Week 3 - Artist Name Protection and Basic Trademark Law

CLASS THREE - Artist Name Protection, Basic Trademark and Contract Law

1. Trade Names are capable of being protected under Federal Trademark Law, State Law, and Common Law.

(a) In the United States, you can acquire rights in a name by simply using it continuously in your trade or business. However, your rights are based on common law (not State of Federal Law) and will only extend to the geographical area where your goods or services are being sold to the public.

(b) Merely filing a fictitious business certificate without actual use in the community doesn’t convey rights to a business name. Same with filing for a corporate name or a domain name. However, such a filing will prevent anyone else from being able to use that name for a corporation or a domain name. States have their own trademark registration procedures, which will protect rights to names registered within the State. If you intend to use the name in interstate commerce, the best procedure is to file for a Trademark with the US Patent and Trademark Office.

2. U.S. Patent and Trademark Office registers and issues Servicemarks and Trademarks which are to be used in interstate commerce. This would necessarily include most music products which are intended to be sold nationally.

3. A trademark can be a name and a symbol or a symbol or name alone, which is used to identify a manufactured product

4. A servicemark is a trademark which is used to identify services as opposed to goods. However, you can register goods under a name you also register as a servicemark if you identify which categories of goods you intend to market under that name. Most musical groups who register servicemarks also apply to use the name in connection with sale of clothing and other items that may be sold at concerts and so forth. Each category of goods or services is called a different “Class”. The following are the most common “Classes” under the Federal Trademark Law which are used when applying for trademark protection by Musical Groups.

class 41 live musical performances - services having the basic aim of the entertainment, amusement or recreation of people.

class 9
recorded music apparatus for recording, transmission or reproduction of sound or images; magnetic data carriers, recording discs;

class 25
clothing, footwear, headgear.

class 41
live performances by singers and dancers 

class 16
stickers. paper goods and printed matter

5. The value of a trademark or servicemark is the right to the exclusive use of the mark for a period of years. Coca Cola is a good example of a trademark. En Vogue is a good example of a servicemark. Once established, it is good for TEN YEARS and can be renewed at the end of every ten years as long as you can show proof of use of the trademark or servicemark in interstate commerce.

6. When should you file for Trademark Protection?

Before serious money is spent to market an artist, most

record companies want to make sure that the name is

available and can be trademarked:

Steps to take to protect names of Artists and Record Companies:

(a) search the trademark records and internet to be sure

 the name you want to use is not being used by someone

else already and is available. If it is not in use, register the

 name (and as many variations of the name as you can think

 of) for use as a website which you will need later. There

are professional trademark search companies that charge a

 fee and investigate not only the registered service marks

and trademarks, but also common law marks that are not

registered which appear on industry lists and so on.

(b) once a name is thought to be available, you can file

what is known as an "Intent to Use" application with the US

Patent and Trademark Office which will protect the name

 for a maximum period of 3 years until your artist’s recordings or materials are released. You will have to eventually supply proof that you have used the name in interstate commerce in the manner you indicate to the Patent Office.

(c) before applying, determine what categories (classes) you want to apply for trademark protection – i.e. musical recordings, musical services, merchandise.

7. What happens if you don’t file for Trademark protection?

As mentioned above, you can still acquire rights in a name without a trademark application being filed in the US Patent Office by simply using the name in commerce, but you will not have the same degree of protection:

Limitations of using but not filing for a trademark are:

(a) you can acquire rights only in the area where you are actively using the trademark

(b) someone else may file a federal trademark for your name after your use and acquire rights in all other territories in the United States and possibly abroad.

Advantages to Federal Registration:

(a) A certificate of registration is evidence of the validity of the Mark in connection with its use with the indicated goods and/or services. The Patent Office won’t issue it unless it has searched their records and not found any similar name.

(b) Registration confers nationwide priority in the mark from the filing date of the application

(c) Registration gives you access to the Federal Courts to hear infringement cases

(d) Registration can be recorded with US Customs to prevent importation of goods bearing infringing marks

(e) Five years from the date of registration, the mark can become incontestable by anyone else if used continuously which has significant advantages in enforcement. You have to file documents alleging such continuous use and asking for this status.

During the time following your registration it is important to collect and retain copies of advertisements of commercial use of the mark in other states (i.e. sales of merchandise or concert activity) or in venues in California that attract patrons from out of state. These will be required to be submitted to the Patent Office to demonstrate continued use of the Mark. As stated previously, as long as the Mark is being used, it can be renewed every ten years. However, to maintain that protection, you must file proof that it is still being used.

8. Trademark Protection in Foreign Territories:

(a) To acquire Trademark and Servicemark protection in foreign territories, you have to file in those territories according to their rules and regulations. Protection can cost up to $250,000 if you were to file in every major country. May want to file in just those countries where you are likely to sell merchandise or expect to be active, such as Canada or United Kingdom. Or, if your commercial activities include the countries comprising the European Union, you might seek a “Community Trade Mark” which if granted will give protection in all member countries.

9. Names and Trademarks in Cyber Space:

If you register a name which someone else has acquired rights either through use, or registration as a Federal Trademark, they may be able to defeat your right to the domain name. Anti cyber squatting law provides remedies. There is also a procedure for resolving disputes like these under the Uniform Dispute Resolution Policy which has a special tribunal designed to settle domain name disputes without going to court. The best approach is to verify that the name is not being used by searching diligently, and then register the domain name and as many variations of the domain name as you can think up. Only the specific domain name spelling you chose will be protected, which means it would be wise to protect other names which are close but not spelled the same way. Have you ever gone to Craigsist.org? Try it and see what happens.

Once you have your domain names protected, you can register your federal trademark when you are about to go public with your band. If you have your domain names and trademark registered, you are fully protected.

10. BAND NAMES:

Band Names can be one of a group’s most important legal assets. Just because someone thinks up a name does not mean that he or she owns it. If a group member thinks up a name and there is no written agreement to the contrary, all the band members who play under that name acquire rights to the name. If one member has created the name and feels that it should belong to him, he must get other members to sign off on that member's ownership or else they will acquire common law rights to the name when they perform.

(a) If a partnership owns a name, after the break up of the partnership, some state courts have held that each partner can go out and use the name unless they signed a written agreement to the contrary. There are several "Drifters" performing for example, in different parts of the country. This is a minority position, but it has happened.

(b) What are the consequences if an artist's name is owned by their record company or Manager?

Answer: Not good. The Company or Manager can use the name after the artist(s) leaves and replace them with new members. i.e. Motown groups such as the Temptations fell into this category. When individual members leave the group, they have to record under their own name (or a new adopted name) since they did not have legal rights to the group name.

(c) Truth in Music Laws

Several states around the country, including California, have passed “Truth in Music” Laws designed to prevent imposter groups from passing themselves off as the real thing when performing in public.

“Press Release:

Beginning January 1, 2008, individuals performing live music under the name of a group that previously recorded music will be prohibited from advertising and performing under that name in California, except under limited circumstances.

California Governor Arnold Schwarzenegger signed the Truth in Music Advertising Act, AB 702, on October 10, 2007. The Act seeks to protect consumers and musical recording groups from “imposter” performing groups that use names such as the Platters, the Drifters and the Coasters but that have no affiliation with the original groups that performed and recorded music under those names. California joins Pennsylvania, Connecticut and Michigan as states that have enacted similar legislation.

Under the Act, groups can advertise and perform under the original recording group’s name if one of the following conditions is met:

• The performing group holds a federal trademark registration for the name of the group;

• One member of the performing group was previously a member of the recording group and has a legal right to use the name;

• The live musical performance or production is identified in all advertising as a tribute or salute, and the name of the performing group is not so similar to the name of the recording group that it would confuse or mislead the public; or

• The advertising does not relate to a performance or production taking place in California.

John “Bowzer”’ Bauman, a member of the 1970s group Sha Na Na, remarked, “Now California audiences will know that they’re getting what they paid for when they go to see a show, and the musical pioneers of the Doo-Wop era, as well as all musical groups from now on, can rest assured that their legacy is safe from this insidious kind of identity theft.”

B. Types of Business Organizations Used by Artists and Labels

Usually one or more individuals provide the money to start a business. These individuals have to consider which form of business entity they want to use to conduct their business. The different options are listed below. Each has pros and cons. The corporation and LLC confer the most financial protection against losses, but are the most complicated and expensive to create. Often individuals begin as sole proprietors and then incorporate once the business is finally successful.

1. Sole Proprietorship

Requires applying for local business license and filing fictitious name certificate if a name other than the actual owner's name is used for the business. As part of the fictitious name filing process, the fictitious name and owner’s legal name are advertised in a newspaper of general circulation. Owner is totally liable for debts and liabilities of company.

2. General Partnership

One of the most common forms of business. Requires two or more people. Also requires city business license and fictitious name certificate if the name of the business is not the same as the name of the owner. Although can be formed orally, good practice requires written partnership agreement. Partners are owners and totally liable for debts and liabilities of company. If a debt is created by the partnership, any one of the partners may be sued individually for that debt. Creditors will usually go after all the partners, and try to collect against the one who has the most money.

3. Limited Partnership

Also requires local business license and fictitious name certificate. Must have written limited partnership agreement which meets legal requirements. Certificate of formation must be filed with the State. Limited partners are only liable to the extent of their investment. General partner(s) who run limited partnership are totally liable for debts and liabilities of company. Another variation of this is the Limited Liability Limited Partnership. This is similar to a Limited Partnership, but the General Partner receives liability protection to the same degree as the Limited Partners. As with a Limited Partnership, the formation documents must be filed with the State to be effective.

4. Corporation

Requires city business license and filing of Articles of Incorporation with the State. Also compliance with Federal and State securities regulations. Owners of corporation can run the business and have their financial liability limited to the extent of their investment if all legal corporate requirements are met. Annual minimum tax fee. There is also a minimum tax of $800 a year or higher (depending on corporate profits) before the shareholders can be paid. If the shareholders make a subchapter S election, the profits can flow through to the shareholders without being taxed at the corporate level, and are only taxed as part of the individual’s tax return. This can prevent double taxation.

5. Limited Liability Company (LLC)

Requires filing with the Secretary of the State. Annual minimum tax fee of $800 similar to corporation. Easier to administer. Limited liability for investor - "members". Key document for this type of business organization is the Operating Agreement. Very similar to a partnership agreement. Contains the rights, duties, and percentages of ownership. Can be taxed as a partnership or an LLC, depending on the election of the company.

6. Joint Venture Agreements

A joint venture is similar to a partnership, but for a limited purpose. Used sometimes when a larger record company wants to partner with a smaller record company. Larger one puts in the money, smaller one signs and records the talent and delivers the records to the larger company in exchange for 50% of profits after expenses once the initial investment of the larger company is recouped. You will often find mutual buy-out clauses included in these agreements.

C. Band Partnership agreements:

Written band partnership agreements are a very common but often overlooked formality. Many bands function on oral partnership agreements, but that is not advisable for several reasons:

1. The law implies that parties who share the control and profits of a business, have become partners whether they know it, or even want to be partners. Therefore, band members could be seen as being partners with each other even if that was not their intent

2. Departing members may set up competing bands using the same name because more than one member may believe, rightly or wrongly, that they control the rights to the band name.

3. Ownership of band property may not be well understood, for example who owns the songs the band writes together? Who owns the equipment?

4. Memories may differ on the agreed split of the profits and expenses

5. Band members may change their minds about what kind of commitment that they have made to the group, i.e. is it exclusive or non-exclusive.

6. A good band partnership agreement should provide for the following:

(a) identify partners

Lawsuits often arise between individuals who disagree over whether they were in fact in a partnership with each other or not. A written agreement is strong evidence of who the partners are and who they aren’t. If someone working with the band is not a partner, they will be either an independent contractor or employee of the band. See below for more discussion regarding these relationships.

(b) designate profit splits between the partners

(c) identify property or money contributed by each partner

(d) name managing partner and means for changing in the future (possible rotation of managing partners)

(e) restrict ownership of the band name to the partnership and exclude any leaving partners’ use of name without permission of all the other partners

(f) address whether band members agree to work exclusively for the band; if agreed they can work outside the band, agree they will not use the band name

(g) address whether publishing rights to songs created by the band are going to be owned and controlled by the partnership

two possibilities:

(i) each band member has their own publishing company

(ii) all songs that are recorded by the group to be put into one publishing company owned by the partnership

(There are pros and cons of each approach)

(h) include terms for replacement of a partner, how it is done, what the outgoing partner receives (usually a share of publishing income and recording royalty income for albums he appeared on) and what the incoming partner receives

D. Employees, Volunteers and Independent contractors

If you are working with, or providing services to a band or label, and you are not a partner, generally speaking you will fall into one of three legal relationships:

- employee

- independent contractor

- interns 

- volunteers 

It is important to avoid creating an employee relationship unknowingly, as employees create specific tax and other obligations. It is best to have a written agreement between the parties which specifies the type of relationship to avoid misunderstandings and un-anticipated legal consequences.

1. Employees:

Employees generally work at the location of the employer and under supervision by the employer in the execution of their duties. By law, the employer must withhold federal/state taxes and social security, from salary, pay unemployment insurance, and make any other legally required deductions. If the employee is discharged without cause (i.e. laid off) the employee can apply for and collect unemployment insurance. If the employer has a certain number of total employees, he may be required to have medical insurance plans. At the end of the year, the employer has to prepare a W-2 form showing what was paid to the employee for the year, and what deductions were withheld. A copy goes to the IRS and to the employee.

2. Independent contractors:

Generally, independent contractors are persons who have their own unique skills, tools or license (if one is required), place of business, and do not require supervision. Personal managers, accountants, lawyers, producers, road managers, sound and lights specialists, and others fall into these categories. Musicians can be either depending on the circumstances. A musician working for the symphony would normally be an employee. A musician brought in for brief tour or a gig could be characterized as an independent contractor.

Independent contractors are much simpler to engage and pay than employees. You don’t need to withhold taxes or social security or pay unemployment insurance. The discharged independent contractor is not entitled to unemployment insurance. At the end of the year, you have to file a 1099 form with the federal government stating how much the individual received. Generally, if you are working as an independent contractor, you should have a business license in the community in which you live or work.

3. Interns

Students and interns who volunteer their time without expectation of compensation are quite often utilized by groups, labels, and managers in the music industry. The opportunity for those individuals to get valuable, real-life music business experience and school credit is seen as a reasonable trade- off for the absence of pay. The employer usually has to agree to certain requirements of the school that insure that the student is getting the type of work activity that meets their academic criteria

4.  Volunteers

Young people will often seek to volunteer to work with their favorite local label or even artist for the experience. This can lead to paid work if they excel.

If you have an oral agreement with someone providing services, when that person is discharged, you may have a problem if they try to collect unemployment insurance. If they do, the State (and eventually the IRS) will come after you for all back employment related taxes unless you can show that the person was actually an independent contractor. Alternatively, you may expose yourself to a claim that they were your business partner and entitled to a share of the profits!

How do I know if I’m an independent contractor or an employee?

You are probably an employee if:

•         You are paid by the hour
•         You work full-time for the company
•         You are closely supervised by the company
•         You received training from the company
•         You receive employee benefits
•         Your company provides the tools and equipment needed to            work
•         The services you provide are an integral part of the                      company’s business
•         You are permanent (the more permanent you are the more            it  looks like you are an employee)

While these are useful indicators, you do not need to meet all of the above factors to be an employee.  

You are probably an independent contractor if:

•         You are paid by the job
•         You set your own working hours
•         You provide the tools and equipment needed to do your job
•         You work for more than one company at a time
•         You pay your own business and traveling expenses
•         You hire and pay your own assistants
•         You can earn a profit or suffer a loss as result of your work          for the company
•         You operate a truly independent business

E. Basic Contract Law

Any study of the Music Business must include a discussion of contracts. The reason is that practically every transaction in the making and exploitation of recorded or live music, if professionally handled, will require a contract. Here are just a few of the agreements encountered in the Music Industry on a regular basis:

1. Band partnership agreement

2. Personal Management agreement

3. Songwriter and Publisher agreement

4. Side Artist Agreement

5. Producer Agreement

6. Live Performance Agreement

7. Synchronization License Agreement

8. Song Split Agreement

9.  Mechanical License

10. Recording Contract

11. Release agreement

12. Tour agreement

13. Publicist Agreement

14. Independent Record Promotion Agreement

15. Digital Distribution Agreement

16. Record Distribution Agreement

17. Sample Use Agreement

18. Endorsement Agreement

19. Merchandising Agreement

20. Studio Agreement

21. Studio Engineer's Agreement

22. Mixing Agreement

23. Musician Tour Agreement

24. Music Video Production Agreement

Every song recorded, every video made, and every concert played should have contracts in place with the key participants and the agreed terms. Large amounts of time and money are spent needlessly due to conflicts over oral agreements.

F. What are the elements of a binding contract?

1. voluntary agreement

(parties must intend to contract with each other;absence of force or duress)

2. offer

(offer must be communicated and contain understandable terms)

3. acceptance

(acceptance must be communicated or by doing the act required)

4. legal purpose

(contracts requiring a party to violate the law are not enforceable, i.e. hit men)

5. consideration passing to and from each party

(generally money or services, or the forbearance to do a legal act;(Note: you cannot enforce a promise to make a gift because there is no consideration passing to the person who is making the gift)

6. legal capacity of the parties

(minors under 18 and mentally incapacitated parties lack legal capacity; to be enforceable, a minor’s contract must be approved by a court or they may disaffirm upon reaching 18)

G. What are the Basic Steps to Entering a Written Entertainment Contract?

Entertainment contracts range from simple one page agreements to complex agreements ranging 100 pages or more. Whether long or short, complex or simple, contracts can be pitfalls for the unwary, particularly if one of the parties is inexperienced and unrepresented. The following is a brief checklist of prudent steps to take in every situation

(1) Research the background of the other party when entering long term agreements

No matter how favorable the terms of the contract, they won’t mean much if the company is about to go bankrupt or has no intention of carrying out their end of the bargain. Even if you think you already know something about the other party, do your due diligence. Check with others who are working with them and get current information about their activities. Go on the internet and see what stories can be found. Do they have a reputation for paying or not paying royalties?

(2) Ask for a deal memo

A deal memo is a short version of the basic terms of the agreement without any of the “boiler plate”. It will enable most lay people to see the key points of the agreement being proposed.

(3) Negotiate

In practically every case, the first offer received does not reflect the best terms that the other side can offer. The only way you will ever find out whether the other side is willing to increase their offer in various aspects is to ask. More than likely, there will be some movement before the other party reaches their limit. If you are unaware of what to ask for, get an entertainment attorney to help you out. Be prepared with justifications for your requests. Don’t be afraid the other side will just “walk away” if you ask for more. That rarely happens.

(4) Understand all the contract language before you sign

Often the basic terms of a deal memo are negotiated which is then followed by the longer more formal agreement. Make sure that you understand all the terms in the long form agreement. Don’t assume that what you don’t understand won’t hurt you. If you don’t understand the terminology, consult with an entertainment attorney until you are clear about all your obligations and compensation. If there are points which need further negotiating to make them acceptable, do it.

(5) Keep a copy of the signed agreement in a safe place

You never know when you might have to refer back to the original agreement. Have a filing system that allows you to find your important agreements.

H. Does a Contract have to be written to be enforceable?

Most contracts are not required to be in writing and can be enforceable by a court whether they are oral or in writing. But a written contract is practically always better!

Why?

(a) with oral agreements, parties often misunderstand the nature of their obligations and expectations. A written agreement causes both parties to review what they expect from the transaction and identify any misunderstandings before proceeding.

(b) in the event of a breach of the agreement, the terms of a written can be more easily proved n court. it is much harder to prove what was agreed upon if no written agreement. parties must rely on memory and verbal testimony. Also an oral agreement must be capable of being performed in one year or the law requires it to be made in writing.

H. What is a Breach of Contract?

When one party does not perform the agreed terms of the agreement. If the breach is substantial, the non-breaching party can sue for the following:

(a) actual money damages due to the breach

(b) an injunction to stop someone if money damages are not sufficient or capable of preventing harm to injured party

(c) prevailing party can get their legal fees paid by the losing party, but only if the contract provides for it