Padd Solutions

Converted by Falcon Hive

Knock offs are nothing new in the fashion world and frankly not in the film world either. For almost the entire glorious history of cinema, smaller, less artistically ambitious B films have thrilled those in need of constant stimulation. So outside of porn B-films are one of the prime time killers for those long on aimless and short on taste.

And the Global Asylum, Inc. (popularly known as The Asylum) does for movies what Chinatown does for Kate Spade…it’s rips it the hell off. But there has to be some appreciation for their sophisticated approach to a curious intersection of art and the law. First off, one should know that most fashion items are not protected by copyright, yet films are. So then how does Asylum get away making a film called “the Terminators,” which tells the story of a resistance movement that battles a horde of evil machines built by the military to protect mankind but gone horribly astray (timed for release around Terminator-Salvation)? Oh yeah and their bold knock off of Cloverfield, Monster. These prolific purveyors of purloined plot lines, promotion campaigns, and product packaging have honed their product pipeline to coincide with the release of big banner tent pole studio productions. And in the process they have skillfully gamed one of the major (albeit logical) blind spots in copyright law: the idea/expression dichotomy.

Copyright, put simply, does not protect ideas. Rather it protects the "expression" of an idea. What this means is that while three different people might have the same idea, which they could all run with, their unique expression of that idea could result in three separate and unique copyrights. That might get some to scratching their heads. But let’s think of three people painting the same still life scene of an apple and grapes in a plate. All three of them will have the same combination of fundamental elements: an apple, grapes, and a plate. However, they may all be painting the scene from different vantage points. They may all use a different color palette; some may choose a realist approach, while some may go for something cubist. The point is that while the basic idea of the scene is the same between artists, the expression of that scene is different.

The same basic framework can be applied to film. So for example, imagine the basic idea being a great space war involving a rebel alliance versus a galactic empire. There are myriad ways of expressing that idea. But, the minute one of those expressions calls for a religious order of knights called the “Jedi” with a particularly gifted one being named Luke Skywalker, well then you’re likely infringing upon the galaxy of Star Wars copyrights.

This brings us back to cinephiles at Asylum. While their love of film cannot be denied (nor confirmed) they are not really violating copyright law at all. For example, The Terminators seizes on the *idea* of a human resistance battling a horde of killer machines. Moreover, little tip for aspiring Kubricks, you cannot copyright a title. Hence the title “The Terminators” is perfectly fair game too. That’s a far cry from a savior machine played by Arnold Schwarzenegger coming from the future to protect John Connor, savior of humanity. Again, the idea and the expression are different enough to escape infringement, even though Asylum’s release is calculated to piggyback on the release of its Big Studio kissing cousin.

That’s just the way it is. But look at it this way: can you possibly measure sthe fun you will have on bad movie with your friends, taking in the poignant power of The Terminators with your friends.
I'm about to write why I don't care about the Pirate Bay decision in Sweden. In fact I'm probably not alone. And let me assure you that the four young men who run the pirate Bay are still smiling that Cheshire cat white. And while one might argue they're simply nihilists the reality is that they know that this entire trial has given them the greatest press opportunity ever provided by the government. And there will be a full round of appeals that will delay any resolution for some time. But more importantly this case actually represents another increment in a line of legal thinking that first occurred with the Grokster decision a year ago.

I have to hand it to the tribunals out there to understand the difference between hypertechnical argument and just plain reality before them. Let me say it again, a website that tracks torrents is not itself transmitting and distributing or actually copying any copyrighted material. But for god sakes man when the site is called the Pirate Bay with a pirate ship and a skull and cross bones (seriously?) and the founders created a VPN network so that their users could escape the prying eyes of the law, do we really have to go through a full trial? Yes, that was a rhetorical question, but very grudgingly rhetorical. I mean this is basically like a gangster trial where the Don never pulls the trigger but has a thug army to gun down the opposition.

But like any good gangster trial the gangsters still run the streets even after the judge has swung his gavel. After this decision nothing much will change outside of Sweden for sure. There are still plenty of torrent tracking options all over the globe. And while the top celebrity for now has been sullied a bit, those looking for pirated software, games, music, books, or porn, will not be disappointed any time soon.

This is not to dismiss the entire significance of the trial. The trial draws a very clear line in the sand and makes clear that this hypertechnical argument has no value. Most importantly, the trial makes clear that the law will not legitimize the pirate Bay so-called business model. And this is what the pirate Bay founders were hoping to achieve as a little bit of gravy on top of the publicity.

Or did the court get seriously played? If this decision looks like the Grokster decision it may be true that the hypertechnical argument was not validated, but Grokster actually gave clear and cogent guidelines to prospective file sharing operations. Law professor Michael Geist said of Grokster : "While the unanimous verdict left the industry calling it a '9-0 shellacking,' the reality is that many file sharing services will be pleased with the decision as it provides them with a roadmap to avoid future liability."

For now all you have to do is create the impression and broadcast to your users that your technology is really safe for non-infringing purposes and that's what they should be doing. If that's the case here, then the future Pirate Bays of the world will just have to fly their pirate banner a little lower.
Trying to figure out the point where piracy ends and legitimate business begins is more alchemy than modern science. For the two are like serpent heads sharing the same body. Now with increasingly regularity the entertainment industry players are adding "joint venture" to "litigation" on their checklist for dealing with the "pirates." Exhibit A is Dutch band “Beep! Beep! Back up the Truck” releasing its entire catalogue on Mininova, a well known torrent site with candy store like access to any illegal content you desire (which is not to deny the site has also greatly expanded the reach and appeal of unsigned artists.) Exhibit B is Facebook's recent acceptance (though this was very short lived) of the Pirate Bay’s new and ready for prime time Facebook app.

If the lack of a “shock and awe” reaction from both Facebook and the industry comes as a surprise, it shouldn't. As traditional means of shaping the public's habits to conform to the pre internet yesteryear (i.e., litigation) have all but failed, these technologies have become more firmly rooted in the public entertainment consciousness. There are very few teens left who don’t think of torrents as a natural way to hit their recommended daily content allowance.

Now get your mind to gander the possibility of Facebook’s 175 million users naively and/or intentionally superpoking themselves into sharing illegal content, through the easy-breezy convenience of an app. And why turn someone into a zombie someone when you can share torrent trackers for that really rad American Idol DVD box set? The thought’s enough to immediately bork your brain.

Well Facebook ultimately decided to bork the Pirate Bay app. And furthermore, Facebook is actively, but quietly, blocking all Pirate Bay torrent links. But the point to note is that this was all done very “hush hush” to limited fanfare. One must recognize that although Facebook covered itself as a legal matter from having anything but absolute authority to reject any app for nearly any reason that does not cover it in terms of the potential user fallout. As Facebook has discovered already, its users are sometimes a very vocal and cranky bunch when it comes to unilateral changes to the Facebook ecosystem that were nonetheless "legally authorized."

The fact is that the pirate bay and torrent tracker sites in general can be put to legitimate and legal tasks, as with the Mininova example above. So users can easily come to see these actions as curbing their “right" (yes, I am aware that the users really have few rights outside the Facebook terms of services agreement) to communication and self expression. What if the management becomes seen as a corporate tool for the man along the lines of the RIAA? This is difficult terrain to navigate, but it is the flipside of having an open and porous social media platform with an application platform layered within.

Hence the management of social media ventures are taking a more nuanced (though probably not sophisticated, as we are all bumping our heads in the dark) position on copyright infringement. Rather than immediately chase down the end
Because Limited liability companies (LLC's) are a new creature in the alphabet zoo of business entities (which includes such varied species as the LP, LLP, C and S corps, etc.) there is a great deal of confusion regarding how to structure one to mimic some of the equity and incentive maneuvers made through corporations. First and foremost in many an entrepreneur's mind is how to provide "stock options" when there is no "stock." Remember an LLC is basically a turbocharged partnership, so there isn't stock that one can issue. Owners aren't owners because of stock, but rather because of the membership interest they carry. So no stock, no stock options, restricted stock, or actual shares.

Like many other legal "tricks" in the LLC world, your lawyer will have to come up with structures that approximate the outcomes in a corporation. Hence, the LLC does not offer options per se.

A potential approach to providing incentives to employees in an LLC is to share "profits interests." by that I don't mean a share in annual profits. Rather I am talking about a share in the profits resulting from the sale of the LLC altogether. While a share in annual profits is a relatively simple concept (I.E., the employee gets a piece of whatever monies are distributed by the LLC), the latter concept is not.

A profits interest in the vein I'm talking about is akin to a stock appreciation right. When one receives a share in profits upon sale, one is receiving a piece of the increase in the LLC's value between the time the profit share was granted and the time the LLC is sold. So it’s not a piece of ongoing operational profits, but rather a share of the increase in the value of the LLC over a period of time. And unlike real stock options, there is potentially a more favorable tax treatment to this type of profit share grant.

Such a profit share is typically structured and provided through LLC units. Units are a way of parceling out an interest in the LLC. So rather than saying a member has fifty percent of a hypothetical LLC, if you were to represent the LLC as 100 units, then that member would have 50 units (or fifty percent of the total units). So you see in that respect units act like shares of stock.
Now it gets trickier. The founders who own all the units jointly can provide incentives to consultants and employees by not giving them the founders' units, but rather by creating a new class of units altogether. So for example, the founders would all hold class A units and the employees and consultants would get class B units. Those class B units would be restricted to prevent sale and would only provide loss or gain on the sale of the LLC. And unlike a stock option there’s no capital outlay on the part of the grantee and no strike price (i.e., the price one has to pay to exercise the option.). Setting up a profit share plan such as this one can have positive tax treatments for the recipients as well.

So when thinking of what entity form you will go with for your venture, you should not dismiss the LLC, simply because as a traditional matter the corporation had the most tools to incentive-ize your people.
Dearest Readers,
I am happy to announce that this blog is being featured as part of a collection of related blogs from quality bloggers, Entmedialaw.com. The world gets smaller, but the info pool gets deeper and harder to swim. And yet there are so many interesting things that we might miss if we are afraid to wade into the deeper part of the pool. Entmedialaw.com, is great way to raft your way to through all this information without fear--it’s not as structured as a community and not as loose as a network. It is the creamy center that allows for the collection of the best content, organized in a logical and simple fashion for those of you who want business, media, and entertainment insight all at once. The goal: to create a place where highly relevant and timely content gets to play together. And more importantly, the goal is to create a place where the readers and bloggers can engage each other.

You can get a sense of the power of the site by visiting it and choosing a keyword on the left. Here’s a snapshot of the keyword breakdown:

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You’ll see that the other bloggers have unique voices and areas of interest that can provide you a deeper insight into the big picture of how law, commerce, and entertainment coincide and collide. For example, the Bennett Law Office (http://ipandentertainmentlaw.wordpress.com/) does a great job tracking trends in copyright. Of course, you should try to acquaint yourself with all of the bloggers. I hope you enjoy.
If you have grown bored of the copyright debate in this country you might want to begin setting your mental TiVo to record recent headline worthy episodes. Business models for all entertainment products are violently changing, being raised from the dead, and facing trial...all at the same time. If that isn't the best of General Hospital mixed with Lost for a season opener to tickle the legal minded crowd then, frankly, nothing will satisfy you people.

Beginning with violent transformation, there's the recent move by copyleft diva Gwen Stefani. Do you like No Doubt, do you like live musical entertainment for you and the family? Well here's the deal you've been waiting for. If you buy a ticket to their next concert, you will have access to a completely legit, no RIAA fuss digital download of. ..wait for it: the entire No Doubt catalogue. This far surpasses similar moves by Radiohead and Nine Inch Nails, who provided free downloads of single albums. But this is an entirely different universe of "free goods." If the industry is now sanctioning this kind of course, then it's a clear sign of the vulnerability/desperation in the air. Or is it a sign of a rationale shift in profit centers with CD’s being loss leaders for increasingly lucrative live tours? Consider that the film industry has long viewed the theatrical release widow of a film as a genuine loss leader for home video and pay TV revenues. Whatever it is it sure is interesting.

Then there is the character coming back from the dead. In this case, it's the RIAA pushing out some last minute lawsuits in the middle of its own great recession belt tightening. That being said, hope and change has given us more of the same as Obama’s DOJ wants to walk the RIAA’s path in its high profile suit against Joel Tenenbaum (who is being defended by Harvard law professor Charles Neeson and his students). That suit has taken a serpentine path of twists and turns with the Judge almost sanctioning Neeson for his “antics”. And Neeson’s newest argument that the statutory damages scheme under the copyright act are unconstitutional is being jointly rebuffed by the RIAA and the DOJ. Who would think that the RIAA and the Obama DOJ would team up? But in this case where there is such a high profile challenge to a foundational aspect of the copyright act, maybe this twist is just another basic plot point that was to be expected.

Finally, there’s the cliffhanger outcome in the PirateBay trial. Yes the swarthy, scurvy lovin’, peg legged lotharios of the digital sea have concluded their media circus trial with salty seamen wisecracks aplenty. For their part, the Piratebay (if you don’t know who they are, you are probably one of the few honest net denizens left—they are one of the most notorious bittorrent sites on the net), have done nothing to spin their authority disdainful image into something more wholesome. Rather, they have put much of their defense on the technical issue of where the allegedly infringing content is stored. On the other had, the prosecutor is calling for real Swedish jail time. And even better, while the verdict is pending, the Piratebay has launched a new VIP, private access only sharing site over VPN. With a total disregard for the possible fate that awaits them, you gotta love the size of the founders’, um…database.

So there you have it folks, twists and turns and as the copyright world turns, the season finale is anyone’s guess. All things copyright are in an epic state of flux, whether there has been a lull or not with all of our minds and wallets focused on stimulus packages and employment forecasts.
When discussing social media law, it is often a mélange of existing legislation and speculation about interaction…the interaction of rapidly evolving social media platforms and the sometime bizarre fact patterns that they can lead to (e.g., the sad but true case of Meghan Meier.) Rare is the case where there is a law that actually speaks to social media, let alone to the unique situations that can occur. But such is the case in the typically all fair zone known as love and war, with NJ’s Internet Dating Safety Act - (S.B. 1977 / A. 4304).

This Act has already been signed in to law (Effective May 15, 2008) and it requires dating sites that are accessible in N.J. to disclose whether or not they conduct criminal background checks. Similar bills aimed at online dating have been proposed and died in Illinois, Michigan, Florida, Texas, Virginia, Ohio, and California.

The point is that there is an emerging state by state framework of laws targeting particular social media operations. While there have already been different state rules regarding taxation and online income/purchases, this law is a marked shift towards real hands on legislative treatment. Not everyone is pleased with the law and it set off an axis and allies style battle between the major online dating players, True.com, Match .com, and Yahoo Personals. In fact it was True.com that pushed the lawmakers’ buttons to move forward, presumably because they are the only one with criminal “screening” in place, while the others panned it.
Lovefraud.com is a web site devoted to arming the soon to be forlorned lovers of the world, chronicles all manner of love fraud, including on the net. (If there is a Yelp for restaurants, why not one for romance?) And this is their decidedly, take on True.com:


How does True.com screen for married people? It asks them to certify that they are not married.

And how does True.com run a background check? According to the Internet Alliance, True.com provides the names people give when they sign up—without attempting to verify any identities—to Rapsheets.com, which then runs the names through its database of criminal records. Rapsheets.com gets its information from various state governments that choose to participate—and many of them don’t. Plus, state records are notoriously incomplete—many counties do not even report crimes to a publicly accessible central database.

The bottom line is that True.com claims to screen for married people and criminals, but it reality, its screening is almost useless.


So what is the moral of the story here? Before targeted legislation of this nature begins to territorialize what has been a largely successful self regulatory approach to social media, it had better understand the technology in place. No one doubts that internet dating fraud can have dire and tragic consequences. But slapping product labels like “does/does not conduct criminal background checks,” without a rigorous testing process, is like having the FDA shoving pills out the door before a single lab coat gets to fire up a microscope.