SXSW panel: SEC updates change the crowdfunding scene

Thousands of actors, producers, and filmmakers assembled for this year’s South by Southwest Film Conference & Festival to attend screenings, keynotes, and workshops. At the Austin Convention Center, attorney Dan Satorius was on hand to offer advice to independent filmmakers hoping to raise money in support of their projects.

During his panel “Other People’s Money: Investors and Crowdfunding,” Satorius, who practices entertainment law in Minneapolis, Minnesota, walked through the details of finance rules and answered questions on how to avoid legal pitfalls when funding a film.

While Satorius touched on the history of Blue Sky Laws and the felonies, fines, and suits that can come from not complying with investing regulations, he also devoted time to talking about safe harbor regulations and the 2012 JOBS Act, which has changed the way filmmakers can receive investments.

In 2013, in compliance with the Act, the Securities and Exchange Commission adopted an amendment to Rule 506 of Regulation D under the Securities Act of 1933. Among other details, the change allows general solicitation for offerings if investors can be verified as accredited. Prior to the update, companies were not allowed to engage in advertising in connection with offerings, including announcements in newspaper or online spaces.

While the amendment comes with some fine print, such as a list of verification methods for determining who is considered an “accredited investor,” it seems to be a game-changer for filmmakers.

The panel wrapped up with a Q&A.

Sound recordings, composer rights, and performance use

Music streaming platforms and the legal issues that come with them were the focus of two CLE panels during SXSW 2015. Leading attorneys from across the nation took the stage to address both fellow lawyers and industry professionals about the current situations.

During “Unhappy Together,” panelists Bob Donnelly, Steve Gordon, and Henry Gradstein delved into the intricate history of copyright laws—from protection against unauthorized public performance in 1897 and the formation of the American Society of Composers, Authors, and Publishers in 1914 to payola laws in the 1960s and the Digital Millennium Copyright Act of 1998.

They also focused on the copyright act in which Congress made sound recordings created post-1972 eligible for federal statutory copyright protection. That decision has been at the center of recent courtroom battles between artists and record companies and streaming services, such as Sirius and Pandora. As Gordon, an attorney with Steve Gordon Law in New York City, explained, an estimated 5 percent of the plays on Pandora and 15 percent of Sirius content fall into the pre-1972 recording category. The streaming companies have taken the position that they don’t have to pay for those sound recordings because they are not subject to federal law performance rights. And many artists are not happy about it.

According to panelists, there are currently six cases challenging Pandora and Sirius XM about royalties for pre-1972 sound recordings, four of which are brought by founding members of rock group the Turtles. Two cases have been won at the state level.

While Gordon said that the wins were unexpected because you have to look hard to find law supporting the artist rights, Gradstein, a partner in Gradstein & Marzano in Los Angeles, California, and the lead attorney in the class actions on behalf of the Turtles against Sirius XM and Pandora, disagreed, pointing to similar cases and noting that selling a record does not mean copyright laws are lost. “It’s just not right. It’s not fair. And it’s also not legal,” Gradstein said.

All panelists agreed that the ramifications of the trials could have a big impact on the industry.

“The essence of the […] cases is actually quite simple. The way the decisions were reached is actually quite complex,” said Donnelly, an attorney with Lommen Abdo in New York City who moderated the panel. “This is an incredibly important moment in time.”

--

Conversation continued in “Still Screaming about Streaming,” with John Simson, Kenneth Steinthal, Jay Rosenthal, and Brad Predergast focusing on the value of songwriters and recordings, as well as the debate surrounding the ongoing review of Consent Decrees by the Antitrust Division of the U.S. Department of Justice.

Specifically, the panelists talked about the potential to alter or dismantle current Consent Decrees, which began in 1941 to address competitive concerns from the market power of ASCAP and Broadcast Music Inc. acquired through the aggregation of public performance rights held by member songwriters and publishers. Although they have been modified since their entry, ASCAP, BMI, and some other firms in the music industry believe the decrees need to be adjusted again to account for changes in how music is delivered to listeners.

Rosenthal, a partner in Mitchell Silberberg in Washington, D.C., who has served as senior vice president and general counsel to the National Music Publishers’ Association, has hope that the review will lead to a reform of what he sees as an unfair rate structure. “We are now in a position where the value of music compositions are so low that songwriters are leaving and not being professional songwriters,” he said. “But there certainly is a consensus that we’ve got to change some things.” Ultimately, Rosenthal believes a free market system would be the fairest option. “I don’t see anything wrong with it. I think its good for everybody. And if it gets to the point of rectifying this 10 to one difference in the values of the music compositions to the sound recording rights, then do it. Let’s get back to the private market as quickly as we possibly can.”

But Steinthal, a partner in King & Spalding in San Francisco, California, who led the recent trial and related court proceedings on behalf of Pandora against ASCAP and BMI, said the disparity point Rosenthal cited is ironic and self-inflicted. “Publishers just rake in cash, they don’t invest,” Steinthal said. “Sound recording companies invest millions and millions of dollars in artists and everybody else. Therefore, you have to look at the sound recording performance in the broader context of our industry, which is fundamentally different than the publishing industry.”

Public comments regarding the Consent Decree review are available at justice.gov.

SXSW panelists present litigation update

During the SXSW panel “Litigation: The Cases We Need to Know,” D’Lesli Davis, a partner in the Dallas office of Norton Rose Fulbright, and Stan Soocher, associate professor of music and entertainment industry studies at the University of Colorado Denver, offered an overview of some legal situations currently impacting entertainment law. In their allotted hour, they walked attendees through a number of specific cases, including the following selections.

Gaga, ooh law law
Wendy Starland v. Rob Fusari

When Lady Gaga burst onto the music scene in the late 2000s, her stellar voice, stage dramatics, and avant-garde sense of style drove her to become one of the world’s most predominant musicians—perhaps more popular than her producer Rob Fusari could have imagined. Before Gaga achieved fame, Fusari made an oral agreement to split his revenues earned from the singer with the person who discovered her.

That person was Wendy Starland, who found Gaga in 2006 and brought her to meet Fusari. Their relationship eventually soured and, citing that verbal arrangement, Starland sued Fusari in 2010 for her portion of the proceeds from Gaga’s work. In November 2014, a federal court granted Starland a little more than $7 million.

Spoken deals are common in the entertainment industry, noted the panelists, but most often they don’t have such big names behind them. “How many times do you hear from your potential clients about deals like that, and they just don’t come to fruition?” posed Davis. “But how scary is it that this $7.4 million finding was riding on that one person’s testimony of one side of a conversation?”

Soocher also noted that in the case there was a multitude of ways that a statute of frauds in the oral agreement could be interpreted. The statute is only enforceable if it can be performed in one year; at what point could that one-year period start? When Starland walked into the room and discovered Gaga? When she brought her to Fusari? When recording started? “Obviously, this needs to be more formalized,” Soocher said.

Give it up
Gaye v. Thicke

Just days before SXSW, a court awarded $7.3 million to the family of Marvin Gaye as the result of the contentious and highly publicized Gaye v. Thicke copyright case. “When was the last copyright infringement case that got this much media attention?” Soocher asked. “Maybe not any because of social media.”  

At issue was Robin Thicke and Pharell Williams’ 2013 hit “Blurred Lines,” which Gaye’s heirs claimed was taken from Gaye’s 1977 tune “Got To Give It Up.” (See a mashup of the songs here.) During the trial, the defense was clinging to the idea that ruling against them would squelch future creativity, said Davis, who was previously a partner in King & Ballow, which served the plaintiffs. Still, after the verdict, an attorney for the plaintiffs maintained that they proved the melodic elements were copied.

“Whether you think that this is good law or bad law, I bet most of the people in this room would say that the feel of the two songs is similar,” Davis said.

Another factor at play? Thicke changed his narrative. In the beginning, he asserted that he and Williams collaborated to write the song in half an hour, but during his deposition, Thicke said he had nothing to do with creating the song. “It’s real easy for juries to pick out liars when the testimony is changed,” Davis said. Now, the panelists pondered, will Williams file suit for the money Thicke received for writing the song despite declaring under oath that he had no responsibility for it?

Bad luck
Cummings v. Soul Train Holdings, L.L.C.

Opening with a clip of the band the Blue Notes performing in the 1970s, Davis and Soocher introduced the case of Cummings v. Soul Train Holdings, L.L.C. When episodes of the show The Soul Train featuring Blue Notes member Jeremiah Cummings were put on DVD for sale and distribution, Cummings sued, noting that he had not signed an agreement to use his right of publicity and that the recordings were misused.

Right of publicity cases are tested under state law, explained Soocher, so while Cummings filed suit in New York, as a resident of Illinois, his case was considered under the Illinois Right of Publicity Act, which recognizes the statutory right but not a separate common law misappropriation claim. There is an exception of the use of an individual’s identity during a live performance so long as the use is not in a commercial. The court ruled that Cummings’ specific exception overrides any right of publicity and the case was dismissed.

“If you look at the New York and California statutes, they don’t have this specific language,” Soocher said. “I do want to say that the song they are singing is ‘Bad Luck.’”

You can see a full list of topics discussed during the panel here.

 

SXSW panel on drones fever: benefits vs. privacy

“Drones are here to stay, and to me that's a very good thing.”

Presenting at SXSW Interactive—where just days before the Austin Police Department had banned all drones from flying in the skies above the festival—Lisa Ellman spoke enthusiastically about the benefits that drones bring and how industry and government can satisfy those who are concerned about drones encroaching on personal privacy.

Ellman—who helped craft Obama administration policies on the use of drones in the United States—presented the positives and the negatives, from what she sees as smart and nonsensical regulation as well as the worthy and concerning usages of drones.

“When I first started working for President Obama, drones were just a blip on the radar,” Ellman said. “Now they are everywhere. They are the present and are quickly becoming the future. I believe the key to good policy making in this area ... is poli-vation—policy makers and innovators working together.”

Referring to the machines as “smartphones in the sky,” Ellman said that the uses for drones range from toys to tools of war, and that they can be used for fun, safety, and technology that makes life better. Among the possible positive functions, she mentioned a drone’s potential to deliver SXSW badges to attendees with the use of facial recognition technology, help farmers survey and dust their crops, film movies from high and varying vantage points, deliver beer, or drop medications in rural areas. Disney, for example, is interested in using drones to replace fireworks in its theme parks; the NFL, meanwhile, has reportedly considered using drones to do things like take footballs to midfield.

But, Ellman said, while America leads the world in producing the technology, it follows in areas of implementation. In Japan, 85 percent of crop dusting is done by drones, she said. “Drones will help America hold on to our competitive advantage."

Despite all the benefits that drones can offer, many Americans are wary of the flying machines’ ability to survey areas of life that have been private for so long. Drones are often equipped with cameras and can photograph anything from homes to employees skipping work to shop at the mall. Ellman explained the concerns as relating to “the notion that our home is our castle, that we ought to have control over our own personal information ... that we all need time alone.”

But, she said, the modern concept of privacy is evolving. “We live in an increasingly connected world. What this means for our nation’s privacy policies, we are just starting to learn about now.” History tells us that people have commonly been fearful of innovation. When the camera was first invented, Ellman said, we worried others would take our picture without our consent; when the postal service was founded, we worried people would read our mail. “It makes sense that, decades later, we worry that drones will be used to spy on us,” said Ellman, who noted that her own father worried that drones could enable competitors to snoop on his backyard engineering projects. Such concerns raise legitimate questions, she said, such as how do we know who’s watching us, who owns the drone, and where images live and for how long?

Ellman thinks that all of these valid points must be weighed with the potential for drones to do good in the world. And here’s where policy comes in to enable the machines to perform such beneficial functions while also addressing the privacy concerns. Noting that commercial use of drones will likely be legal in a few years as Congress is working to integrate drones into federal airspace, Ellman said that there is also “no shortage of legislation from all levels of government aimed at limiting use of drones in the name of privacy.” Some policy is smart and some isn’t, she said, referring to a proposed Oklahoma law that would allow private citizens to shoot down drones that come onto their property.

When crafting legislation, Ellman said it’s important that policymakers embrace the glories of drone technology while also avoiding the duplication of laws that are already protecting the public. “It’s likely that complete bans on drone use are overbroad because they ignore the benefits,” she said. “We must ask ourselves, ‘Are drones uniquely troublesome in certain ways?’ But we must also ask, ‘What laws and policies are already in place that protect us?’” Ellman thinks that legislation on drone use without warrants is duplicative because of 4th Amendment protections already in place and that drone-focused private property laws are duplicative because trespassing laws already exist. “We should take a close look at those and see where there are gaps, but don’t duplicate,” she said.

Looking to the future, Ellman said that she sees property owners having rights to the sky above their homes, much as mineral rights protect below-ground interests such as oil and natural gas. But, these will only go so high, perhaps to about 350 feet above ground, and will have to integrate with federal airspace that begins at 500 feet (more information at noflyzone.org). While Congress works on passing legislation to allow commercial use of drones—which Ellman predicted will be law by “2017 at the latest”—interested commercial parties in the meantime can file a 333 exemption with the Federal Aviation Administration, which has granted about 500 exemptions and will soon be issuing these more quickly, she said. Noise issues are another concern, but the quieter drones become, Ellman pointed out, the more potential they have to silently spy. Another topic that must be addressed, she said, is the fear from laborers such as pilots and delivery people who worry that drones will take their work.

“There are drawbacks,” she said, “but we have to remember that many problems have solutions. Now is the time for all of us to get involved.”

For more information on Lisa Ellman, co-chair of McKenna Long & Aldridge's Unmanned Aircraft Systems Practice Group, go to the firm's website. Ellman's Tedx Talk on drones and privacy is available on YouTube.

SXSW panelists discuss intellectual property in media

If you’re a filmmaker wondering if you will be sued, ask yourself: “Have I created a very popular film?”

That message came off loud and clear during the “Intellectual Property in Film and Interactive Media” CLE at SXSW. During the panel, Akin Gump attorneys Kellie Marie Johnson and Charles Everingham discussed trademark and copyright issues, including the increasingly sophisticated use of marketing and product placement in media. Some brands, including Chipotle and Lexus, are even creating their own content to distribute, they noted.

But with every integrated ad comes a host of legal issues. Brands want exposure, producers want to protect content quality, and talent wants to protect its image. To that end, Johnson and Everingham broke down some of the things parties should keep in mind when making marketing deals:

-Be aware of a brand’s permissions and rights

-Ask for a script to see if the details make sense for your brand

-Be as involved in the process as possible

-Negotiate for minimum guaranteed integration

-Negotiate for category exclusivity

-Establish provisions for talent back out

Still, even perfectly crafted contracts can have holes or lead to unforeseen issues. Consider the following cases highlighted during the CLE session:

Luxury brand Louis Vuitton was not laughing during The Hangover: Part II. In an airport scene, the character Alan (played by Zach Galifianakis) warns fellow traveler Teddy to watch out for his luggage, letting out a cold, “Careful, that is a … that is a Lew-is Vuitton.” Following the film’s debut, Vuitton sent a cease-and-desist letter to producers Warner Brothers, claiming that the appearance of the shoulder bag (which was a knock-off) and his dialogue infringed on its trademark and caused dilution. When Warner Bros. declined to remove the scene, Vuitton filed suit, claiming false designation of origin and unfair competition in violation of the federal Lanham Act, among other things. Ultimately, a New York judge granted a motion to dismiss the trademark complaint.

Then there was the time a New Jersey woman sued Disney, alleging that the film Frozen includes elements from her autobiography. The case was dismissed.

And Natrol Inc. was not too pleased with product placement firm Brand-in Entertainment last year when Reese Witherspoon backed out of a film. The vitamin company had placed $180,000 in the movie with the expectation that Witherspoon’s character would discuss their product. Natrol claims they are still owed a refund as part of their contract. The case is still ongoing.

At the end of the panel, the bottom line was that brands and the entertainment industry can work well together, so long as all parties understand their legal rights.

Tags: , , ,

SXSW documentaries focus on legal issues

Two films with vastly different themes highlighted legal matters during the South by Southwest Film tract this year.

In A Brave Heart: The Lizzie Velasquez Story,audiences were introduced to Lizzie, a 25-year-old Texan with a rare syndrome that prevents her from gaining weight. Lizzie’s appearance made her a victim of bullying throughout school and the hurtful behavior peaked at age 17, when she discovered a YouTube video of herself, uploaded by a stranger, titled “World’s Ugliest Woman.” It had millions of views and thousands of hateful comments.

Lizzie decided to take action by creating her own positive YouTube channel and working against bullying. Since making waves with an inspirational TEDx talk in 2013, she has presented her story on stages around the world and she is now taking her cause to Capitol Hill.

In A Brave Heart, Lizzie meets with lawmakers to discuss the federal Safe Schools Improvement Act, which, among other policies, would prohibit bullying and harassment in educational environments. Lizzie joined the crew of A Brave Heart at Monday’s showing, answered questions from the audience, and explained her plans to meet with additional legislators.

For more information, go to abraveheartfilm.com.

---

Producers took audiences under the hood of the Internet in Deep Web, which had three showings during SXSW. The film centers on the story of Austin native Ross Ulbricht and his connection to Silk Road, a now-defunct but often replicated anonymous online market for drugs and other illegal goods.

In 2013, Ulbricht was arrested and charged with narcotics trafficking and computer hacking, among other offenses, performed under the alias of Dread Pirate Roberts. While Ulbricht was found guilty in February, the film addressed some of the questions surrounding the case, including Ulbricht’s Fourth Amendment rights, the evidence that was allowed during trial, and the possibility of multiple users with the D.P.R. moniker.

Additionally, interviews with everyone from professors and cybercrime investigators to open-source programmers and digital drug vendors offered a glimpse into the philosophy and intricacies behind the Silk Road itself, including the use of Bitcoins during transactions, the reiterations of the site since it was shut down, and arguments against the War on Drugs.

For more information, go to deepwebthemovie.com.

 

 

SXSW panels take hard look at U.S. justice system

Two SXSW Interactive panels on Monday focused on the inner workings and effects of the U.S. justice system. Panelists of “Ex-Prisoners Speak: We Deserve a Second Chance” spoke on the flaws of the country’s prison system, which they said does nothing to help incarcerated men and women reenter society. Later, a couple of blocks away at the Austin Convention Center, the mother of Ross Ulbricht, who was convicted of being the kingpin of the Silk Road online marketplace, explained why she sees her son’s trial as unfair and unjust.

Shaka Senghor, who served 19 years for killing a man during a drug-related argument, described the prison system in America as one that “incarcerates more people than anywhere else in the world.” “What we don’t realize,” he said, “is that at some point these men and women will return to our community.” Senghor said he made the choice while in solitary confinement to educate and empower himself. But he recognized that while he and some of his co-panelists loved reading and having deep conversations about literature in prison, spaces that foster such transformation are rare. Prisons, he said, do not honor the humanity of the individuals who are incarcerated, which would enable them to return to society as healthy human beings. And, beginning even earlier, schools in inner-city and minority neighborhoods are sometimes in worse conditions than prisons. Senghor is now a successful writer, mentor, and motivational speaker.

Yusef Shakur, who was in prison for nine years for a crime he didn’t commit, spoke about the prison system having nothing in place to help transform inmates’ behavior because, he said, the focus is on oppressing rather than healing. His moment of transformation came when he met his father for the first time while in prison, which he said affected how he viewed himself. That paired with a love for reading and education gave him liberty and impacted how he saw the world. Shakur led the way, being the first of the panelists to be released from prison, and is an author, educator, entrepreneur, and social activist.

Trabian Shorters, CEO of BMe—a community organization that invests in and supports black men—noted that most of us see ex-prisoners for the very worst thing they’ve ever done in their lives, while we look at others and see whole persons instead of immediately judging them based on their poorest decisions. Everybody, he said, should try to see ex-prisoners for their contributions to society, and businesses and companies should not automatically disregard them as potential employees if they are currently good people.

Chris Wilson, who was 17 years old when he was sentenced to life, spoke of being in prison and having an unexplainable feeling that his life could change. “They told me to just get comfortable but I said, ‘There has to be more to life than this.’” Wilson made a master plan to turn his life around, one that included using no profanity and educating himself while incarcerated. When he was let out, the hardest aspects of life were finding housing, navigating transportation, and catching up with technology. He is now a business owner and leads the Community Workforce Development at Greater Homewood Community Corp.

All men on the panel spoke passionately about how difficult it can be to find employment and voiced support for the Ban the Box campaign, which would remove the requirement to divulge former convictions on job applications. Senghor said that all members of a community can work to address local, state, and federal policies where they go wrong. Wilson suggested that former prisoners consider starting their own companies if they’re having trouble getting hired, noting that business creation by the black community has been growing for a decade. Another point of agreement among the panelists was that education and positive male role models play an imperative role in preventing and reducing incarceration.

---

At the SXSW Interactive panel “The Silk Road Case: Impacting Our Digital Future,” Lyn Ulbricht spoke passionately about the recent trial that resulted in her son’s conviction for operating the online marketplace Silk Road.

Lyn, who had been at the trial, shared her observations on the prosecution’s actions, the defense’s strategy, and the judge’s decisions. Most outrageous to her was the moment when her son’s defense attorney was "banned" from asking a Department of Homeland Security witness questions that suggested the agent had suspected another individual to be the mastermind of the Silk Road. Lyn recalled how the prosecution objected to this and the judge ruled against the defense, which had cited Brady rules. The court, she said, introduced an “exceptionally restrictive” set of rules for the defense team, while the prosecution objected constantly.

Lyn went on to say that the prosecution failed to grasp the way the Bitcoin system of currency works, and judge didn’t allow the defense to bring expert witnesses to explain this to the jury. The prosecution, meanwhile, did not bring any witnesses who testified to how the Silk Road had harmed them.

Her most important message for the audience was that her son’s conviction could affect all Americans because, if a pending appeal fails, the case will become legal precedent. It brings up important 4th Amendment questions concerning the extent of search warrants for computers, and also the government’s right to access the Silk Road’s servers in Iceland without having a warrant to do so. When the trial was done, Lyn said she had concluded that “justice is just a beautifully crafted hunk of bronze,” referring to a statue standing outside the New York courthouse.

Despite mentioning reasons why she thought an appeal should be successful, Lyn appeared to avoid having naïve hopefulness. When asked how Ross was doing in prison, she told the audience that he’s learning Spanish so that he can talk with some of his fellow prisoners, but that the situation is very hard for him. The conviction, she said, has been devastating for the entire Ulbricht family.

SXSW panel asks if tech is law's friend or foe?

“The world is becoming automated, and law is no exception.” This is an unavoidable reality, according to panelists of the South by Southwest Interactive session “Your Next Lawyer Could be a Machine,” who said that it is a “scary time” for lawyers who don’t embrace the possibilities of a technologically driven future but “an incredible time” for entrepreneurship-minded lawyers who do.

Nicole Bradick, owner and chief strategy officer of CuroLegal, began the session with a primer on the historical law firm model, which she described as being a pyramid that is based on recruiting the best law student graduates and having them “work their tails off” to make a profit. This is a problem, she said, because inefficiencies are tolerated, and even encouraged, due to their resulting increases of billable hours and because some clients are unwilling to pay for the “hyper-productive” pyramid base.

Bradick, whose company consults law firms, noted that the traditional firm model is slowly changing as many corporate clients are starting to control how firms work a case (such as by directing the firm to outsource contract review to a foreign county), and average consumers are using self-service technology (such as LegalZoom.com) because so many of them can’t afford lawyers. More big firms are taking on structures similar to corporations and companies, with a select few people managing the firm, and the rest of the lawyers are encouraged to do lawyers’ work. While the United States leads Europe in terms of producing new legal technologies, Bradick said that Europe is way ahead of us in terms of innovative firm business models.

The attraction of welcoming and adopting new technologies into a firm’s inner workings are many, Bradick said, predicting that while only 10 to 15 percent of the legal market currently charges flat fees (with the remainder billing hourly)—this will be increasing, and in a decade, most firms will likely be billing in this way. Even for solo practitioners and lawyers practicing in small firms or in small towns (most of whom still operate on an hourly basis), charging flat fees sets you apart from competitors in the eyes of potential clients.

So improving efficiencies and saving time is key, and this is where technology steps in. Lawyers must accept the “industrialization of law,” Bradick said, and that some aspects of their important work do not require a genius. “Lawyers are super special. What we do is very complex. But the recognition now is that when you break a huge matter down into all of its parts, not every part is complex. A lot of that stuff can be automated.”

Co-panelist Noah Waisberg, CEO of automated contract analysis company Kira Inc., introduced various technologies that are being used to solve legal problems. Straight-to-consumer products include services like LegalZoom (form-completion technology) for fairly simple documents like wills, marketplaces like Avvo that provide lawyer ratings and help connect clients with appropriate representation, and legal knowledge sites that allow people to attain a firmer grasp on difficult concepts in the law.

Technology that benefits lawyers can include document assembly that “generates a better quality draft,” Waisberg said, as well as case and practice management services and high-tech products like analytics that predict who will win cases, research services, and high-quality document analysis (extracting data for e-discovery and contract review). Waisberg said studies have shown that his company’s technology can analyze e-discovery documents “better, faster, and cheaper” for clients with up to 150,000 documents or as few as 50. This saves the time of junior lawyers, who are typically assigned to do such work (and who, Waisberg said, usually hate the work and don’t do a great job at it). And it also saves clients money.

“This technological change is great for consumers,” Waisberg said, especially for the segment of the population that can now afford to have legal help when beforehand it was out of the question. Bradick echoed this sentiment, noting her favorite legal quote: “The law doesn’t exist to employ lawyers; the focus must be on the consumer.”

SXSW CLE Wrap-up

Part I: Cool Things v. Consumer Privacy, Filming Unsuspecting Subjects, and Streaming Pay Scales

By the end of South by Southwest 2014—held in Austin from March 7 to March 16—attorneys were referring to the festival’s official legal program as “Camp CLE.” Like the much larger SXSW spectacle, the CLE room was full of lawyers from around the country, as well as a mix of artists, publishers, and other entertainment industry professionals. Put on by the Midwest-based Lommen Abdo Law Firm, a total of 12 sessions were held, led by 30 law experts. The Texas Bar Journal reports on several of these events below. Stay tuned to the State Bar Blog for additional SXSW CLE articles.

 

The Sentient Economy: Law and Policy for the IoT. Session leader Gerard Stegmaier—of counsel to the technology-focused firm of Wilson Sonsini Goodrich & Rosati in Washington, D.C.—explained that the Internet of Things “is like looking into the crystal ball,” which consists of objects that people use in their everyday lives that have the ability to connect to the online network. Smart phones, personal activity trackers, even refrigerators with interactive computers make up the IoT. These devices often ask for the user to provide a varying amount of personal information so that the user’s experience can be individually customized—oftentimes to motivate the user to achieve a specific goal.

Stegmaier quipped that this “machine-to-machine” connection is dangerous because it is a billion-dollar industry that involves controversial consumer privacy matters. “And when there’s that much money at stake,” he said, “lawyers come running.” Privacy law issues, Stegmaier believes, will either inhibit or prohibit the growth of the IoT. Because most consumers value being notified—or being asked for permission—any time their personal data is captured, Stegmaier recommended that tech companies consider taking such “privacy by design” approaches.

Businesses that supply objects within the IoT can get into trouble for violating deceptive-trade laws, either by being outright deceptive (when the writing used is determined to be misleading) or by being unfair (when substantial consumer injury outweighs any potential benefits). While the IoT “makes cool things possible,” he said, lawyers need to make sure consumers and companies aren’t at risk.

 

All About Hidden Camera and Investigative Reporting. A handful of attorneys mixed with dozens of filmmakers and media professionals at this CLE session, led by entertainment attorney Michael Donaldson of Donaldson & Callif in Beverly Hills. The discussion focused on the recommended practices for documentary films and news programs that film non-actors—or “unsuspecting subjects”—and wish to publicly distribute the recordings.

Donaldson noted that it is always a good idea to start by researching the relevant states’ laws on recording conversation and to try and obtain releases from any unsuspecting subjects who are filmed. The movie Borat, for example, employed a release (although not for all filmed subjects) that courts found to be “rock solid” because it was absolutely clear, in plain language, and short.

When no releases are obtained—as is commonly the case for undercover and investigative reporting pieces—the most important factor that courts have considered is the filmed individual’s expectation of privacy. A TV news show that secretly filmed a physician inappropriately prescribing painkillers lost in court based on the doctor’s reasonable expectation of privacy in his own office. On the other hand, a suit brought on by a performer who was filmed backstage beating apes that were used in his circus show was unsuccessful because the court found that he had little reasonable expectation of privacy backstage, where stage hands and other performers were frequently present.

 

Screaming About Streaming. Said to be the hot topic of this year’s SXSW CLE, this three-person panel focused on online streaming and the copyright and royalty issues related to the increasingly popular way of consuming music. Panelists included Ken Steinthal of King & Spalding in San Francisco; Colin Rushing, senior vice president and general counsel to SoundExchange; and John Simson, of counsel to Lommen Abdo Law Firm. They explained that music streaming involves two separate copyright issues: one for the composition’s publishing and another for the master recording. And, streaming itself is divided into two categories: interactive streaming (i.g., Spotify) and non-interactive (i.g., Sirius XM and—controversially—Pandora).

To illustrate this complex legal situation, panelist Steinthal focused on the recent court case involving Pandora and the American Society of Composers, Authors and Publishers, in which Pandora sought to pay the same rate that traditional radio pays (1.7 percent of revenue) for ASCAP-registered material. (Pandora insists that it is guaranteed protection to have such low rates, while publishers and ASCAP argue that it is unfair and results in an industry where millions of hits on a single song generate less than $600 in compensation.)

Panelist Rushing of SoundExchange gave the audience some historical background, noting that traditionally, radio stations had to buy the rights only to a song. But after 1995, all sound recordings broadcast via digital public performance also required publishing rights. While technically the publishing copyrights are compulsory and masters copyrights are voluntary when dealing with interactive streaming services (and vice-versa for non-interactive streaming), Steinthal and Rushing explained that it is probably best to acknowledge both copyrights.

SXSW Panel: Remixing, Mashups, and Copyright Law

Music and law experts explain how to reuse original compositions while staying in the legal clear. 

The take-away from the South by Southwest Music Festival panel titled “Remixing, Mashups, and Copyright Law,” was to play it safe when creating derivative musical works. Panelists included Christiane Kinney, musician and partner in the LeClairRyan law firm’s Los Angeles office; Sean Kinney, a music and film industry consultant; and Dean Serletic, head of marketing and licensing for Music Mastermind Inc. All three stressed to the audience of artists, producers, and a handful of attorneys to obtain a license if wishing to distribute a remix of an existing song or a mashup of several songs and/or videos. If the license is for using just a portion—however small or large—use just that part of the original and nothing more. And don’t even think about claiming the Fair Use Doctrine to support non-licensed remixes or mashups.

Serletic pointed out that, at one time, the music world only occasionally featured remixes and mashups. But with technology’s rise, the changing trends in musical sound, and relatively inexpensive home recording equipment, these creations are now much more common. Many amateur users who post their reinterpretation of songs and videos to YouTube have no idea that there is a law regulating such actions. Still, some of these uploads are flagged and removed. After all, YouTube enables its users to make money from advertisements on their page, so there is revenue being generated from the original owners’ content.

While he believes the music industry should accept that art sometimes relies on existing work to create reinterpretations, which can have significant impact, Serletic added that he would like general consumers and recreating artists to understand who owns the composition. Both parties need to openly negotiate—and do so before the reused work is distributed in a public way, which gives the re-creators more bargaining power. When this happens, Serletic said, both sides win because content is being purchased fairly and derivative works can be shared freely.

Panelist Christiane Kinney noted that indie musicians looking to license their work for usage in a remix, mashup, commercial, movie, etc., should request reasonable royalties. Apparently, many indie artists request higher payments than The Rolling Stones request for usage of their rich body of work. Sean Kinney added that the creators of derivative works must ensure that they too have contracts on the derivative work to include anybody and everybody that had a role in producing the end product.

A less desirable course to take when remixing or mashing original compositions is to distribute the derivative work without obtaining licensing beforehand and then claiming that this action was legal under the Fair Use Doctrine. Christiane Kinney called this “an excuse for copyright infringement.” For more information, go to Christiane Kinney’s entertainment law blog at musicalredhead.com.

Twibel, Tumblr, and the First Amendment: Ongoing themes at SXSW Interactive

With the option to hide behind avatars, handles, and screen names, people can be downright mean, even libelous, while communicating online. When defamatory statements are published online and a victim chooses to take action, who is to blame?

For websites like Tumblr and Twitter, which provide outlets for anyone with a username to publish content, the answer is somewhat complicated. But one thing is certain—it’s not them.

Under Section 230 of Title 47 of the United States Code, passed as part of the Communication Decency Act of 1996, web hosts have protection against legal claims arising from hosting information written by third parties. This includes content such as hate speech and sex trafficking.

During a March 9, 2014, SXSW Interactive panel “The Fragile Law that Protects Online Speech,” Ari Shahdadi, general counsel to Tumblr, explained how the company applies Section 230 to cases where unhappy users ask for negative posts concerning them or their affiliated groups to be removed from the site, sometimes threatening legal action. Examples included rants against ex-boyfriends and bad business reviews, which Shahdadi noted are protected under the First Amendment. Taking them down, he argued, might discourage the positive grassroots conversations that also take place on the site. “You’re either committed to free speech or you’re not,” he noted.

Tumblr, however, has chosen to remove select posts, such as uploads that glorify self-harm.

According to Ellyn Angelotti of the Poynter Institute for Media Studies and Catherine Cameron with Stetson University College of Law—panelists in the March 10, 2014, conversation “Twibel: Fight Bad Speech with More Speech”—the social media site Twitter is facing similar questions when dealing with libelous posts. But despite numerous instances of online defamation, few cases have actually gone to court. Angelotti and Cameron, along with audience members, speculated that this could be a reflection of the costs associated with suing or simply an understanding that “that’s just the way things are online.”

Recognizing that traditional mediation and dispute resolution approaches are not always practical in online defamation cases—where more often than not, a victim desires for the situation to simply never have happened—Angelotti and Cameron discussed alternative approaches, such as community monitoring, as a system for combating libel.

Both Tumblr and Twitter offer community guidelines. Still, questions regarding the rights and responsibilities of both users and hosts linger and appear likely to remain present until additional legislation is passed.

SXSW Interactive Wrap-up: With Lightning Speed

South by Southwest has a tradition of encouraging innovators to push the tech envelope. But with new developments come new legal questions, and technology often moves faster than the legislative process.

During the opening days of SXSW Interactive, tech and law experts converged to discuss some of the legal issues currently at play regarding tech development. From patent control to protecting personal information, the topics were hot—and the opinions surrounding them were just as heated.

A session dubbed “Clubbing the Patent Trolls: How We Can Fight Back” featured U.S. Representatives Hakeem Jeffries (New York) and Blake Farenthold (Texas); Alan Schoenbaum, of counsel to Rackspace Hosting in San Antonio; Michael Petricone, senior vice president of government affairs for the Consumer Electronics Association; and Julie Samuels, staff attorney and the Mark Cuban Chair to Eliminate Stupid Patents at the Electronic Frontier Foundation. Panelists took the stage to address the alleged overuse of patents as legal weapons and explained that both big and small businesses can be targets of patent trolls—groups that threaten litigation against companies they argue are infringing on their protected patents, though the patents are arguably broad and commonsense, such as public wi-fi, and not always the claimant’s original creation. In turn, companies threatened with litigation might pay the “trolls” to go away instead of facing expensive court costs to fight the accusations, which are reportedly usually erroneous.

While the issue is currently being discussed in courts across the nation, panelists say the process is moving too slow and stressed the importance of a push for reform, encouraging grassroots efforts and legislative action. They also suggested that in the meantime, pro bono attorneys could assist small businesses that have limited funds to combat litigation.

But some audience members responded with concerns that stricter limitations on patent lawsuits could jeopardize honest businesses and universities that have legitimate patents on products they worked hard to develop.

Slower-than-lightning-speed lawmaking is also an issue when it comes to app development and security. According to panelists in “Mobile Security & the Future of the App Economy,” U.S. lawmakers are struggling to keep up with monitoring and protecting user rights within the ever-changing mobile development sector. Panelist Jaclyn Louis, legislative director and counsel to congressman Tom Marino of Pennsylvania. pointed out a study that showed 95 percent of the top 200 free apps exhibit risky behaviors, further explaining that major threats to consumers include premium-service abuse, data theft, and adware.

Yet many Washington leaders want to avoid stifling development, which could potentially be an effect of stricter requirements on app producers. Louis noted that the idea of a voluntary badge for apps (think Energy Star) could be an effective method of vetting apps for consumers without too much government oversight. To follow updates from other law-related sessions at SXSW, look for #SXSBOT on Twitter. Follow us @statebaroftexas, @lowellmbrown, @hkid, and @LSMader.