The Jiminian Law PLLC News Clipboard - 2.25.15

The stories I found interesting this week in Media/Entertainment, Business, IP and Nonprofits.


  • Republican Congress to Try to Convert Net Neutrality Into a Benghazi-like Controversy for Obama
    • The Federal Communications Commission is on the precipice of voting this week to enact White House-backed regulations that would reclassify broadband Internet as a utility and block so-called "fast lanes" on mobile and Internet devices. Republicans in Congress and on the 2016 campaign trail already have shown an eagerness to portray the vote as another example of executive overreach by the Obama administration. They plan to continue slamming the president for avoiding Congress in a similar vein to recent executive actions on immigration, Cuba, and environmental regulations.
  • The 'Blurred Lines' Trial Begins with Jury Selection, Robin Thicke and Pharrel Williams Expected to Attend Trial
    • The jury selection process kicked off the festivities and included an unusual question: Who was offended by the music video for "Blurred Lines," which features bare-chested, nearly nude women? Some responded they couldn't remain impartial.
  • Hollywood Docket: 'Walk of Shame'; Viacom Settles With B. Scott; 'Fifty Shades' Publishing
    • A roundup of entertainment law news including director Albert Hughes still seeking money for the aborted "Motor City."
  • Pandora Dealt Setback in Turtles Lawsuit
    • Pandora responded with an anti-SLAPP motion to dismiss the Flo & Eddie suit. In making its case, Pandora asserted that like anyone who buys a copy of a sound recording, it has a free speech right to play those recordings in any manner it desires without obtaining authorization from Flo & Eddie to do so. So Judge Guiterrez denied Pandora's anti-SLAPP motion to dismiss, as anticipated. But that denial now allows Pandora to file an appeal, which could move the case to another judge in the U.S. Court of Appeals for the Ninth Circuit. Since Pandora knows which way Judge Guiterrez is thinking on the pre-1972 issue, it wants to take its arguments to a different judge.
  • Lil Wayne Breaks Silence on Cash Money Lawsuit, 'Free Weezy Album'
    • In a 21-page document filed with a federal court in New York on January 28th, Wayne sued Cash Money for $51 million, citing a wide range of alleged financial misdeeds. Among other things, the lawsuit claimed that Cash Money withheld key accounting documents from Wayne, and that the label owes him $8 million for Tha Carter V under a 2012 deal that guaranteed a staggering $10 million advance per album. 
  • Use of Iconic 9-11 Photo in FOX TV Show’s Facebook Stream Not Fair Use
    • This reminds me a bit of Morel. The defendant is an established media entity, with a producer that had received training on fair use (but not with respect to this image). Nevertheless, a single image sourced from the wrong place and used in the social stream creates a giant headache. Perhaps this just illustrates the “photos are different” rule in action. This type of ruling is perhaps the reason why bloggers and websites are well advised to never simply search for an image and use it in a post or article.
  • News Photo Falsely Implicated Firefighter in Sex Scandal
    • The placement of a Philadelphia firefighter’s photograph to illustrate a New York newspaper’s online article about an alleged sex scandal in the department falsely implicated the firefighter’s involvement in the scandal, according to a libel suit filed earlier this month at the Philadelphia Court of Common Pleas. Francis Cheney II, of Philadelphia, seeks compensatory and punitive damages on three counts against the New York Daily News Company – including invasion of privacy, defamation and intentional infliction of emotional distress – for an article published on its website on Jan. 29.
  • The Right of Publicity: An Often Overlooked Asset in Estate Planning 
    • The Bosh and Howard lawsuits, and others like them that have popped up in recent years, reflect a growing trend – namely, that of famous athletes and celebrities asserting their “right of publicity” to prevent others from commercially exploiting their name, likeness, or image without their prior approval. As discussed herein, the right of publicity has only recently emerged as an important asset that must be considered by estate practitioners when planning or filing for their more well-known clientele.
  • Comcast Net Income Edges Up, Boosts Dividend, Plans Share Buyback
    • Comcast Corp.'s fourth-quarter net income edged up less than 1 percent as the company added more customers for its cable TV, high-speed Internet and phone services. The nation's largest cable provider also raised its dividend and said it would repurchase $10 billion in stock. Its shares edged up in morning trading Tuesday. Comcast is in the midst of a $45 billion takeover of Time Warner Cable that is undergoing a regulatory review. The company said it hopes to have that deal approved early this year.

Intellectual Property
  • Security, Privacy and the Law Update on President Obama’s “Summit on Cybersecurity and Consumer Protection,” Part II: The Executive Order
  • Innovation Act Needed More Than Ever As Patent Trolls Roll On
    • When considering whether reform is needed, it is important not to lose sight of the massive and sustained increase in patent troll litigation over the past decade. To illustrate how much troll litigation has surged, there were more cases filed by patent trolls in one month in January 2015 than in the entire year of 2004. (Trolls filed 250 cases last month as compared to 234 cases in all of 2004, Even accounting for the impact of the America Invents Act’s anti-joinder rule, that is an astonishing increase.) Although there was a small decline in litigation in 2014, patent trolling exploded over the past decade and remains at historically high levels. This litigation is overwhelmingly a tax on innovation and does nothing to promote the deployment of new technology.
  • Patent Reform: Innovation Act of 2015
    • The bill as introduced includes the following provisions:
      • Heightened Pleading Requirements  
      • Presumption of Attorney Fees  
      • IPR Claim Construction  
      • Discovery Limits  
      • Willful Infringement  
      • Transparency of Ownership  
      • Stay of Customer Suits  
      • Foreign Bankruptcy  
      • Codifying Double Patenting
  • Apple Ordered To Pay $533 Million For Patent Infringement
    • Apple Inc has been ordered to pay $532.9 million after a federal jury in Texas found that its iTunes software infringed three patents owned by patent licensing firm Smartflash LLC. Though Smartflash had been asking for $852 million in damages, Tuesday night's verdict was still a blow to Apple. The jury, which deliberated for eight hours, determined Apple had not only used Smartflash's patents without permission, but did so willfully. Apple, which said it would appeal, said the outcome was another reason reform was needed in the patent system to curb litigation by companies that don't make products themselves.
  • Sony’s trademark for The Last Guardian has expired again
    • “Based solely on the history of this application, this indicates that at some point in 2012, Sony planned to create a game titled ‘The Last Guardian,'” said Saivar. “They filed what’s called an ‘intent-to-use’ application which means they weren’t using that title yet, but planned to at some point in the future” Saivar explains that the USPTO reviewed the application and found everything was in order. The next step for the agency was to order a “Notice of Allowance” to Sony. This is a three-year registration period that is broken up into six-month chunks. Every half year, Sony has to check in with the USPTO with a “Statement of Use.” This is when Sony can either show how it is using the trademark or it can ask for an extension. “Sony filed three such extensions to keep the application alive,” said Saivar. “However, they had another Jan. 15, 2015 deadline to file an extension and they did nothing. This indicates that, unless they blew the deadline unwittingly, they have no further intention of using that title.”
  • Former Two Sigma Analyst Gao Pleads Guilty to Software Theft
    • A former analyst at the quantitative hedge fund Two Sigma pleaded guilty to taking the firm’s data, the second of five men charged in a crackdown on the theft of intellectual property from financial firms to resolve his case.
  • Washington's NFL Football Team Fight TM Ban
    • A federal government decision to cancel this NFL's team's offensive name trademark because it may be disparaging infringes on free-speech rights and unfairly singles the team out, the NFL team's lawyers argued in court papers filed Monday.

  • Expedited Determination Process for 501(c)(4) Organizations
    • The Internal Revenue Service recently released a memorandum modifying and clarifying procedures for Section 501(c)(4) applicants seeking exemption after December 23, 2014, which may potentially be engaged in political campaign intervention or providing private benefit to a political party, but that otherwise do not present any issues regarding their exempt status. The memo directs the Exempt Organizations Determinations Unit (EOD) of the IRS to offer, by letter, an optional expedited process to such pending applicants. The process permits these organizations to make representations under penalties of perjury regarding their past, current, and anticipated future political campaign intervention and social welfare activity.
  • What Every Prospective Nonprofit Board Member Needs to Know
    • You have been asked to serve on the board of a nonprofit organization. Should you accept? Prospective board members should carefully consider an invitation to join a board. Before accepting, a potential board member should understand the responsibilities and duties of board membership. In addition, it is important for a potential board member to conduct due diligence regarding the organization’s structure, programs, key staff positions and financial status.
  • Read this before you co-sponsor a sweepstakes or contest
    • Before deciding if a co-sponsorship is right for your promotion, you should consider your circumstances. In most instances, the parties have significantly different roles in the sweepstakes or contest. A party that is asked to provide the prize is usually not involved in preparing the official rules or selecting the winners. Likewise, the party preparing the official rules and determining the winners may not be involved at all in procuring or delivering the prize.  Co-sponsoring a promotion under these circumstances could result in the parties being found liable for mistakes made by the other party — mistakes over which they have no control.
See ya next week!


What is a Loan-Out Company? And Should I Form One?

Although I wrote this originally for El Blog de HOLA with actors in mind, loan-out companies are used by artists and entertainers of all stripes; directors, musicians, writers, producers, fashion designers, etc. Therefore, the following below is beneficial to you too if you have reached a certain level of success in the arts and entertainment industries.

“I’ve heard that a lot of Hollywood actors have a loan-out company for their acting services. What is a loan-out company and should I form one?”

A loan-out company is a business entity formed by entertainers like actors, musicians, directors, producers, etc. (“owner”) to provide their services under the guise of  “employee” to a third party like a studio, production company, television network, record label, etc. Although usually a C corporation (one that is taxed separately from its owners), the loan-out can be an LLC (limited liability company)or an S corporation. It is called a loan-out because the company “lends” the services of the “owner”/“employee” via contract with the third party. Instead of the entertainer, the loan-out is the signatory to the contract. The loan-out company then “hires” the entertainer to do the job. However, note that many third party companies like studios make the entertainer sign an inducement which is basically an additional document that creates an obligation to the third party, i.e. it makes the entertainer promise to live up to the promise made by the loan-out.

I know you’re probably asking, What’s the point of doing all that?

In a nutshell, entertainers set up loan-out companies for the following reasons:
 To take advantage of favorable tax breaks that are available to corporations and LLCs (such as medical reimbursements and other employee benefits) but not to self-employed individuals. 
• To allow the loan-out to provide the “owner”/“employee” with essential services (everything from accounting to legal to coaching to agency representation) and then deduct them as business expenses. 
• To pay a lower tax rate. Under the progressive income tax system, wage earners pay a higher tax rate as their income goes up. However, corporations are taxed at a flat rate and that flat rate is usually lower than the rate for a person earning the same amount. 
• To set up an IRS-qualified pension plan that offers tax benefits to “owner”/“employee” contributors. 
• To initiate a profit-sharing plan that lets the “owner”/“employee” contribute a certain amount from year to year towards their retirement. 
• To protect the company’s assets from the entertainer’s creditors and lawsuits.  Technically, any money the entertainer earns through the loan-out as an “owner”/“employee” belongs to the loan-out. Only the property the entertainer possesses, as an individual separate from the loan-out, is accessible to creditors.
By now you’re probably thinking, This loan-out sounds like a good idea, help me form one.

But here’s the reality check:
• You need to be making a good amount of money first; at least $75,000 and preferably over $100,000 a year to truly benefit. 
• It takes money and work to maintain a loan-out company. You have to make annual filings and tax payments to the state you formed it in to maintain your company’s status. And you probably have to make payments to the states where you operate in as well. So if you live in New York but work in Los Angeles then you can see how it adds up.  
• If your company is a corporation (or your LLC elects to be classified as a corporation) then you will face double taxation. That means the loan-out pays taxes on its net earnings and then the “owner”/“employee” pays taxes on the wages and bonuses the company pays the “owner”/“employee.” 
• It can all be for naught as there is a possibility you end up paying the higher personal rate of taxation instead of the lower corporate tax rate because the Internal Revenue Service (IRS) considers your loan-out as a tax-avoidance scheme. The IRS is aware of loan-outs and what they are used for and so if the company is not properly established and maintained then the IRS will be suspicious of the loan-out. To avoid suspicion, the entertainer should form the loan-out BEFORE signing the contract.
The loan-out is simply a business and legal strategic tool to protect and manage your earnings. While it can provide substantial tax benefits and other bonuses, a loan-out requires proper planning, formation, maintenance and administration. Otherwise, it can end up being a major headache. Therefore, it’s worth the time and money to seek out professional help from a tax advisor familiar with the entertainment industry, as well as, an entertainment lawyer who understands the industry and your needs.

Danny Jiminian is an attorney who specializes in Entertainment Law, Intellectual Property, Business Law and Nonprofits and practices out of New York. For a free consultation, reach me at my email.

Matter included here or in linked websites may not be current. It is advisable to consult with a competent professional before relying on any written commentary. No attorney client relationship is established by the viewing, use, or communication in any manner through this web site. Nothing on this blog or blog posting is official legal advice; it's just information and opinion. If you want to, you can visit my professional website and hire me by clicking here.


How an Entertainment Lawyer Can Do More For the Client

I was reading about the beef between Chevy Chase and Richard Pryor when I came across a short section describing how Pryor's attorney and agent helped him out:
[Attorney] David Franklin had been a godsend. (In actuality it was singer Roberta Flack who sent him to Richard.) The Atlanta-based attorney straightened out Richard’s finances, renegotiated contracts, made certain he was paid his various royalties on time, retired Richard’s more than six hundred thousand dollars in outstanding debt, settled his alimony and child-support obligations. Further, Franklin established Richard Pryor Enterprises as a corporation to ease his tax burden, and Black Rain, a production company named for Richard’s youngest daughter. He also encouraged Richard to move out of his Hollywood Hills bungalow and buy himself a house. Which he did, a Spanish villa with two guest houses situated on an eight-acre estate in the Northridge section of the San Fernando Valley with the Santa Monica Mountains providing a natural fortification against Hollywood.
I was impressed at the extra mile Franklin went for his client and I thought to myself I want to be like that for my clients. I want to be more then someone who just bills for hours anad then sends them on their way. I've been taking that approach since I started on my own but it was nice to see it validated by someone who was at the top of their game. 

However, I must say that in learning more about Franklin, I came across some bad things he did to Pryor and this wasn't cool:
In a 35-page judgment, Carl G. Joseph, the hearing commissioner, called David McCoy Franklin, Mr. Pryor's agent from 1975 to mid-1980, ''guilty of serious moral turpitude'' and said he had ''willfully misappropriated'' monies that should have been paid to Mr. Pryor for his services as an artist.
So on the one hand he was exemplary and later on he was horrible. What to do? I don't know what happened to disrupt their relationship and why Franklin ended up doing what he did but the RIGHT things Franklin did for Pryor are good goalposts any entertainment lawyer eager to do more for their clients beyond the basic legal representation can strive for.
So I will focus on that part and extract the following things that a lawyer can do beyond the basic legal work:
  • Help an entertainer or artist deal with and understand their finances;
  • Review the old contracts and renegotiate them in a way that favors the entertainer or artist;
  • Ensure the entertainer or artist is paid on time and if not track the debtor down;
  • Assist the entertainer or artist in getting out of debt and handling their debt/familial obligations;
  • Find ways to ease the tax burden of the entertainer or artist; and
  • Figure out ways to help the entertainer or artist make good business decisions so they have peace of mind and can focus on doing what the do best: their artworks.

It's alot to strive for but I think it's worth doing. 
(Minus the moral turpitude and willful appropriation stuff. But hey we knew that already, right?)


An Actor Inquires - How to Protect Yourself if You Are a Non-union Actor

I have recently started a series for HOLA (the Hispanic Organization of Latino Actors) on El Blog de HOLA based on business and legal questions actors have.

“If I choose to work in a nonunion film (one that is not SAG-AFTRA), what key contract terms or clauses should I look out for to protect myself?”

Here’s something that any working actor can tell you: there are many more nonunion roles than there are SAG-AFTRA roles. So, actors, in a quest to build their credits, gain experience, make themselves visible and hone their craft will take on a nonunion role if they find it in their interest to do so. Whether they should or not is another story but assuming they do there are some things an actor should look out for to protect themselves from unscrupulous or sleazy producers.

• Put it in writing. While it is true that oral agreements are enforceable, if it’s not on paper, your job to prove you were promised something for your work in a production becomes that much harder. So make sure that anything you are promised winds up in the document you sign. If it’s not, then don’t sign until it is.
• If the contract has a clause that your image or work can be used in whatever form for perpetuity understand that that means they can do anything they want with the images they shoot of you. Forever. Ask that it be limited to non-pornographic purposes or to be used ONLY for the production or the marketing of that production. If they use it for some other project, you should be paid for that, in my opinion.
• In addition, producers tend to add clauses that state that your work or image can be used in “any medium known or unknown throughout the universe” (or something like that), which gives them the right to use your work or image in any medium without having to pay you extra for it (besides any aforementioned compensation or residuals, if any, already stated in the contract).
• Also beware of any audition release forms that give a producer the right to use your audition footage in whatever way they wish.  It’s one thing to have the acting you did for a movie appear in a trailer (which is to be expected), but your acting for an audition is less polished and more intimate which means you might not want that footage released to the public.
• Pay attention to clauses that limit what future work you can do because of a conflict. This could come up in cases where you work in a commercial for a particular product/service and the clause is put in there to prevent you from working for a competitor product/service. Even though you might not be able to change this clause, at least understand that it means you can’t work for a competitor’s commercial. However, to be fair, this clause should be limited to a certain time period and geographical area.
• If the script calls for sex or nudity, check to see if the contract provides for a clause with restrictions on who can be on the set during the shoot, how the footage is to be used and whether or not nudity/semi-nudity is required.

When it comes to contracts, the first thing is awareness; actors need to know what they are signing. The second thing is whether or not the actor can get something changed or removed from a contract. The truth is that an actor’s ability to have clauses modified or removed comes down to how much leverage the actor has. Famous actors, actors desired by producers to play a specific role and actors demanded by certain investors for a role all have leverage and can get their way if they ask for it. However, even if you don’t have that kind of leverage, if you feel strongly about something, don’t be afraid to speak up. You’d be surprised to know how much a director or producer is willing to address your concerns. And if they don’t, then at the end of they day, you don’t have to sign the contract. It all depends on how much you want that role.

Matter included here or in linked websites may not be current. It is advisable to consult with a competent professional before relying on any written commentary. No attorney client relationship is established by the viewing, use, or communication in any manner through this web site. Nothing on this blog or blog posting is official legal advice; it's just information and opinion. If you want to, you can visit my website and hire me at www.djimlaw.com.


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