably won’t think about your business structure any further.

At least for a while.

One day, you, the now-successful creative pro hires an accountant to do your taxes and that CPA tells you you should incorporate or form an LLC. The accountant is concerned about the relative tax burdens and, often, it does make immediate financial sense to form an entity; that is, you can save a bundle on your taxes. But, the accountant doesn’t (probably) know about the copyright ramifications, and (usually) neither does the average creative pro.

Yes, there are copyright ramifications.

Overall, there are a whole host of legal issues to consider when it comes to potentially forming an entity. Most people focus on the tax issues, and that makes sense, but there are other legal issues and I highly encourage anyone considering forming an entity to talk to a lawyer before taking that step. Anyway, for this post, I’m only going to focus on the copyright one as it is most often totally ignored, and it shouldn’t be.

So, let’s imagine you have formed a single-member LLC and, as per your CPA, you’ve made yourself an employee of that LLC. Your tax bill thanks you. Now, however, when you make your art (whatever kind of art you make–doesnt matter), who owns its copyright?

If you said you do, you’d be wrong. Even though you are the only member of your entity (the LLC), it’s that entity that owns the copyright in the art you make as an employee of that entity. It’s an automatic work-made-for-hire. No writing required.

Well, I hear you saying, but I am the entity so it’s the same thing. Nice try; but, under the law, no, you aren’t and no, it isn’t at all.

First, since the entity is now the author of the work, the length of the copyright is no longer life of the author plus 70 years. A copyright authored by an entity lasts either 95 years after its first publication or 120 years after its creation, whichever is shorter[1]. By the way, there is an exception to this to get back to the authors death +70 years length, but it requires more paperwork and I know how much y’all love paperwork.

Second, when you register that copyright, you need to do it correctly. You have to name the entity as the author and the claimant because you, as an individual, by law did not create and do not own the copyright. While screwing this up doesnt necessarily totally void a registration, it certainly will be an issue if you ever get infringed. You (and your lawyer) don’t want to have to fight about the validity of your registration. I’ve seen it in cases and it could result in a great case becoming a loser. Remember, if you sue for infringement and lose, you might end up being required to pay the other side’s attorneys’ fees and costs; you don’t want something like this to scuttle your otherwise watertight ship.

Third, let’s say you get hit by a bus and shuffle off the mortal coil, who gets the copyrights your entity owns? And what about existing licenses and royalties based off those copyrights–who gets the money? It’s not so easy, if you havent planned ahead. Do you have a succession plan in place for your entity?

None of these issues are insurmountable at all. For example, you can have a writing that keeps the copyrights created after the entity is formed as your own (if you want to do that and there are reasons to do that, or not). Overall, the issues beyond the tax ones that come up when you form an entity, including copyright ones, do require some thought and there are decisions that need to be made and new processes need to be learned if you decide to go ahead and incorporate.

Don’t go it alone and hope it all works out–thats a lousy business strategy. Talk to your own attorney and get good, personalized advice.

[1] 17 USC 302(c).

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