ARTMORPHEUS: Establishing a Business and Legal Issues for Creative Enterprises Presented by attorneys Mitchell Bragg and Deborah Danger

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1 Business & Legal Issues for Artists & Creative Enterprises -Basic business law and the contemporary landscape of copyright protection for visual artists whose images appear on websites and the internet. Notes from a workshop and roundtable discussion led by attorneys Mitchell Bragg and Deborah Danger at ARTMORPHEUS in November 2010, contributed by Elizabeth Michelman, a multimedia artist and curator who participated in the workshop. These notes are for informational benefit only and should not be used in place of actual legal services. It was observed that all artists should be aware of the way their business dealings subject them to risk and tax liability and should educate themselves in the various ways they may need legal advice or protection. Of the six types of business entities recognized by the IRS*, most of the participant artists identified themselves as sole proprietors, who are considered businesses simply by virtue of taking business deductions for their arts activity on their tax forms. Professional artists generating more than the bare minimum in direct sales should register with their city or town as doing business as (D/B/A), obtain relevant tax forms and a tax ID number, and plan to collect and pay state sales taxes on their activity. Those working as partners or as co-owners for profit need greater protection among themselves than an oral agreement and handshake. They should work with an attorney to create a binding written partnership agreement that clarifies and records their terms of agreement. Having entered a thoughtful and formalized agreement in the first place can prevent messy situations later on. Artists working collaboratively in small groups should consider organizing their relationship through written documents establishing a partnership or Limited Liability Company (LLC). The LLC offers better protection against liability to others than either the sole proprietorship or a general partnership, where one s personal assets can be put at risk by the actions of another person. (*Note: for additional information, refer to the handout: Business Entities ). Deborah Danger pointed out that not all artists need to start a business to do business, citing alternatives such as selling your work to others whose business it is to sell it to the consumer or collector. Nevertheless, artists frequently enter into contracts around their art and should use lawyers to help them write contracts that foresee and protect against disagreement and risk. While individuals can and frequently do write their own contracts, the lawyer s job is to increase the artist s awareness from the start of a venture, making it less likely that the contractual arrangements will ever need to be tested in court. Most important to state and local governments is that artists pay their taxes and that as a business they do so quarterly throughout the year. Artists can get tax advice directly from the ARTMORPHEUS: Establishing a Business and Legal Issues for Creative Enterprises Presented by attorneys Mitchell Bragg and Deborah Danger

2 IRS (in the JFK building in Boston s Government Center) or through the Small Business Administration and SCORE (Service Corps of Retired Executives). The artists in attendance brought up a variety of problems and questions, including where to find free legal resources* for drawing up contracts, when it is desirable to consult an attorney rather than using self-help materials, and how to distinguish the more reliable books and websites on these subjects. Danger and Bragg recommended several Web resources, listed at the end of this article, which may be helpful to those that want to explore legal concepts on their own at first. (*for additional resources and information, contact ARTMORPHEUS by at info@artmorpheus.org or by calling ) Participants raised a number of substantive questions about the protection of images and ideas under intellectual property law, particularly when using the internet, and about sorting out creative contributions to a copyrighted product. Mitchell Bragg outlined a number of useful facts and principles, and common misconceptions about copyright law. He recommended that artists base their actions on reliable interpretations of the law, not rumors and oversimplifications. 1) Copyright law DOESN T protect mere ideas, i.e., material locked in one s mind or mentioned casually to others. It does, however, as the Copyright Act states, protect ideas fixed in a tangible medium of expression. Once such ideas have become fixed in notation or form, the artist can seek a remedy if another infringes his or her copyright interest. Basically, you are entitled to protection for an idea once you have written it down; but this writing or fixing is construed broadly to include being in a computer, on a website, or in a video or photographic record. 2) While the mere writing down creates a protectable copyright interest, your degree of protection is much greater if you register your form or image on line at copyright.gov for $35 per application. The application process, while fairly simple, does have certain requirements that must be met before you can submit the work for protection. While this amount may seem high for those who produce many images, one can beat down the cost by registering a screen shot or contact sheet with many component images, or a view of a room full of separate objects. When copyright registration is done in this manner, artists should be aware of how much protection this aggregate method might provide in the event that a lawsuit takes place. 3) Copyright law is codified in a federal statute, but in addition there is also the Digital Millenium Copyright Act, which essentially applies standard copyright principles and protection to the use and borrowing of images through the internet, in particular when those images are appropriated and used ON the internet. Basically, the DMCA says, if A owns a copyright on an image and B puts the image on a website without permission, A can ask B to take it down. A must follow the protocol required by the law and send a demand letter, which may also include a valid copyright registration, to the host content provider. The host must then ask B to remove the piece from the internet. In this way the DMCA protects the true owners of videos, photography, and pictures of actual work. It does not, however, address off-line use of images originally found on the internet; basic copyright law addresses this. ARTMORPHEUS: Establishing a Business & Legal Issues for Creative Enterprises Presented by Mitchell Bragg, & Deborah Danger, Esq.. Page 2

3 The DMCA can be a murky area of the law, especially as technology changes, so artists should consult an attorney if they feel overwhelmed with the legal requirements. 4) In general, it is always wise for artists to get agreements about use of images in writing, which is generally in the form a contract. If you start with an oral agreement or phone discussion, follow up with a dated letter or referring to and recording the details of your agreement. The artist should not broadly concur in the unrestricted use of his or her material. Instead, if you want to give limited permission to others to use your work, you will most likely want to limit how others use your work and do this in the form a license. When doing so you should state clearly that the material, your work, is copyrighted. Once in effect, the copyright stays in effect for 75 years beyond the life of the person that created the work. Disputes about when copyrighted material may be used by another may be analyzed under the Fair Use doctrine. Contracts for use cannot prevent all such uses, and whether a particular use falls within an exception often will only be determined in the courts. The four elements of the Fair Use defense establishing that the use was legal must be established by qualitative tests and reference to instances described in past case law. With the constant flux of internet and communications the case law may often require further interpretation. Consideration is given to: 1) Amount and substantiality of the use. Is it the core of the material that is being used, or a tiny detail or portion? 2) The purpose and character of the use. What are you actually doing with this material; are you using it for business purposes or commercial gain? For example, certain uses by teachers or educational institutions may be protected. Additionally, courts may examine whether the copyright work is used for profit. Might the infringer have benefited economically? A use can be considered infringement even if the infringer does not make money himself. 3) The nature of the copyrighted work infringed upon. Was it actually creative work that was being used as opposed to commonplace details? 4) The harm to the market for the copyright owner. In other words, does the original artist still have the ability to sell her work without competing with the alleged infringer? Furthermore, a court may also consider that certain creative uses of material under copyright may be excepted, such as the creation of parodies of the original. And note, the fact that somebody has given credit to the author/maker doesn t necessarily protect them from the claim of infringement. Some alleged infringement may also fit under a news exception, which sometimes may provide protection to bloggers reproductions. Artists should never assume a work is in the public domain at any time. Under the DMCA the typical remedy for an abuse is the owner s right to issue a DMCA takedown notice requiring the infringer to remove the material from the website. ARTMORPHEUS: Establishing a Business & Legal Issues for Creative Enterprises Presented by Mitchell Bragg, & Deborah Danger, Esq.. Page 3

4 Copyright protections are greater, including attorney s fees and damages if the work is actually officially registered. It is always wise, at the very least to mention Copyright 20XX by Artist, not to be confused with, which may only be employed for a registered copyright or trademark. Special considerations for Collaborations/Work for Hire Where a work is created by the joint efforts of a group, absent an agreement otherwise, each collaborator has a copyright interest in the final product. If the work results in profit, absent an agreement otherwise, it must be shared among collaborators. It is important with group collaboration that an agreement be written clarifying individuals shares and responsibilities, including what each person may do separately with the product. The best procedure in this case is to create a separate legal entity that owns the copyright and controls how it may be used and how the benefits may be shared. In a work for hire contract, the makers do not share in the copyright but are compensated and give up their separate rights. A good example of this is when an artist is commissioned to do work for someone. Such an arrangement may not be desirable from the point of view of the contributing individual who wants the ongoing and perhaps delayed benefit flowing from the copyright over time. Artists should determine whether each situation warrants agreeing to own at least a share in the copyright in the work. Many legal issues were not addressed in this workshop, including: libel and slander, freedom of expression, First Amendment, invasion of privacy, and detailed issues of licensing. Other recommended resources: Topics: DMCA (Digital Millenium Copyright Act); TEACH Act (allows certain permissible uses of copyrighted work in educational settings) (legal questions and answers published weekly on the Massachusetts Cultural Council website) The Stanford Copyright and Fair Use site: Center for Social Media Fair Use site: Since the law changes over time, any given legal advice book will need to be updated to be accurate. Some recommendations include products and handbooks published by NOLO Press. Citizen Media Law Project a resource for helpful information on legal advice specific to artists. It has a ton of information on it, so feel free to cruise around the entire website. Massachusetts Corporations Division homepage This resource provides details on creating an entity that is right for you, including the registration process for that business. Remember to look into localized (i.e. town, city, etc.) requirements that might exist as well. ARTMORPHEUS: Establishing a Business & Legal Issues for Creative Enterprises Presented by Mitchell Bragg, & Deborah Danger, Esq.. Page 4

5 Example of Digital Milenium Copyright Act Takedown Notice requirements: This is how one website lays out the requirements for filing a Takedown Notice. Remember, these are sent to the website host provider when you believe someone is using your materials. You do not need a registered copyright in the work to do this, but it is always helpful. Article that touches on Photography in Public Places This is an article on a recent lawsuit in Washington, D.C. when an individual took a photo in front of a federal building. I thought you might find this interesting. It is a bit legal in nature, but hopefully it is still informative. As always, these are not necessarily bullet proof if you follow their advice, but they will usually put you in a better place than if you did not use them. About the Presenters: Deborah Danger practices corporate law and estate planning in New Hampshire, and specializes in legacy planning for artists. Mitchell Bragg practices intellectual property law in Cambridge, MA and New Hampshire. He helps artists and creative industries protect themselves in forming business and entering into contracts related to their work. See additional handouts: Copyright FAQs & Resources Business Entity Handout DISCLAIMER: The information above is for informational purposes only and should not be considered legal advice. Because each individual s situation is unique, please consult an attorney for specific counsel on your circumstances. Neither Danger Law, Ascentage Law, ARTMORPHEUS, nor their staff are associated with or received any compensation for the resources mention in this presentation ARTMORPHEUS: Establishing a Business & Legal Issues for Creative Enterprises Presented by Mitchell Bragg, & Deborah Danger, Esq.. Page 5