Crowdfunding – How Crowds Are Funding Ideas Reply

Crowdfunding has taken off with websites like Kickstarter which allow entrepreneurs, inventors and creators to pitch their innovative ideas to potential funders/investors to raise start-up money for their projects. Kickstarter is an example of REWARD based crowdfunding which offers a reward to investors for their financial sponsorship. While reward crowdfunding may be the most well known and popular type of crowdfunding… another type of crowdfunding is EQUITY crowdfunding. As the name suggests, equity crowdfunding gives investors equity in the business being funded instead of a reward.

Here are a few noteworthy points on crowdfunding:

  • The two types of crowdfunding are regulated differently because giving a reward verses a security or equitable interest invokes different laws and regulations.
  • Some of the popular reward crowdfunding websites are: http://www.kickstarter.com, http://www.indiegogo.com, http://artistshare.com/v4, http://www.quirky.com/
  • Each reward funding website operates differently. For example, the fees charged by the sites (generally in the range of 4%-9% of the money raised) as well as the sites policies for what happens to pledged contributions if the target goal isn’t met… vary website by website.
  • Once an idea is posted to a crowdfunding website… it CAN be copied! (You must protect your Intellectual Property!)!!
  • A few of the most funded reward crowdfunding projects earned over $1-$2 million dollars (the projects were for: a video game headset, an LED light bulb controlled with a smart phone and a 3D printer).
  • Reward crowdfunding websites do not necessarily regulate fulfillment of the promised rewards. (In Quest v. Singh, the entrepreneur who wasn’t able to deliver promised rewards was sued by a funder and ended up going bankrupt).
  • It can be argued that equity crowdfunding over regulates initial offerings by requiring a licensed intermediary, limiting the capitol raised to $1million a year, and placing significant burdens on the intermediary and issuers. (Title 3 of the JOBS ACT).
  • SEEDERS (http://www.seedrs.com/ based in the UK) is the first equity crowdfunding platform to be granted regulatory approval anywhere in the world.

This post is dedicated to my dear departed colleague and mentor, D. Caplan, who was an incredibly entrepreneurial attorney with his eye on the development of crowdfunding.

See also: JOBS ACT: http://www.gpo.gov/fdsys/pkg/BILLS-112hr3606enr/pdf/BILLS-112hr3606enr.pdf; JOBS ACT Q&A http://www.sec.gov/divisions/marketreg/tmjobsact-crowdfundingintermediariesfaq.htm; Proposed Amendments to the Prohibition Against General Solicitation and Advertising in Rule 506 and Rule 144A Offerings: http://www.sec.gov/rules/proposed/2012/33-9354.pdf; CROWDFUND ACT: http://www.opencongress.org/bill/112-s2190/show; http://money.cnn.com/galleries/2012/technology/1204/gallery.crowdfunding-startups/index.html; Medstartr – a health and medical focused crowdfunding platform: http://wp.me/p10nNq-mN; @iplegalfreebies and www.kasterlegal.com.

BY: Vanessa Kaster, Esq., LL.M.

vk@kasterlegal.com

 

Looking back at the top posts on IP Legal Freebies Reply

As we kick off a new year, let’s take a look at the top posts on IP LEGAL FREEBIES:

  1. Copyright Law: Using quotes from someone else in your book, blog or website Using Dr. Martin Luther King Junior’s famous ‘I Have a Dream’ speech as an example of a copyrighted work filled with famous quotes… we take a look at the fair use doctrine and how evaluations are made regarding use of copyrighted content.
  2. Music Royalties will start being paid for plays on YouTubeIn 2012 YouTube started paying royalties for plays on their website.
  3. How to write a © copyright notice and why to use itWriting a copyright notice on your original work is free and easy to do. (if you aren’t already in the habit of doing this, make it a new years resolution!)
  4. Copyright Law: Using quotes from someone else in your book, blog or website (part two)Remember that the HEART of a work is heavily protected by copyright law.
  5. Copyright is valuable – ‘The Birthday Song’ earns $2 Million a year in royaltiesWe all know it… it’s only eight measures long, spans an octave and was written for children …but it’s a big money maker.
  6. Understand How You’re Getting Paid – ROYALTIES on GROSS vs NET REVENUE and an ADVANCESeeing these words in a contract or agreement will impact payment… become familiar with the meaning of these terms.
  7. ‘NAME Brand’ – Using your name as a brand and trademarkPaul Revere may have been the first American entrepreneur to use his name to brand his products. Are you considering it too?

Happy New Year! Thank you for reading. Wishing you all the best with your creative and entrepreneurial endeavors.

For the latest post see: https://iplegalfreebies.wordpress.com and www.kasterlegal.com; @iplegalfreebies and www.kasterlegal.com.

BY: Vanessa Kaster, Esq., LL.M.

vk@kasterlegal.com

 

Viral Post Won’t Protect Copyright in US… Although Maybe in EU 2

If you use Facebook, I’m sure you have seen the viral post proclaiming copyright in posted content. While the proclamation sounds rather official…. it doesn’t actually mean anything (if you are in the US)… nor does it preserve any of your rights (including copyright) that are modified, abdicated,or terminated by the Terms of Service and Privacy Policy of the Facebook website. What this means is that by using the Facebook website the conditions listed in the Terms of Service (which speak to broad control and use of posted content by Facebook for virtual eternity) are consented to.

The Viral Post (or a modified version of it):

I hereby declare that my copyright is attached to all of my personal details, illustrations, comics, professional photos and videos, etc. For commercial use of the above my written consent is needed at all times! (Anyone reading this can copy this text and paste it on their Facebook Wall. This will place…them under protection of copyright laws).

In response to the viral post, Facebook has a statement on their website dispelling the rumor and directing folks to its Terms of Service which state (but are subject to change):

For content that is covered by intellectual property rights, like photos and videos (IP content), you specifically give us the following permission, subject to your privacy and application settings: you grant us a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any IP content that you post on or in connection with Facebook (IP License). This IP License ends when you delete your IP content or your account unless your content has been shared with others, and they have not deleted it.

How did the viral post get started? One explanation is youthful optimism. Another possibility (and very interesting possibility) is that the post was started in the EU where organized challenges to Facebook’s Privacy Policy and Terms are Services are being made for non-conformance with EU laws. The EU has different policies (from the US) regarding the use of data including photo archives and EU laws may require different consent mechanisms. (Since Facebook is a US company, it is likely that their Privacy Policy and Terms of Service are written in American legalese). While surfing through the website for Europe-v-Facebook.org (which is a group in the EU that is challenging Facebook’s Privacy Policy and has threatened litigation for non-compliance with EU law) I read this: “We were just informed that Facebook is soon proposing a new change to its privacy policy…. Facebook said so far that if 7,000 users demand the same changes they would have users give the chance to vote on them.” If this is true… it could be interesting… it could have started the viral post or one like it… and it could possibly change Facebook’s Privacy Policy and Terms of Service in the EU… and maybe other places too.

See also, http://europe-v-facebook.org/EN/en.html; http://news.cnet.com/8301-1023_3-57554497-93/viral-post-wont-copyright-your-facebook-updates/; http://www.facebook.com/legal/terms; http://newsroom.fb.com/Fact-Check; NY Times article: Law Students in Austria Challenge Facebook Policy on 12/5/12 and www.kasterlegal.com

BY: Vanessa Kaster, Esq., LL.M.

vk@kasterlegal.com

‘GI BILL’ trademarked to shield veterans from fraud Reply

This fall the Department of Veteran Affairs trademarked the term ‘GI BILL’ to gain control over how the term is used by universities to solicit and recruit veterans. Evidently, an investigation by the Senate and Government Accountability Office found that some for-profit colleges and universities have been using the term GI BILL to recruit veterans without full disclosure of costs, loans and dropout rates.

ImageAgentProxyBy registering the trademark GI BILL (USPTO Reg No. 4225784), the Department of Veteran Affairs will be the owner of the trademark and gain exclusive control over how the trademark is used which means they should have the power to prevent deceptive and fraudulent uses of the term. The Department of Veteran Affairs plans to issue terms of use for the ‘GI BILL’ trademark within the next few months and has already obtained rights to the GIBILL.com domain.

By registering the GI BILL trademark, the Department of Veteran Affairs will continue to support Servicemembers, Veterans and their families in their educational pursuits and is taking proactive steps to stop fraudulent and deceptive uses of the term.

For more information: http://www.va.gov/opa/pressrel/pressrelease.cfm?id=2408, www.uspto.gov and www.kasterlegal.com

BY: Vanessa Kaster, Esq., LL.M.

vk@kasterlegal.com

Here is a link to ask Congress NOT to reduce music royalty rates paid to musicians by Pandora Reply

–> http://www.musicfirstcoalition.org/ <–  Tell Congress: Don’t Slash Music Creators’ Pay

As a follow up to my post yesterday [http://wp.me/p10nNq-p8] it’s easy to reach out to your Congress reps at the link above and speak out against Pandora’s push to slash royalty rates paid to creators.

Musicians push back as Pandora lobbys Congress to reduce royalty rates Reply

Three cheers for musicians defense against Pandora’s Congressional lobbying efforts to reduce royalty rates that it pays to musicians. Currently Pandora pays a fraction of a penny to musicians each time a song is played on its internet radio service. …Pandora wants to make more money (don’t we all)… but taking a bigger cut from musicians is low. In protest of Pandora’s proposal, Rihanna, George Clinton, Billy Joel, Bonnie Raitt, The Doors, Katy Perry, Pink Floyd, Alabama, Sheryl Crow and other artists have written a letter opposing the Pandora-backed legislation that aims to reduce royalty rates.

THE LETTER: A MUSICIAN’S PERSPECTIVE ON PANDORA

We are big fans of Pandora. That’s why we helped give the company a discount on rates for the past decade.

Pandora is now enjoying phenomenal success as a Wall Street company. Skyrocketing growth in revenues and users. We celebrate that. At the same time, the music community is just not beginning to gain its footing in this new digital world.

Pandora’s principal asset is the music.

Why is the company asking Congress once again to step in and gut the royalties that thousands of musicians rely upon? That’s not fair and that’s not how partners work together.

Congress has many pressing issues to consider, but this is not one of them. Let’s work this out as partners and continue to bring fans the great musical experiences they rightly expect.

This letter is running in Billboard Magazine and with any luck has gone viral and is gaining momentum and support. A congressional hearing is scheduled for tomorrow in Washington D.C.

For more information: the proposed legislation – Internet Radio Fairness Act; Battling Rihanna Puts Pandora in Box on Lower Music Royalties at http://www.bloomberg.com/news/2012-11-26/battling-rihanna-puts-pandora-in-box-on-lower-music-royalties.html; From Alabama to Rihanna, Starts Fight Pandora on Royalties at http://www.billboard.com/news/from-alabama-to-rihanna-stars-fight-pandora-1008016162.story#/news/from-alabama-to-rihanna-stars-fight-pandora-1008016162.story; and the letter at http://www.musicfirstcoalition.org/sites/default/files/Artist%20Letter.pdf; @iplegalfreebies and www.kasterlegal.com.

BY: Vanessa Kaster, Esq., LL.M.

vk@kasterlegal.com

 

Turkey trademarks – don’t run a-fowl of descriptiveness Reply

We all know and love many popular TURKEY trademarks… like WILD TURKEY and TURKEY HILL… and notice that these TURKEY marks are used on products that have nothing to do with turkeys. For example:

  • WILD TURKEY is trademarked for whiskey, distilled spirits, and liqueur
  • TURKEY HILL is trademarked for ice cream cones and other frozen confections

By comparison, popular trademarks that are used to sell turkeys don’t use the word ‘turkey’ in their mark. For example: BUTTERBALL, HONEYSUCKLE WHITE… and my personal favorite CAJUN GROCER (that sells delicious turducken – http://www.cajungrocer.com).

THE SECRET? Words that describe the goods and services that they sell are descriptive and are weak trademarks. In fact, it can be difficult and sometimes impossible to register a descriptive mark with the USPTO for trademark protection. (There is a sliding scale for measuring descriptiveness. Some terms are more descriptive than others. This example of trademarking the word TURKEY (as a brand for turkey products) is a highly descriptive use of the word that overlaps with it’s dictionary definition). The reason behind blocking trademark registration for descriptive terms is logical. Since trademark registration grants exclusive use to the owner… and dictionary words are free for us all to use…. USPTO trademarks are not registered for descriptive terms because this would block words from being used in commerce (by competitors) to describe common goods and services.

Back to the trademarks listed above, the popular WILD TURKEY trademark has a fairly strong monopoly on using the word TURKEY to sell whisky and other alcohol products. Similarly, TURKEY HILL is a popular trademark with a fairly strong monopoly on using the word TURKEY to sell ice cream.

When creating brands for your business and registering trademarks… remember not to run a-fowl of trademark descriptiveness. Enjoy your Thanksgiving!

See also www.uspto.gov; @iplegalfreebies and www.kasterlegal.com.

BY: Vanessa Kaster, Esq., LL.M.

vk@kasterlegal.com

 

Recording and posting concert clips: what’s legal… what’s not 6

Just because it is easy to use your phone to record a clip at concert doesn’t give you the right to do very much with the recorded clip. There are multiple sets of legal rights at play in every concert performance which include:

  • Copyright in the music compositions and lyrics (often controlled by the publisher or sometimes the artist)
  • Copyright in the performance (often controlled by the label)
  • Trademarks of the band, club or venue
  • Band’s right of publicity
  • Contractual rights granting you the privilege to attend the performance (often on the ticket stub, or posted signs at the venue, or the terms and conditions of a website)
  • License granted by ASCAP or other rights manager to the club or venue for the performance.

Each of these rights gives the holder a monopoly to do certain things or exclude others from doing certain things. Excluding others (ie you with the recording device) can be taken seriously by all the rights holders. For example, club or venue owners can exclude others from recording on their premises. This means they can confiscate your phone until the end of the performance or ask you to leave if you are caught recording a clip of the concert.

Technically speaking, recording a clip of a concert for your own personal use is probably considered fair use. If you post the recoded clip to a website, chances are that one of the rights holders listed above will contact the website and request that the clip be taken down. If this happens, the clip will come down and you may forfeit your right to access or use the website where you posted the infringing clip.

Rights holders generally try to maintain a balance when it comes to enforcing their rights; since, they don’t want to alienate their fans and patrons. Although, given the history of how aggressively the music industry went after folks who were targeted for illegally downloading music… this could change.

BY: Vanessa Kaster, Esq., LL.M.

vk@kasterlegal.com

See also: Other posts on music copyright at https://iplegalfreebies.wordpress.com/category/c-o-p-y-r-i-g-h-t/copyright-music-copyright/; Music Law 101: Legal Issues Surrounding the Recording and Posting of Concerts, by R. Friedberg; @iplegalfreebies and www.kasterlegal.com.

Haunted House movie raises a ghostly trademark dispute – WINCHESTER MYSTERY HOUSE Reply

The spooky and haunted WINCHESTER MYSTERY HOUSE is the source of a trademark dispute. Last week, a California appellate court affirmed a grant of summary judgment against Winchester Mystery House, which had claimed that a movie production company had infringed its trademark by making a film, “Haunting of Winchester House,” based on the haunted tourist attraction.

QUESTIONS: Does the movie title, “Haunting of Winchester House,” infringe the trademark “WINCHESTER MYSTERY HOUSE”? Does the use of a sketch of a fictional representation of the Victorian-style mansion on the DVD cover infringe the design trademark of the house?

The court held that there is no infringement. Here is an excerpt from the court’s holding:

Here the plaintiff’s marks identify not only a world famous tourist attraction, but also the property of its former eccentric owner. There was an actual Sarah Winchester, who, according to legend, created a Victorian-style mansion to fend off ghosts. A film that is based on a “true” story will inevitably have a more powerful impact on those who enjoy ghost or horror films. Thus, defendant has used “Winchester House” in its title and a Victorian-style mansion on its DVD cover, which are similar to plaintiff’s marks, and created a fictional work based on the historical figure Sarah Winchester and her allegedly haunted mansion. In our view, where marks have historical significance and similar marks are used in the title of an artistic work or advertising, the Rogers test adequately ensures protection of both the public interest in avoiding consumer confusion and the public interest of free expression.

The Rogers test is a two prong test, applied by the court in this case, to test trademark infringement. The first prong requires that the title of the film have artistic relevance to the content of the film (low threshold of minimal artist relevance). Here in this case, both the Victorian-style mansion on the DVD (which is not the actual Winchester House) and the title “Haunting of Winchester House” have some artistic relevance to the film. The second prong of the test requires that the title and cover of the DVD do not “explicitly mislead as to the source or content of the work.” Here in this case, since there is no suggestion that the film was endorsed, authorized or produced by the plaintiff (Winchester Mystery House or Winchester Mystery House, LLC) there is no misleading nor misrepresentation as to the source or content of the film.

Happy Halloween! Read more about the spooky legend of the Winchester Mystery House –> http://www.winchestermysteryhouse.com/

See also: the holding for the California Court of Appeal, 6th Cir; USPTO trademark registrations 85294333 and 3749783; and www.kasterlegal.com; @iplegalfreebies and www.kasterlegal.com.

BY: Vanessa Kaster, Esq., LL.M.

vk@kasterlegal.com