Fashion Distribution Agreements

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Biletsky Law - FashionThe time has come, the drawings are done and the sketches are ready to become a reality. The only thing missing now is…who is going to buy the product? Of course in many situations, this question comes up well before the design stages, but regardless of the stage of development that you are in, it is a question that needs to be answered.

For many designers and producers, a distribution agreement is the key to being able to commercially exploit a product. But before signing away the products that you’ve worked so hard on, it is important to have a grasp of what these agreements will mean for you and your product. Are you giving away too much? Are you being robbed of any credit? And of course, are you getting the maximum compensation and exposure possible?

How you obtain the distribution deal depends greatly on your goals, your product, the market and most of all, your connections. Once you have engaged the distributors and the deal is in motion, there are several important considerations to keep in mind.

Exclusivity

Similar to obtaining the deal itself, whether or not this distribution will be exclusive (either on your part or on theirs) depends on many factors. A larger distributor will likely have a multitude of designers and will not be exclusive to you. However, depending on the product line, you may be exclusive to them. This favors the distributor in that they know that because this product is being made exclusive to them, that they may be able to charge their clients more for the exclusive product and that they will have some leverage against you since you are not able to sell the product to anyone else.

Term

The term of the agreement will let you know how long this relationship is to last for. The term can be anything from just a season to several years. In addition to the initial term, there may be an automatic renewal of the term or it may need to be negotiated once the first term ends.

Purchase Order

As with most other things in this agreement, the purchase order depends on several things such as who the distributor is and what kind of product you are designing. In certain cases, especially when you are held to be exclusive to the distributor, the contracts may be either a “requirement contract“ or an “output contract.“ A requirement contract is a contract where the designer or owner delivers to the distributor as much of the product as they “require.“ An output agreement is one where the distributor will purchase everything that the owner is able to produce.

Purchase Price

The purchase price is usually what gets the designer or owner’s attention. These deals are often straight purchase orders for a bulk amount of the product either based on a unit price ($2 per shirt for instance) or based on the bulk amount ($2,000 for 1,000 shirts). These figures may vary depending on what kind of purchase order the distributor is putting in.

Conclusion

There are of course many other provisions that you should be aware of including quality control, storage, marketing, advertising, and credit. Each of these topics, like the rest of them, depends on who the parties are and what the product is. One of those provisions that a designer often regards as being important is credit. Depending on the product itself, there may not even be any credit provisions or they may be one that just requires that credit be provided on the product itself. Others may have requirements that the designer be provided credit in the area in which the product is being sold (think of the clothing department at a major retail store that says “designs by ______” or “by ______”).

What it all comes down to is that there are many deal points in distribution or licensing agreements and unless you are competent to negotiate each of these provisions, it is best to have an attorney who has experience with fashion distribution agreements to take care of this agreement for you. For assistance with your fashion legal needs, contact Biletsky Law.

 

Where to Incorporate

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IMG_0464When the topic of what state to form your business in comes up, most people immediately say Delaware. In certain situations, this may be the right answer, but the state of Delaware is often thrown around as the answer more than it should. There are many issues to take into consideration when determining which state is the most ideal for your business to be formed in. We will go through a few of these important considerations below.

Where are you located?

Chances are it’s not in Delaware. Delaware certainly has its’ advantages when it comes to the cost of running a business as well as taxes, but it is often forgotten that you will also likely be subject to the fees and taxes of the state that you operate in. For example, a business that is incorporated in Delaware but that is doing business in California will likely need to register as a foreign company in California and will then likely be liable for California fees and taxes. However, Delaware does makes it easy for most small businesses in that if you are registered in Delaware, but are not doing business in Delaware, you will likely not need to pay any Delaware taxes (although certain fees may still apply).

What about the other states?

Delaware has long been held as the state that most people think of when it comes to where companies are from (especially corporations). There are many reasons for this, but one that sets it apart from the other states is called the “Court of Chancery”. Although it’s certainly a fancier name than your normal “Superior Courthouse”, this court’s main focus is business. Cases and controversies that go through this court enjoy expedited case times and are presided over by judges with particular experience in business issues. But at this point, this court is probably not what is convincing you to incorporate in Delaware.

Low and behold, other states saw Delaware’s success in attracting businesses with their low costs, no taxes, and discrete reporting and those states decided to jump on the bandwagon. The two other states who have made a name for themselves as the favorites amongst businesses are Nevada and Wyoming. These states offer similar low or no cost fees and don’t require certain reporting such as shares issued or who the directors are (this can be a big advantage when someone doesn’t want the world to know that they are the owners of the corporation for whichever reasons).

Nevada and Wyoming have even upped the ante with Delaware in that neither state instills any personal tax on a corporation owner and has no annual franchise tax. This is a substantial advantage in particular for other states which do have annual franchise taxes, such as California. California requires that an entity pay a minimum of $800 regardless of whether the company is even running or is operating at a loss. Having no such franchise tax in states such as Nevada and Wyoming is a great advantage unless you run into the issue that I mentioned above…where you still may be subject to the fees and taxes from the state you operate in.

So what does this all mean?

States such as Delaware, Nevada, and Wyoming have been designed as being very business friendly in the hopes of attracting your business to incorporate there. Often, many people will recommend one of these states as the state of incorporation. But the biggest issue that tends to be forgotten is that forming your company in another state does not necessarily leave you free and clear from having to pay the state that you operate in.

For more information on what state to incorporate in, contact Biletsky Law.

 

Work-for-Hire

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Biletsky Law - Work for HireIf you take a closer look into your favorite movie, television show, or song, you may come to realize that there are a lot of different components that go into these productions. Even more so, each individual who contributed to the project may have different roles in the production as well. Take a hit song for instance; the music that you are listening to is likely owned by a record label and/or a publisher. Although it is the artist’s song that you are listening to, the song is likely owned by someone other than the artist. Likewise, the important individuals who produced or mastered the song likely have no ownership interest in the song either.

This comes from an important concept in copyright law called a “work-for-hire.” Under the U.S Copyright Act, a work-for-hire is something that is either a work prepared by an employee within the scope of their employment or a “work commissioned for use as a collective work, part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as an answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire” (17 U.S.C 101) .

Before explaining the concept of work-for-hire more, it is essential to understand why it is so important for something to be categorized as a work-for-hire. What it mostly comes down to is ownership. When a work-for-hire is commissioned either by an employer or by someone contracting an individual or a group to create the work, that person is entitled to the complete ownership of the copyright within that work. Since the owner of the copyright is the only one who is legally allowed to exploit the work (without permission or a license otherwise), this means that the owner gets all of the money that comes out of the work.

Now that you see some of the importance of a work-for-hire, we can discuss what it is and when it applies. Normally, a person automatically owns the copyright in the work that someone creates (an artist owns the painting, a writer owns the book, etc.), but when something is designated as a work-for-hire, the employer or the person commissioning the work automatically becomes the owner. As I mentioned above, the work-for-hire concept is often found in an employer-employee relationship. A big issue that the courts have had to deal is when an independent contractor is involved, but that is a topic for another article. The reason that the employer-employee relationship requires that the works that are created by an employee become the property of the employer is simple; the employee is being employed to create the work (note the “within the scope of employment” definition above; whether someone is within their scope of employment is again, another issue).

In addition to the typical employer-employee relationship, there are also the works that are commissioned by another person. This is where we come back to the example of the song, or a movie, or a television show. A movie is a great example because it is even defined in the U.S Copyright Act as something that a work-for-hire may qualify for. Songs often qualify as well under one or more definitions such as “collective work” or “compilation”. The reason songs qualify is because they are actually compilations or collective works. If you think about it, it is not as often that you find an artist that writes, records, producers, and masters their own song (Although these artists still do exist!) and that’s where the compilation part comes in.

So to bring it all together, a work-for-hire is a vital piece of copyright law that allows other people to own and monetize off of the work of others. Of course, the people who make it are often rewarded (think advances, royalties, cash compensation, etc.) and that is just one part of what makes the entertainment industry function.

For more information on the concept of a Work-for-Hire, contact Biletsky Law.

New Mexico Tax Incentives

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Biletsky Law - New MexicoMany states around the country offer tax incentives to film and television productions in an attempt to lure the production into the state. With major motion picture and television productions comes the possibility of a state receiving a great economic benefit from having the production team located in the state as well as the use of many of the state’s resources.

While Louisiana, Georgia, and Massachusetts have been recognized as some of the states with the most favorable tax incentives, other states such as Alaska and Pennsylvania have started making a name for themselves on the list. On April 10th New Mexico has also boosted their tax incentives when Governor Susana Martinez signed a new tax incentive bill which allows production companies to pre-assign their tax rebates to third parties and which also extends a 30 percent tax credit to stand-alone pilot episodes under the condition that they shoot the show in New Mexico and encourage producers to hire and source locally.

This move marks an effort from New Mexico to join the ranks of states which offer production companies substantial tax credits in order to bring in revenue from the entertainment industry. But the new productions that may be enticed to film in New Mexico won’t be the first ones on the scene. Starting in 2008, the hit AMC television series “Breaking Bad” began their five season run by shooting on location in New Mexico.

It is no wonder that the bill signed by Governor Martinez applies to pilots which may at some point become television shows. The five seasons of filming that Breaking Bad brought to Albuquerque likely brought substantial revenue to the city and state due to the production crew and actors who stayed in New Mexico during the production as well as the locations and resources that were used throughout the series.

Although these immediate economic benefits are the majority of the reasoning behind these types of tax incentives, certain hit movies or television shows also leave a lasting impression in the area where the production was filmed. Take the sets that were used for the Breaking Bad filming for instance. Now that the film crews and sets are gone, a new type of tourism has been created in the city of Albuquerque. This type of tourism, which is often created as the result of a hit production being filmed in a certain location, is a form of “pop-culture” or “filming” tourism. Tours, guides, and maps are set up which provide tourists with information on the locations that were used for the production’s filming. http://www.visitalbuquerque.org/albuquerque/film-tourism/breaking-bad

For more information on state-by-state tax credits, contact Biletsky Law.

 

 

Happy Birthday Copyright

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Biletsky Law - Happy BirthdayThe timeless classic “Happy Birthday” has been around in some form since as early as the late 19th century. However, for the last 80 years, there has been an underlying ownership claim to the song which has required those who had performed the song to pay license fees or royalties.

First, a little background about the song “Happy Birthday.” In 1893 Patty and Mildred Hill composed a tune called “Good Morning to All.” Around 1912, lyrics were added to this tune and the song became “Happy Birthday to You.” Up until this time, there were never any registered copyrights for the song and it is even disputed if the song itself was written down anywhere. The reason that this is an important aspect of the story is that one of the requirements for a copyright to exist is that it be embodied in a “tangible medium of expression.” (See my blog post “WHAT’S IN A COPYRIGHT?”).

In 1935 a company named The Summy Company registered the copyright in a song entitled “Happy Birthday.” This copyright was then purchased by Warner/Chappell Music for an estimated $5 million.

Modernly, Warner/Chappell Music has aggressively protected what the Guinness Book of Records calls the “the most recognized song in the English language.” Synchronization licenses (a license to use the music in a TV show or movie) can cost thousands of dollars with willful copyright infringement coming with a hefty $150,000 penalty.

In 2013, a class action lawsuit was filed against Warner/Chappell Music to refute their copyright claim to the renowned song. The class action was brought by Good Morning to You Productions Corp. on behalf of the individuals and companies who had to shell out sometimes thousands of dollars to use the song in television shows and movies joined the suit. One of the main arguments against Warner/Chappell’s ownership is simple, that the original tune, made in 1893, is no longer subject to copyright protection.

Like most other laws in the U.S, copyright laws have evolved over time. The largest milestones in copyright law in the U.S have been in the years 1790, 1909, 1976, and 1998. Without going too specific into each law, copyrights under the 1790 law enjoyed a duration (how long they lasted) of up to 28 years. Then the Copyright Act of 1909 changed the duration to a maximum of 56 years. The modern 1976 Copyright Act changed the duration to the life of the author plus 50 years. Finally, duration was changed to where we are today, the life of the author plus 70. As you can see from the duration of copyrights above, a work that was copyrighted in 1893 would likely not still be valid.

As of now, the suit is slowly inching towards trial with motions having been heard as recent as March of 2015. Either way, this trial is likely to last for a while as the battle between one of the largest music publishers in the world continues.

For more information on copyright laws, contact Biletsky Law

Cuba Trademarks

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Biletsky Law - CubaFor the last 50 years, Cuba has been an almost unreachable destination for U.S citizens. Sure, there were loop holes and ways to get there, but for the majority, Cuba was an off-limits territory. This all changed in December of 2014 when U.S President Obama declared the easing of the embargo that has placed restrictions between the U.S and Cuba. With this announcement came a whole slew of new issue involving U.S and Cuban relations including visitation, immigration, telecommunications, and of course business.

Now that the trade lines between the U.S and Cuba are starting to resurface, there is a new realization of the untapped market that lies just 90 miles from the Florida coast. Cuba, which is home to over 11 million people, has not been saturated by any U.S companies for the last half century and as businesses start to pour in, there are several vital issues to take into consideration. One such consideration is the protection of intellectual property and, in particular, trademarks.

Cuba is a “first to file” jurisdiction where the first individual or company to file a trademark will be entitled to the use of that trademark. This is in contrast to the U.S which has a “first in use” policy which makes it that whoever used the mark first is the one that is entitled to continue to use of the mark. Now that U.S companies are permitted to obtain Cuban trademarks, it is essential that companies evaluate whether steps need to be taken in order to protect their intellectual property.

So what does this mean? Well, it doesn’t necessarily mean that without action that your trademark will be taken, but if you are in an industry where there is some likelihood of a cross-over between markets, then it might be a good idea to secure your trademark.

As of now, there are two ways to secure your trademark in the Cuban territory. Which way is appropriate for you depends heavily on your circumstances and it is best to consult an attorney before taking either step. One way to secure your trademark is to register your pre-existing mark with the World Intellectual Property Organization (WIPO) under the Madrid Protocol Treaty. Another way to secure the trademark is to register the mark with the Oficina Cubana de la Propiedad Industrial (OCPI), which is the Cuban equivalent of the US Patent and Trademark Office (USPTO). The new developments in the U.S – Cuba relations also allow U.S companies to pay filing fees, obtaining Cuban registered agents, and to litigate to protect their intellectual property.

For more information on how to protect your intellectual property in the U.S and abroad, contact Biletsky Law.

 

Biletsky Law Video Blog Introduction

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Hello everyone,

I am proud to re-introduce myself as I begin a new series of video blogs, or “vlogs”. My name is Joshua Biletsky and I am the founder of Biletsky Law. I am an attorney based in Hollywood, California and provide legal services to clients in the entertainment industry as well as to entrepreneurs and businesses. In each vlog edition I will be discussing legal issues and events in various areas of entertainment law, intellectual property law, and topics concerning start-up businesses. The blog content will be the same quality you’ve always enjoyed, but will now be accompanied by a short video to go along with the content of the blog. I hope you stay tuned to Biletsky Law’s next edition.

 

Welcome!

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Welcome to the Biletsky Law blog! Be sure to bookmark this page or check back regularly for articles about emerging trends and topics in the entertainment industry, intellectual property area of law, and business law.