Category: Contracts

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Update Your Contracts

A client informed me yesterday that Vox Media had announced a partnership with OpenAI that permitted that leech-of-a-tool to use Vox Media content to train. This is bad and very likely goes beyond agreements it has with many writers and photographers, but it’s going to do it anyway because tech companies have no decency and too many media companies have no spines.

So, first, if you have work that you have licensed to Vox Media, check the language in your agreements and, assuming you didn’t sign away too much already, contact Vox to remind them that your work cannot be used for AI-training purposes. Period. Don’t let them try to talk you into some piddly bump in fees–what they are doing is enabling tech to put you entirely out of your work so just say “No.” You need to think long term here–an extra few bucks here isn’t worth torpedoing your particular creative industry.

Second, look at your own contracts, which you should be using anyway but, yeah, I know, you probably don’t because the bigger companies are bullies about that. Anyway, you should add something to your own contracts that makes it absolutely clear that any use that may result in the training of AI is not permitted under your license. You need this for contracts you use with individuals (like for event/wedding photography) as well as for companies for their marketing or advertising use.

Remember, when you permit your clients to use your work on certain platforms, you are permitting those platforms to use your work to train AI. That is bad. Spectacularly bad. So don’t do it. Make it absolutely unambiguous–if they do that you will sue them for infringement.

Finally, if you aren’t already, start registering your copyrights. Now. It’s the best tool you have to fight these sharks. Don’t think “I can still use the CCB if my work isn’t registered” because (a) you still have to register your work to sue using the CCB; and (b) you won’t get very much from the CCB, especially if your work is not timely registered (no more than $7500, and probably MUCH less).

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Say Yes to No

I’m a firm believer in saying yes and generally being positive about things; have done for years. For example, if a client has a technically gnarly project, saying “Oh, that looks super hard” and then explaining how much work it is going to be or, worse, even hinting that you might fail, is not a good idea for your business. Instead, saying “Oh, that looks super hard…I love a challenge! I’m sure my team and I will find a solution!” will engender confidence in your client. Later, when you hand them a big estimate, they’ll remember you as the creative who said they could do it, increasing your chances of winning the project even with big numbers. So saying yes is a great thing for your business… except when it isn’t.

How often have you heard a (potential) client send you a contract and say “Everyone agrees to this” or “Oh, sure, the doc says you are assigning us your copyrights and that you can’t use the work, but we’ll let you use it” or “It’s industry standard to have a 90-day payment period,” or “You have to indemnify us against any claim that arises when you’re shooting for us, not just those related to your work or employees–no one ever makes an issue of that” etc. ? A bunch, I’ll bet and I bet you’ve often accepted those terms, trusting your client. Then, later…well, as Marlon Brando in Guys and Dolls says,“Daddy, I got cider in my ear!”

The sad truth is that, whenever someone in a financial transaction with you says one thing but the paperwork says another, they have an ulterior motive and it ain’t good for you. Hearing anything like “oh, don’t worry…” or “You’re the only person who has ever asked…” is your signal that you absolutely must go with what the papers say. Always. Your clients, no matter how nice, are not on your side. They can’t be—they are negotiating for their best deal, not yours. You can like them, but don’t ever trust their word over what is on the page.

The terms they are insisting on are good…good for them, that is, and so they do use them. If they didn’t, the terms would not be there. Always. So, if they are saying “oh, we never do this thing the contract says we can do” and they won’t take it out, then you know they want to do exactly what they claim they never do, and will do exactly that if they can. 

Relatedly, if your client/buyer tells you “my way or the highway,” waste no time in politely taking the second option. As the current writers’ and actors’ strikes confirm, bullying and fear-mongering is pervasive in the creative industries. All of them. Threats about not getting work are just manipulative bullshit. You didn’t have the gig but then lose it by saying “no”; nope, they just wanted to scare you into accepting a bad deal. Walk away. Use the time to get a better client. 

Don’t bother trying to fix them or teach them the errors of their ways. You can’t control what your clients/buyers do and you’ll drive yourself mad if you try. But, you can control what you do. 

The first thing is to know where your boundaries are. You can negotiate lots of things, but you should always know what lines you will not cross and respect those limits. No one will respect them if you don’t. You can and I think MUST set your own limits; and you should do it before any negotiations so that you know what they are. Write them out like a list if that helps: will never sell copyrights; will only indemnify for my own actions; will not lower my price without getting something (besides just getting the gig) in return; etc. 

Once you have your limits defined, then you can respond rationally to whatever demands are made. So, for example, if a client insists on owning your copyrights created for the project, you can say “No” if your line is ownership, or, if you’re willing to sell at the right price, say “Not at this price—if you want full ownership, that will cost $X.”  Don’t explain, don’t rationalize, and don’t be suckered in by them. Stick to your own boundaries. For example, “I hear you, but I won’t sell my copyrights for this price–you need to either pay more or get a license instead.” If they ask “Why?” you can simply say that this is how you run your business. Period.

You can use your boundary list for contract negotiations of all kinds: time to pay, deposits, usage license terms, indemnification clauses, you name it. When you do that, you are taking good care of your business: You set your limits. You have control. 

Saying “no” to bad terms and bad deals does not make you a jerk, it makes you a smart businessperson. And, although standing up for your rights and doing what is best for you and your business is not always easy, it is vital. The other side is surely going to stand up for theirs.

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Control

I know… I suck… I haven’t been keeping up with posting here. In my defense, my boyfriend and I are in the middle of selling his condo and buying a house. In San Diego. In the middle of a pandemic. Which brings me to the theme of today’s post: you can’t control others but you have control over what you do.

Real estate transactions are one of the most stressful things in life. Several articles like this one point out that home buying ranks above planning a wedding, becoming a parent, or even losing a job, for being stressful. In San Diego, like other very expensive places, I think it is even more so. For example, we looked at a 1300 sq. ft. house the other day that was priced at $825K (like most properties here, it will likely sell for more, but not from us); its ceilings were practically falling in and its floors were warped from water damage, amongst other problems. Almost a million dollars for a fixer-upper. INSANE!

We did find a house we loved and submitted an offer. The owner countered in a totally greedy, irrational, and frankly insulting manner. First, we got pissed; then we remembered that we can’t do anything about how a seller acts. In this situation, we let go of the hurt feelings and walked away. Let someone else over-overpay. Now, we’ve found another and just submitted an offer. It’s likely we won’t get the house because the owners are flippers and will only care about making bank, but we submitted a generous offer with terms that both make it more attractive and yet still protect us in the process. Still, I suspect someone will out bid us and do so without an appraisal contingency and maybe even “as-is” and even without an inspection contingency. We can’t control the other offerors nor the sellers, so we’re not going to worry about it. Either we get this house, or not. 

Leaving off contingencies makes an offer stronger in the seller’s eyes. However, what it does for the buyer is put them in an unreasonably risky situation. For example, the appraisal contingency protects you in case the house is overpriced. An appraisal is necessary so that the loan provider knows it can make money if you default on your loan by making sure it will hold enough equity in the house to make money on a foreclosure. See, if the house is sold at $800K but appraises at $750K, without an appraisal contingency the loan company will only fund up to $750K and you’ll have to make up the difference somehow… like in cash. If you make a large downpayment, a loan company may forego the appraisal and tell you it’s okay to waive the contingency, but that’s because it knows that it’s going to make money selling your house if you default because its loan to you was only $400K (50% down), not $640K (20% down) or more. But you are still overpaying for the house.

If our offer is countered with contingency removal demands, we’ll just say “no” and walk again. We may end up renting for a while, but we will not pay a huge sum for a house without protections in the process. It would not be good for us and we can only control what we do. 

I bring all this up because what I’m hearing from sellers is just like what creatives hear all the time, and what creatives must learn to say “no” to. That is, you’re told “everyone does this” or “sure, the doc says you are assigning us your copyrights but we’ll let you use the work” or “it’s industry standard to have a 90 day pay window,” or “you have to get releases from everyone you shoot at this event or indemnify us against claims if you don’t,” etc. Whenever someone in a financial transaction with you says one thing but the paperwork says another, go with what the papers say. Always. Your clients, no matter how nice, are not on your side. They can’t be—they are negotiating for their best deal, not yours. You can like them, but don’t ever trust their word over what is on the page.

Moreover, the terms they are insisting on are good for them and they do use them, or the terms would not be there. Always. So when they are saying “oh, we never do this thing the contract says we can do” and they won’t take it out, then you know they want to do what they claim they never do, and will if they can.

If your client/buyer tells you “my way or the highway,” take the second option, for sure. Bullying and fear-mongering is pervasive in the creative industries. Threats about not getting work are just manipulative bullshit. You didn’t have the gig and lose it by saying “no,” they just wanted to scare you into accepting a bad deal. Walk away. Use the time to get a better client.

But don’t bother trying to fix them or teach them the errors of their ways. Like the real estate situations mentioned above, you can’t control what your clients/buyers do and you’ll drive yourself mad if you try. But, you can control what you do. 

The first thing is to know where your boundaries are. You can negotiate lots of things, but you should always know what lines you will not cross and respect those limits. You set your own limits; and you should do it before any negotiations so that you know what they are. Write them out like a list if that helps: will never sell copyrights; will only indemnify for my own actions; will not lower my price without getting something in return (besides the gig); etc. Once you have your limits defined, then you can respond rationally to whatever demands are made. So, for example, if a client insists on owning your copyrights created for the project, you can say “No” if you’re line is ownership, or “Not at this price—if you want full ownership, that will cost $X” if you’re willing to sell but for the right value. 

You can use your list for contract negotiations of all kinds: time to pay, deposits, usage license terms, indemnification clauses, you name it. You set your limits. You have that control. Stick to them because they are best for your business. 

Saying “no” to bad terms and bad deals does not make you a jerk, it makes you a smart businessperson. And, although standing up for your rights and what is best for you and your business is not always easy, it is vital. 

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Things to do During Stay-at-Home

If your state or city hasn’t issued an official stay-at-home order because of COVID-19, it’s likely only a matter of time before it does (or it is being run by a terrible leader, and you should stay in anyway). If your work is usually not at home or even if you are someone who usually works at home, you can make good use of this time “off.” I have some suggestions…

  1. Review your standard paperwork. Estimate forms, invoices, contracts, releases, licenses… if it’s paperwork that you use in business, now is a good time to review it and make updates and changes. Maybe you’ll need legal help for this, maybe it’s just a case of fixing the format so it reads more clearly; whatever, this is a great time to get your paperwork in better shape.
  2. Consider updating your business insurance. One thing lots of people have already learned in this crisis: not having business liability insurance or disability insurance (etc.) is unwise.
  3. Related to #2, inventory your gear and update (if needed) your insurance coverage. Whatever your gear is, take photos, update serial numbers, make sure you have enough coverage for your critical tools and gear, including computers and software. At worst, doing the inventory will give you a clean list you can have for later claims (keep a copy off-site!).
  4. Register a bunch of your work with the USCO. Now is a great time to play catch-up with your copyright registrations.
  5. Work on a (new) marketing plan. Eventually things will start to work again and you want to be top-of-mind with your targets when that happens. Now is a good time to look at what will get you there.
  6. Check in with clients. Don’t contact them to solicit work but rather call or email your contacts, personally, and wish them well. Simple, generous, kind human interaction now will be remembered later.
  7. Check in with your vendors/crew. Like clients, your vendors and crewpeople will appreciate the kindness, even if you can’t hire them or buy from them right now. If, though, you can buy something from them now, consider doing so to make sure they are around later.
  8. Give yourself a personal project to work on. I mean a creative project, whether that is in your usual medium or not. Some photographers and other creatives are using their art to document their experiences, which is fine, but I suggest something that is non-virus-related for this. You can do both, of course, but something creative that isn’t about the crisis would probably be good for your stress levels, too.
  9. Give yourself permission to do less. Lots of people are trying to work full-time from home and do all the other stuff that they now have to (like taking care of kids, for example) and are getting burned out fast. Give yourself a break and be flexible.
  10. Related to #8, give yourself permission to be imperfect. Too many people are trying to be perfect in this crisis–stop it. You’re going to have days where you won’t get any “work” done or that your kids won’t have formal lessons or the dishes don’t get washed… if you hold yourself up to your usual standards of perfection (like you do in your creative work), you will burn out faster. Embrace the suck, as a good friend says.
  11. (because of course it goes to 11) Do something specifically for your mental health. Meditate. Take long walks/runs (alone). Do yoga or other exercise. Watch a comedy film. Sing to the radio. Dance in your living room. Play with your dog/cat/kid/lover. Write a journal. Bake cookies. Eat cookies. Simply find something that brings you peace and equanimity, and do it. Yes, this is good for your business as well.

There are difficult times, sure, but they will not last forever. The suggestions above can help you feel more in control even when we seem to have little of that.

Wishing all of you well, safe, and happy.

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Your 2020 To-Do/Please Don’t List

As we wrap up 2019 and start to look ahead, I thought I would give up some of my best thoughts on both business and legal issues, for creative pros, in list form. I think I should to warn you, though, I’m not holding back on the language. I think someone needs to play Carol Kane in Scrooged to the creative industries and, well, I’m just the broad to do it.

So, here’s what you should/should not do for your business in 2020:

  1. If anyone talks about ROI or value propositions or anything else that smacks of weasel-in-a-suit when it comes to your marketing, run away. All that shit is dead. Sure, you want to get the best bang for your buck, but the most effective marketing for a creative business is simply not quantifiable. Lest you forget, you are not selling widgets or some service that anyone can do, but rather a very specialized service that has virtually no competitors. Much of that MBA mumbo-jumbo just doesn’t apply to highly specialized service providers, and all artists are (or should be) exactly that. Despite our hyper-image-based social media world, your marketing today needs to be honest, real, and a reflection of who you really are. I sure as hell hope you are not a “suit.” Stay away from buzzwords–don’t use them and be skeptical of those who do.
  2. Forget about old selling tools like “elevator speeches.” Look, when you shill, no one gives a shit who you are or what you do. It’s totally off-putting to get the spiel–be that at a party or (yikes) in an actual elevator. Car salesman-esque. Fake. Ew.
    My “elevator speech” is I’m a lawyer for creative professionals. That’s it, because all I’m doing is answering the question “What do you do?” Why only this? Because I’m not pushing the sale (that is very old and disliked) and I leave space for a dialogue by NOT answering all the implied questions (see #3). I’m letting go of trying to control the interaction and, in so doing, get better results.
  3. When meeting someone new, especially a target, after saying that you are a commercial artist of whatever stripe you are, always follow up with a question (or more than one) about the other person: Do you work on the Widget campaign? What other ones? Who’s your dream to work with? etc. And respond honestly to their responses and use follow-up questions: I love the Widget work–where did you find that actor? You are a hell of a lot more interesting to a potential target when you are interested in her/him, especially (in this context) his/her work (it’s good to do research on your targets ahead of time so you know enough to have questions).
  4. SEO is a waste of your time. People who sell SEO services are the used-car salesmen of the 21st century. The reality is that Google has like 97% of search traffic and it manipulates its results something wicked. Really, chasing that SEO goal is wasted effort. Moreover, good buyers are not using Google to find their creative providers. At best they may do an image search of some kind (mostly for inspiration, not to hire) and then that’s going to be more about effectively using your work’s metadata than “optimizing” your site.
    Yes, we all know of someone who got a great gig from Google: and that person is the exception, not the rule. It’s like what we do often with dating: we hear about the one friend of a friend who ended up getting happily married after the guy/woman didn’t call forever and we think that can happen to us. We could get hit by lightening, too. Probably better odds of that.
    4.a Anything blockchain or AI-related as some sort of saviour tool for creative businesses is also total crap.
  5. Put on your big boy/girl panties and, for the love of Buddha, stop whining that you can’t do X or Y. I’m so tired of hearing “Yeah, great idea, but I can’t do that,” like you’re somehow different. That attitude is bullshit: yes, you can do it, whatever “it” is. It might be hard and it may be risky, but you can do it. I don’t care what it is, almost always you can find a way. Just get a set already. Look at me: I started law school when I was over 40 and had my marriage blow up before my first set of exams; I started my own business first in 1999, then again as a lawyer. Life ain’t always easy, but it’s worth it. Business is often hard and there are no guarantees. You want a guarantee, buy a blender. You want to be a creative pro? Accept that it is tantamount to doing the flying trapeze, without a net. Let go and have fun with that. You chose to be an artist–stop whining about the risks. Be a friggin’ ARTIST, unapologetically.
    5.a. The answer to the question But what if someone doesn’t like my work? is always Fuck ’em. In short, they aren’t your target audience.
  6. The “trick”to business is finding the right people to market to. Actually, this isn’t that hard: when you see work you love and that you wish you could have been a part of, research who made that work and add them to your marketing lists. Like attracts like. See Number 3, above. Don’t be afraid to reach out to those people–it’s not like they’re going to have you killed if they’re not interested in working with you; they’ll just say “no.” More importantly, they might say “yes.”
  7. Make art for yourself, as often as you can. Don’t create for any other reason (like to specifically make something for your portfolio) but rather create for the love of creating and for making the work that excites you. Don’t worry if it’s good or right or what you should be doing, just make some damn art for you (see 5.a. above). That is your job and you have to do it for your business just as much as you have to pay your web hosting bill.
  8. Get out of your office/out from behind your computer and interact with people. Social media is a form of connection but it’s a weak and highly manipulated one. You want to get work, you need to meet people in real life. Yes, that means actual meetings. It means traveling to the places where your targets are and meeting with them there or putting on events to get them to where you are. Go to portfolio shows. Oh, and at the end of any portfolio meeting, do NOT ask for a job on the spot. They hate that. You are not selling, you are marketing–it’s a long game.
    Getting out also means going to events connected to your targets, like AIGA presentations, Ad Club events, or even lectures by lawyers (look up your closest Lawyers for the Arts chapter). Take people to lunch (or bring it with you), throw studio parties, put yourself out there. And have fun with it!
  9. Register your damn copyrights. Please. I beg you. If you are a creative professional, stop making excuses and start doing this. There are services, but I don’t recommend using any of them because the resulting registrations might not be anything more than maybe adequate and they might possibly be deficient. A well done registration can make a potential defendant in an infringement matter settle fast and for more money. A wonky one may be challenged by a wily defendant or will at least give one pause. Registration is not hard anyway, particularly for visual artists and even more so for still photographers.
    9a. Relatedly, stop thinking about the cost of registration as a reason not to register–first, it is a legitimate business cost and so you can write it off and, second, it is like insurance that you pay for once but off which you can make many claims (and for much more than the original cost). You will (almost assuredly) make more money in your business if you register your copyrights, and do number 10.
  10. Pursue Infringers. Not every case has to be worth 5-figures or more to get legal help. Some attorneys, like me, will take on small cases because they believe in fighting for the “little” artist and, besides, small cases simply do add up. Let’s say you have small value infringements, but a bunch of those that are worth $2500 average settlement (that number is just for sake of argument). 10 of those cases over the year is $25K. Now, let’s say your attorney gets 36% of that: you’re still pocketing $16K.  How about 20 cases and $32K in your bank? I have clients who make 6-figures annually because they register their work and go after the infringers–some bring in $2500, some bring in much more. Don’t wait for the CASE Act (which may never pass)–you can register work today and for infringements that start after that registration, you can wield the enhanced remedies stick!
  11. I don’t care what any consultant or other artist tells you, separate out your Usage Licensing Fee from your Creative Fee. Better yet, make sure the License Fee is where most of the “cost” lies. As more and more work is getting ripped off you need to be able to prove the value of your license (even if you are going for statutory damages–it helps) and you just can’t do that if you use a combined fee on your estimates and invoices. The other side will have a great argument that most of that number is the Creative/Shoot Fee and you get screwed a second time. Why do you think buyers say they want them combined? Because it benefits their companies, not you. They are protecting their asses–you need to look after your own.
    You can do this if you want to make sure not to piss off a buyer: on the cover/summary page of your estimate (and invoice!) you lump your numbers together into two main categories (Fees, Production Charges) so that there is a simple, one-page overview for the buyer to glance at. Inside, however, you break out every Fee and Production Charge, line item by line item, and make sure to line item the License Fee separately.
  12. Speaking of fees, increase your rates in 2020, especially your license fees. Every creative pro who does this is terrified the first time. I have, however, never heard anyone regret it later. You may lose some clients, but really, you needed to kick those cheapskates to the curb already. Ever notice the inverse relationship between budget and pain-in-the-assishness? Why bend over backwards for the clients who nickel and dime? Just stop. Demand more money and you will get more money and you will respect yourself more.
  13. Watermark your visual art. Do this and, for bonus points, make it a proper copyright notice. See here for the details but, the short answer is that if you do that you (a) have a stronger case for willful infringement (more money); (b) eliminate the “innocent infringement” defense; and (c) if it gets removed, then you may have a good case for a lawyer to help with even if you have not registered the copyright and can’t prove your damages!
  14. Get your paperwork in order. Yeah, I know, contracts are not sexy but they are a very necessary evil in business. Get contracts drafted for you by your own lawyer so that your interests are in first position. If the other side insists on using theirs (yeah, big companies can be bullies), get those reviewed by your own lawyer. Have releases and licenses crafted for your needs. Think you can’t afford that? Think more about how signing one bad contract can wipe you out. Besides, not all lawyers demand insane retainers to be there for you. Check out my Burns Less program for a very cost-effective option (by the way, I am not the only lawyer with alternative fee structures!).
  15. This last item is the most important: be yourself and be proud of yourself in everything you do. Honesty, ethical behavior, and real connections are what will make your business successful now. Have convictions and don’t apologize for them. Most of all, be passionate about your work. That’s what I’m demonstrating here. Sure, some people are going to be offended by my language and/or say it’s inappropriate in business, but in creative businesses (including lawyering for creatives), being real beats convention, every time. So here I am: I swear (in multiple languages even), I’m passionate, and I’m unconventional, but most of all I want y’all to succeed and I work hard to make that happen. I love my work, even though there are days when I want to throttle certain infringers and set fire to certain online platforms. I’ll tell a client when I think s/he/they are making a bad choice and I’ll fire a client who isn’t ethical. A few years back I decided to be more real and open with my thoughts and opinions–I’ve never regretted it and most of my clients and readers have appreciated it.

    For the others who don’t, well, see number 5.a., above.
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Creator? Get a Lawyer

Most of my clients are photographers. That’s no surprise since I started working with commercial photographers in the last millennium (yes, I’m old), and long before I became an attorney. Photographers know me; they’ve come to my lectures, bought my books, read my blogs, and know that I have their backs. However, I serve all kinds of creators, artists, and writers (I generally call all of you artists, by the way).

Regardless of what kind of artist you are,  frankly, I’m shocked at how many of you don’t have lawyers.

The logic of having one is pretty simple:

  • All professional artists have businesses–if you make money from your art, you are in business.
  • All professional artists have contracts in their businesses–yours, your clients’, etc.
  • All professional artists create copyrights (and should register them).
  • All professional artists get infringed (if you haven’t yet, it’s only because you haven’t found it).
  • All professional artists may get married, will die (sorry, but let’s be real), and have assets to protect.

Obviously, then, all professional artists (actually, all artists, even amateurs) have legal issues connected to their work and, for the pros, vocation. Why, then, do so few of you have relationships with lawyers? I suspect it’s mostly the cost. Maybe a little bit of “I don’t want anyone to see how I’ve been BSing my way through my business” imposter syndrome, but mostly cost.

I encourage you to do a simple cost-benefit analysis before you have a legal need to see if it really is as expensive as you think. The answers will likely surprise you.

For example, is it better to spend a couple of hundred now to learn how to register a copyright properly with a lawyer’s help in answering some registration-related questions first; and so that, for every infringement after, you can get at least $750 in statutory damages? Or, do you want to take your chances to maybe screw up your registration and end up getting nothing–or even paying the other side’s attorneys’ fees?

How about a typical contract your clients wants you to sign for, say, a $1000 gig–the contract with a hidden assignment clause, meaning you’d be selling your copyright totally, for that grand? If you missed that how much value and income over time would you lose?

Or maybe you’re thinking about getting married–did you know that can affect your copyrights created in the marriage? A chat with an attorney before wedded bliss could save you a bundle if it all goes south later (sadly, that happens).

If you’re afraid you’ll sound like an uneducated rube if you ask questions of an attorney, that’s your ego talking; attorneys exist to answer legal questions and any attorney who laughs at you for asking questions, well, you should fire her/him. If you think you can go it alone, that’s also your ego talking–you aren’t a lawyer (or an accountant or a doctor) so you should do your thing (make art) and let other pros do their things to enable you to do your thing better.

If you’re an artist, I hope you’ll consider me for any legal help, of course; but, more importantly, I hope you’ll find someone qualified and with whom you can establish a solid working relationship. There are other great attorneys out there who work with artists and understand their needs–I’m definitely not the only horse in this race. Talk to a few of us and find someone you feel comfortable with–who gets you. Then, go on about your business of being an artist, with the security of having a lawyer on your side.

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Exclusive Versus Sole

Earlier this year I wrote about exclusive licenses and how they can make a big difference in your legal rights, when it comes to infringements. Today, I was reminded of a related issue: how to grant a client the rights to use a work only for that client’s materials, and not get caught in an exclusive license trap.

Here’s what I suggest: only use the word “exclusive” (or non-) for actual, legal rights–specifically the ones covered by the statute (17 USC §106) and stick with “sole” for other limiting factors in a license, like media or geography.

For example, let’s say IlloBob wants to license an illustration of a squid to SurferSam for use on his surfboards and newsletters. He wants to make sure SurferSam doesn’t use the illustration on t-shirts or to be able to re- or sub-license to third parties for their use. He also wants to be able to license the same illustration to others including for their use in their newsletters. His license might read like this:

Conditioned upon full and timely payment received, IlloBob grants to SurferSam the non-exclusive right to reproduce the Squid Illustration solely on SurferSam surfboards and in SurferSam newsletters for one year, starting January 1, 2019. SurferSam may not license these rights or any other rights to any third party, except as required to produce the surfboards and newsletters permitted by this license.

By using the word exclusive (or non-exclusive) only with the rights (as opposed to the media), a licensor is protected from accidentally granting exclusive rights. To see the difference, look at this variation of the license above:

IlloBob grants to SurferSam the right to reproduce the Squid Illustration exclusively on SurferSam surfboards and in SurferSam newsletters for one year, starting January 1, 2019.

Is that an exclusive license? Can IlloBob license the work to anyone else to use in a newsletter? Can SurferSam use the work on t-shirts but without exclusivity? Maybe yes to all of the above. Well informed lawyers could debate all that and more, just because of how the word “exclusively” is used.

If you don’t fully grasp the differences here, that is what I (like other lawyers) am here for. I can help you draft licenses that will provide your client what it needs while making sure you aren’t accidentally giving away more, and it won’t cost you an arm and a leg. A little professional hand-holding now can save you lots of money and frustration in the future.

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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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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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Breach or Infringement?

I’ve heard that some photo organizations may be suggesting that the way to avoid the costs of litigating an infringement claim is to have a liquidated damages clause in your site’s terms of service (TOS), because then (they say) it’s a breach of contract rather than an infringement. For example, if you put something on your site’s TOS like “If you use any of the work from this site without a license, you agree to pay to PhotoBob three times his usual fees for the license” and someone uses your work, then you can bring a breach of contract case in small claims court and avoid the cost of litigating infringement in federal court.

I have to say, I think this is very bad advice. I hope that pro groups are not recommending it. Short answer? It probably won’t work and, even if it could, it’s not a good choice. Let me explain.

First, it is very possible that your TOS are not binding on your visitors. There is case law that says that in order for TOS to be binding, a user has to either click to agree to those terms (called a clickwrap agreement) or those terms have to be so obvious as to, essentially, be on each page of your site–just having a separate page with your TOS won’t cut it. (Lawyers reading this, yes, I’m generalizing from the cases–we need to know the nitty gritty but creatives really don’t.)

Second, even if you could make the TOS stick, you would be limited to winning no more than your 3X number, and you’d have to prove that you usually got $X as a license fee in the first place. 3X is likely not going to be much money. In fact, it’s going to have to be under like $5,000 if you want to stay in small claims, depending on what the small claims court rules are where you are–that is, there are limits on how big a case you can bring in small claims. Oh, and you probably can’t use a lawyer (many small claims courts bar representation) so you’re going to have to do it all yourself.

Oh, and let’s say you win a judgment in small claims and the defendant doesn’t pay. You can’t then go marching into federal court claiming that it’s now an infringement and demand a lot more money. Even if by some miracle you did pull that off, that is that the court didn’t dismiss the case immediately, the court would likely say your damages are limited to the judgment you got already or darn close to it.

Third, how are you going to prove that the infringer got the work from your website? Have you posted it anywhere else, like Instagram? Good luck enforcing your site’s TOS, then.

Fourth, and this is the big one (yes, I buried the lede): copyright pre-emption will likely make your breach claim a loser. See, copyright is exclusively federal law and can only be adjudicated in federal court; so, if you bring a claim that is really an infringement claim, a smart defendant is going to tell the small claims court “Hey, this is really infringement we’re talking about here so you have to dismiss this case because this court doesn’t have jurisdiction.” I think a defendant is going to win with that and, boom, you’ve just waisted all your time (and filing fees).

There is one possible exception to pre-emption here, but it’s a narrow window and one I don’t like anyway. That is, if you agreed to license the work to the defendant and it later failed to pay for the license, then courts have said that is a breach of contract rather than an infringement (unless the terms of the written license stated that the license was contingent upon full and timely payment). See Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 559 N.7 (9th Cir. 1990). Now, I think you should have written licenses and those licenses should specifically state that no license is granted until full and timely payment is received; but, if you have that, then the courts say it is not a breach of contract and, so, there you go… pre-emption again.

Really, I think it’s cutting off your nose to spite your face to try and convert an infringement claim into a breach of contract one. I mean, if you register your work in a timely manner (before the infringement) then you have the right to elect statutory damages and you have a decent chance at being awarded your attorneys’ fees as well. That is very, very likely going to be a much larger number than what you’d ever get in small claims court. More importantly, if you want to avoid litigation (and I always say: you want to avoid litigation), you have a better chance at negotiating a better result if you have statutory damages and maybe attorneys’ feesto back up your claim. A breach of contract claim is almost always some kind of wonky and the damages are limited–why do that to yourself?

 

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