Copyright Law Update: the EU Copyright Directive Roils the Internet

In Europe, the EU’s Legal Affairs Committee (JURI) voted in favor of several new amendments to the Copyright Directive, which was originally adopted by European Parliament in 2001.  The amendments contain, among other things, two provisions entitled Article 11 and Article 13, respectively.  

Article 11 would essentially impose a "link tax" - yes, you read that right -  that would require  online platforms like Facebook and Google to buy licenses from media companies before linking to their stories.

Article 13 would require large platforms like Facebook and Reddit to introduce filters to flag copyrighted material that is uploaded by their users.  The companies would have to prevent such content from being published.  Currently in the EU, internets sites observe a notice and take down regime.  In other words, if a creator notices his or her copyrighted content is being posted without permission, then the internet site is required to take the infringing content down upon notice from the creator/rights holder.  This is similar to the practice in the United States. 

ANALYSIS: The European Parliament has to vote on JURI recommendation.  Currently, there is no date set for that vote.  These amendments have big implications for any business that hosts third party content and creators who are users of such sites.  While these rules have no immediate applicability in the United States, this issue is worth watching. 

Copyright Law Update: All About Fair Use

(The following is an excerpt from my book risk, create, change: a survival guide for startups & creators, now available here at Amazon.com.)

    One of the key doctrines of copyright law is the concept of fair use.  Fair Use is, simply stated, a defense to a copyright infringement claim.  This doctrine allows for, in certain, limited circumstances, the unlicensed use of copyrighted works. 

    The Copyright Act provides provides the statutory framework for determining whether something is a fair use and identifies certain types of uses—such as criticism, comment, news reporting, teaching, scholarship, and research—as examples of activities that may qualify as fair use. 

    Generally speaking, only a federal court after a copyright infringement case has been filed can really determine if one’s actions in using a copyrighted work constitutes Fair Use and is thus permissible.  From a startup or entrepreneur’s standpoint, if you are in the educational space or publishing space involving artistic criticism, Fair Use becomes a significant debate at the office.  For the purposes of this paragraph, “publishing” could include not only the written word but also video blogging and related content production. 

    There are four factors that courts will consider in determining if the unlicensed use of a copyrighted work constitutes Fair Use:

  1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
  2. the nature of the copyrighted work;
  3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  4. the effect of the use upon the potential market for or value of the copyrighted work.

    Since Fair Use is such a generally applicable topic, it bears some additional explanation.  The first factor in the fair use analysis focuses on what the purpose and character of the use is, including whether the use is of a commercial nature or is for nonprofit educational purposes.  A key part of the analysis here is how the party claiming Fair Use is using the copyrighted work.  Courts are much more likely to find that nonprofit organizations using copyrighted material for educational and noncommercial uses qualify as Fair Use.   One should not automatically assume, however, that all nonprofit education and noncommercial uses are automatically fair and all commercial uses are not fair.  This first factor is only part of the four part analysis, and it is the court’s analysis of all of the factors as a whole that will determine the outcome.

    “Transformative” uses are more likely than not to be considered fair.   Transformative uses are those that add something new, furthering the purpose of the original work or imbuing the original work with a different character.

    The second factor focuses on the nature of the copyrighted work.  This can be a slippery concept.  The analysis here is the degree to which the copyrighted work that was used relates to the overarching purpose of copyright law in encouraging creative expression.  In other words, when someone uses a copyrighted work that is a novel, movie or song - all forms of creative expression - that person is less likely to be entitled to argue the Fair Use doctrine.  If the copyrighted work was a news story or a technical article, the it is more likely that Fair Use could be found in that circumstance.

    The third factor focuses on the amount and substantiality of the portion used in relation to the copyrighted work as a whole.  In short, how much of the copyrighted work was used?  Here courts would look at both the quantity and quality of the copyrighted material that was used.  Not surprisingly, the larger the portion of the copyrighted work used, the less likely it will be that Fair Use will be found.  Also, the converse is also true.  The smaller amount of the copyrighted work used, the more likely that a court would determine Fair Use was applicable in the situation.  In some contexts, using even a small amount of a copyrighted work was determined not to be fair because the selection was an essential part—or the “heart”—of the work.

    The fourth and final part of the Fair Use analysis focuses on the effect of the use upon the potential market for or value of the copyrighted work.  Does the use harm the copyright holder’s asset?  The court would have to examine the existing or future market for the copyright owner’s original work. Does the use  harm the copyright owner by displacing sales of the original owner’s work that would have happened but for the infringing user’s activities? This is probably the last place on earth where you would want the monetary value of your property to be determined, especially if your work is avant garde or there is no clearly established market (yet) for your product.  

Have questions about your creative work and copyright law?  CONTACT US

 

Employment Law Update: U.S. Supreme Court Upholds Employers' Contractual Rights to Require Individual Claims Via Arbitration

In a significant and far-reaching decision, the U.S. Supreme Court ruled that employment agreements that require the arbitration of certain employment claims brought by employees on an individual basis will be enforced as written.  Employees may not band together to form a quasi-class action against their employer in an arbitration setting if the employment agreement specifically prohibits it. 

Today's decision in the case of Epic Systems Corp. v. Lewis addressed an issue that has been unresolved in employment law for decades.  It also potentially affects every employer and every employee in the United States.

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Employment Law Update: Philadelphia Ordinance on Wage History Blocked

The Chamber of Commerce for Greater Philadelphia was awarded a preliminary injunction in the US District Court for the Eastern District of Pennsylvania against the implementation of a City of Philadelphia Ordinance which purported to: 1) prohibit an employer from inquiring about a prospective employee's wage history and 2) make it illegal for an employer to rely on wage history "at any stage in the employment process" to determine a salary for an employee.

The Court held that the "Inquiry Provision" of the City Ordinance violated the free speech clause of the First Amendment. The Court allowed the "Reliance Provision" to stand. 

The City's rationale was that relying on salary history arguably could perpetuate a perceived wage gap between genders.  

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Copyright Law Update: The "Monkey Selfie" Case Ends in the 9th Circuit

In order to understand the impact of the 9th Circuit's recent ruling in Naruto v. Slater, we have to quickly survey the history of the case.  David Slater is a photographer from the UK.  In 2011, Slater was in Indonesian jungle photographing a group of macaques.  Slater sets up a camera in a clearing to work without his presence.  

Subsequently, a macaque approaches the camera, starts to handle the camera, and in so doing presses the shutter button down, resulting in a series of images which immediately became known as the "monkey selfies".  

Slater takes those images, includes them in a book of his collected work, and begins to sell the book independently. 

That's when PETA alleged that Slater was infringing on - wait for it - the monkey's copyright in the "monkey selfie" photographs included in Slater's published collection. 

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Capital Gains Tax, Explained

The tax filing deadline is approaching, and there are quite a few new wrinkles in the Tax Code for individuals to consider.  Recently, I have fielded quite a few questions about the recent changes in how capital gains tax is calculated.  Here are the basics you need to know this tax season:

A capital gain is realized when a capital asset is sold or exchanged at a price higher than the price paid for that asset (or its “basis”). Basis is defined as an asset’s purchase price, plus commissions and the cost of improvements (if any), minus depreciation. 

A capital loss happens when an asset is sold for less than its basis. Capital gains and losses are not adjusted for inflation. 

Long term capital gains and losses occur if the asset was held for more than one year.  

Short term capital gains and losses occur if the asset was held for less than one year.  

So what are the capital gains tax rates?

The Tax Cuts and Jobs Act of 2017 changes things up quite a bit from the prior methods of capital gains taxation.  

Let’s first address an easy concept:  Short term capital gains are taxed at the same rate as ordinary income.  If you have bought and sold a capital asset within one year, you just pay your normal federal income tax rate on that gain.  

For long term capital gains, however, it not that straightforward. The long term capital gains tax rate is either 0%, 15% or 20%, depending on your income level. This is most easily described by the following chart:

IMG_0596.jpg

Gains on the sale of artworks and collectibles are taxed as ordinary income up to a maximum 28 percent rate.