Intellectual property in music industry - Case Study Example

Intellectual property in music industry of Intellectual property in music industry Questions through 7 are associated with the following fact pattern: Professor W creates a simple cookbook, consisting only of 30 recipes (lists of ingredients and brief, straightforward instructions for putting the ingredients together, etc.). None of these recipes are original to Professor W, who is not a good cook: they have all been collected from members of his daughter’s nursery school community. Each page of the book contains one recipe; at the top of each page is the name of the recipe and a small piece of ‘clip art’ – public domain artwork that Professor W downloaded off the Internet — relating to the recipe. (For example, recipes involving chicken have a cartoon chicken character near the top of the page.) Other than the clip art and title, there are no unusual design aspects to the pages, and no text other than the recipe text. The recipes are arranged according to how long they take to prepare, with the shorter recipes first. The book was produced at a local copy shop onto folded sheets of 8.5 x 11 paper, with staples in the ‘fold’ holding the book together. The cookbooks are sold for $5.00 each, and given to anyone who donates more than $100 to the school 1. Is the cookbook copyrightable? . a. . Yes, as a compilation . b. . No, it does not meet the minimum standards for originality . c. . No, recipes are patentable . d. . Yes, but any copyright will be jointly held by the creators of the recipes, not Professor W . e. . None of the above. 1 分   问题 2 . For purposes of this question only, assume the cookbook in its entirety is fully copyrightable. Professor W asks you steps he needs to take to ensure that any possible copyright is obtained. . The cookbook must be registered with the U.S. Copyright Office . The cookbook must be sold ‘in commerce’ at least once . The cookbook must be marked with the appropriate symbol (©), name, and date . All of the above are necessary . None of the above are necessary. 1 分   问题 3 . It turns out that an employee of the copy shop kept an extra copy of the cookbook, and took it home for his own personal use. Has the employee infringed any copyright . a. . No, the cookbook is not copyrightable . b. . No, the copying was done pursuant to his employment in the copy shop. . c. . No, the copying was fair use. . d. . No, because functional works are subject to a compulsory license. . e. . None of the above 1 分   问题 4 . Consider the following activities with respect to the cookbook above for questions 4 and 5 only:  I. Photocopying a single page of the cookbook to distribute to a high-school home-economics class for an in-class cooking project; II. Listing the recipe titles from all the pages into a computer and posting them on a web site; III. Photocopying the recipe portions only of each page (i.e. not the title or clip art); IV. Buying 20 copies of the cookbook and reselling them for $10 each. Which of the above is most likely to be fair use under § 107 . a. .  I . b. . II . c. . III . d. . IV . e. . None of the above is fair use. 1 分   问题 5 . Which of the above is most likely to be ruled copyright infringement? . a. . I . b. . II . c. . III . d. . IV . e. . None of the above is likely to be ruled an infringement. 1 分   问题 6 . Of what relevance is the arrangement of the recipes in the book? . a. . It increases the chances of copyright protection for the individual recipes. . b. .  It increases the chances of copyright protection for the cookbook. . c. . It decreases the chances of copyright protection for the individual recipes . d. . It decreases the chances of copyright protection for the cookbook. . e. .  It is irrelevant. 1 分   问题 7 . Assuming (for the purposes of this question only) that the book is copyrightable as a compilation created by Professor W, how long will the copyright term last? . a. . Until 70 years after Professor W’s death . b. . Until 50 years after Professor W’s death; or 95 years from the date of first publication, whichever is first. . c. . Until 95 years from the date of first publication . d. . Until 95 years from the date of registration . e. . None of the above. 1 分   问题 8 . Radiadata Systems, Inc. manufactures and sells a line of hand-held radiation detectors. The plastic and metal housings of all of Radiadata’s detectors have a distinctive dark purple color. Which of the following regimes offers Radiadata the best prospects for intellectual property protection for the dark-purple color scheme for hand-held radiation detectors under these facts? . a. . copyright . b. . trademark . c. . patent . d. . right of publicity . e. . trade secret 1 分   问题 9 .  Radiadata Systems, Inc. has developed lengthy software code for a computer program that uses mathematical modeling to analyze the stress placed on aircraft wings during atmospheric turbulence. In order to satisfy regulators and others about the efficacy of the software for deriving useful engineering results, the software source code has been made open to inspection. Based on their review, experts have agreed that the software correctly applies well-understood mathematical analysis in modeling materials dynamics. Which of the following regimes offers Radiadata the best prospects for intellectual property protection for the software code under these facts? . a. . trade secret . b. . copyright . c. . trademark . d. . patent . e. . right of publicity 1 分   问题 10 . Radiadata Systems, Inc. has produced a training film that demonstrates safety procedures when dealing with radioactive materials. Which of the following regimes offers the best prospects for intellectual-property protection for the film under these facts? . a. . copyright . b. . trademark . c. . patent . d. . right of publicity . e. . trade secret 1 分   问题 11 . A researcher for Radiadata Systems, Inc. was reading printed volumes of The Alaska Journal of Aerospace Metallurgy, a journal which was only published during a brief span from 1972 to 1973. Within the fragile, dusty pages, the researcher came across a formula for creating a titanium-aluminum alloy with incredible properties of strength, durability, and resistance to corrosion. Despite the fact that this alloy would represent an incredible breakthrough for the aerospace industry, no one has used the formula. Apparently, no one ever noticed the write-up in this obscure journal. Which of the following regimes offers Radiadata the best prospects for intellectual property protection for the alloy formula under these facts? . a. . copyright . b. . trademark . c. . patent . d. .  right of publicity . e. .  trade secret . 1 分   问题 12 . The name and a photograph of Wilford X. McStanley, the founder of Radiadata Systems, Inc., was featured in a full-page magazine advertisement for Schlopps, a brand of Scotch whisky. The ad claims that McStanley drinks Schlopps scotch regularly. And, in fact, he does. Which of the following intellectual-property regimes offers the best prospects for a cause of action brought by McStanley against Schlopps? . a. . copyright . b. . trademark . c. . patent   . d. . right of publicity   . e. . trade secret . 1 分   问题 13 . An engineer for Radiadata Systems, Inc. figured out a clever new way to shape the lid for the battery compartment on hand-held radiation detectors such that the lid can easily be unlatched and opened, or closed and secured, even when the operator is wearing heavy lead-shielded gloves. Which of the following regimes offers the best prospects for intellectual-property protection for the shape of the battery compartment lid under these facts? . a. . copyright . b. . trademark . c. . patent . d. . right of publicity . e. . trade secret . 1 分   问题 14 . The power of Congress to create the current scheme of federal trademark law derives from which of the following? . a. . the power of Congress to regulate interstate commerce, as provided by the U.S. Constitution   . b. . the U.S. Constitution’s specifically enumerated grant of power to Congress “[to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”   . c. .  the tax-and-spend power provided under the U.S. Constitution   . d. . the supremacy clause of the U.S. Constitution . e. . the inherent sovereignty of the federal government, cognizable through the Statute of Monopolies . 1 分   问题 15 . If a trademark is federally registered on the Principal Register today, how long will trademark protection last under current federal trademark law, assuming renewal . a. . 20 years from the date of the application . b. . 28 years, plus a renewal term of an additional 28 years, for a total of 56 years . c. . the life of the registrant plus 70 years . d. .  295 years . e. . potentially forever, if there is continued commercial use . 1 分   问题 16 . If a work is written and published today by a natural person under that person’s real name, how long will copyright protection last under current federal copyright law?   . a. . 20 years from the date of the application . b. . 28 years, plus a renewal term of an additional 28 years, for a total of 56 years   . c. . the life of the author plus 70 years   . d. . 295 years . e. . potentially forever, if there is continued commercial use   1 分   问题 17 . Copyright protects ideas, procedures, methods, systems, processes, concepts, principles, discoveries and devices. 对 错 1 分   问题 18 . Lance, an independent contractor, sends stories to The Herald. Lance learns of acceptance when he gets checks. For a fee, Herald allows Lexis-Nexis to put its full content online. Lance sued Herald. . . a. . Herald is liable because Lexis-Nexis infringes . b. . Herald is liable as a direct infringer.   . c. . Checks do not transfer copyright in freelance stories to Herald. . d. . All statements are correct. . 1 分   问题 19 . If a patent is obtained on a useful, nonobvious article of manufacture, machine, or process, how long will patent protection last under current federal patent law, assuming maintenance fees are paid? . a. . 20 years from the date of the application   . b. . 28 years, plus a renewal term of an additional 28 years, for a total of 56 years   . c. . the life of the author plus 70 years   . d. . 295 years   . e. . potentially forever, if there is continued commercial use  . 1 分   问题 20 . Sharon Myrnezicke runs a small hairstyling salon downtown. She sells a brand of shampoo called Myrnezicke’s Moisture Maintainer. A 16-ounce bottle sells for $80. Sharon has a secret: The bottles labeled Myrnezicke’s Moisture Maintainer contain plain, unadulterated Herbal Essences Hello Hydration shampoo, which can be purchased in regular grocery and drug stores everywhere. Afraid that her clientele might get suspicious if they see her buying large quantities of Herbal Essences Hello Hydration, Sharon has her husband, a long-haul trucker, and buy up dozens of bottles when he is out on the road, at least a few states away. Herbal Essences Hello Hydration is manufactured and distributed by Proctor & Gamble. Which of the following is the best cause of action for Proctor & Gamble to allege against Sharon in a lawsuit? . a. . passing off . b. . reverse passing off . c. . copyright infringement   . d. . patent infringement . e. .  mask-work infringement . 1 分   问题 21 . Which of the following remedies are NOT available for patent infringement?   . a. . damages in the amount of the profits the patentee would have received but for the infringement . b. . damages in the amount of the defendant’s profits that result from the defendant’s infringing activity . c. . damages measured by computing reasonable royalties   . d. . an injunction prohibiting further manufacture of a claimed invention   . e. . an injunction prohibiting further use of a claimed invention   . 1 分   问题 22 . American Idol ("IDOL") is a TV reality show in which wannabe superstars sing songs each week before a large studio audience. The songs are always Top 40 tunes from the past few decades for which IDOL has obtained any necessary copyright licenses. Each performance lasts two to three minutes. The singers perform on an elaborate, glitzy, shimmering set. After each broadcast, viewers of the program can vote for their favorite performers, and the lowest vote getter is kicked off the show. Each week, the entire process repeats with the surviving performers. The show features three judges who orally review each performer. To some, these three are the true stars of the show. They are: a former musician and current record producer who often compliments performers for "keeping it real, dawg", a former dancer/songwriter who brings tears, emotion and unrelenting positive feedback to every episode, and a caustic Brit who ridicules almost every performance. The show is in its 12th season and has developed an enormous following, with tens of millions of viewers tuning in to each episode. NotRealityTV.com, a company which runs a small website, begins to produce an Internet-only video program that they call "American Idle" ("IDLE"). The "show" is published to the web a few days after every broadcast of American Idol has aired. In each episode of IDLE, the previous episode of IDOL is mimicked. Each IDOL performance from the most recent episode is recreated on IDLE in two ways: First, actors/singers sing short (1 minute) renditions of each performance. Owing to the low budget of the show, most of these performers have no singing ability and their performances are mere caricatures of the actual competitors, although some look and sound a tiny bit like the IDOL singers they represent. The IDLE performers sing in a cheaply constructed "studio" that bears a passing resemblance to the set of IDOL. Second, short video clips (no more than 30 seconds each) from each performance of IDOL are replayed on IDLE, after their respective in-studio renditions. After each rendition, the performances are reviewed by three judges: a clown (complete with makeup and wig) who compliments performers for "keeping it fake, dog" and occasionally juggles while talking, a badly-performed, hand-puppet princess who cries mock tears at the end of every review, and a caustic Aussie who ridicules almost every performance. Because IDLE is an Internet program unregulated by the FCC, the judges lace obscenities throughout their reviews. The reviews are marked by their venom and harshness, and almost every performance is ridiculed mercilessly. NotRealityTV.com displays ad banners below the video window during viewings of IDLE and also includes a "Tip Jar" link where people can donate money using a credit card. NotRealityTV.com also sells T-Shirts that say, "American Idle" on the front and "Since 2006…Keeping It Fake, Dog!" on the back. Although IDLE lacks the viewership of IDOL, IDLE becomes a minor Internet sensation, attracting as many as 10,000 viewings of the video each week. The Producers of IDOL own the copyrights and trademarks associated with their show and they sue NotRealityTV.com. In their complaint, they allege copyright infringement, trademark infringement, and trademark dilution. Address the various IP issues involved the claims that could be made, the defenses to those claims and assess the likely success of the alleged causes of action. Copyright infringement For copyright to exist it presumed that the item that is copyrighted must first be in material form that is reproducible, secondly originality under section 32 of the copyright law must be verified, third the substance of the items to be copyrighted and fourth how the ideas are presented. The copyright owner (American idol) reserves exclusive rights to reproduce the work, derivative works accruing from the original works, the right to distribution, the public display right, the public performance right. Violation of the exclusive rights of the copyright owner constitute Copyright infringement whether unintentional or intentional. American idle appears to be a derivative work of the American idol show in the aspect of story line, cast presentation and performance. It is observed that the judges represent some aspect of the judges in the American idol show, whereas the performers are also mimicking contestants of the previous American idol show. They also play short videos of the original show. In determination of criminal infringement sect 2319 of title 18 incorporates willful infringement for purposes of commercial advantage, or gain, reproduction or distribution inclusive of electronic pathways, work that has not yet been officially released are violations provided under section 106A(a) in violation section 602. Therefore American idol can sue American idle for infringement in copyright. Trademark Infringement A word, name, symbol, or device whether in combination or singularity that is adopted and used by a seller to identify and distinguish his goods or services can be considered a trademark? The use of the trademark gives the owner the rights to it; under common law the use of the trademark in a particular geographical area confers rights to the owner. The U.S. Patent and Trademark Office registers trademarks used in commerce between states. The trademark owner according to federal registration acquires certain enhanced rights. Federal Statute under the Lanham Act, (15 U.S.C 1051-1127) and States statutory and common laws provide protection for US trademarks. Under State common law without any prior registration requirements and as part of the Law of Unfair Competition, trademarks are protected. Infringement is defined as an unauthorized use or reproduction of a trade mark that would cause confusion to the consumer regarding the source of goods or services. Confusion is analyzed based on the precepts of strength of the mark, similarity of the marks, similarity of goods, channels of trade, consumer sophistication, wrongful intent, actual confusion, zone of natural expansion. In the case of AMF Inc. vs Sleek craft boats it was found that in using sleek craft the defendant infringed on the plaintiffs slick craft trademark and would potentially cause confusion. Even though both companies produced boats the product varied in performance. In reference to this it can be quantified that the use of American idle infringes on American idol trademark rights. Likelihood of confusion is an important for proving infringement under s.10 (2) of the Trade Mark Act in the UK. The 1994 act Section 10(2) of the TMA introduced "likely of association” into UK trade mark law which asserts identical or similar sign used in conjunction with identical or similar goods associated with a registered trademark are probable cause for infringement if likelihood of public confusion can be sufficiently proven; similarity of the mark with the sign, analyses of the concept of similarity between the respective goods and services and determination of likelihood of confusion because of the similarity. Therefore American idle has cause to sue American idle for trademark infringement under section 10(1) of the trademark act as they almost similar products. Trademark Dilution Dilution is defined as “the gradual whittling away or dispersion of the identity and hold upon the public mind of the mark or name. Or, is the use of a famous trademark in a way that would lessen its uniqueness". This definition encompasses unauthorized use of anothers trademark on products or services that do not necessarily compete. American idle presents material that is inferior in quality as compared to American idle both in performance, artistic skills of presentence and the presentation of the overall show. If the likelihood of confusion cannot be sufficiently determined damage done to the recognized trademark through the second sellers unfair use of it is sufficient cause to file for trademark dilution suit. In this context blurring and tarnishment can be presented as evidence of trademark dilution. Blurring diminishes the original marks distinctiveness by associating it with goods or services of inferior quality. Panavision Intern., L.P. v. Toeppen would be a good example. Tarnishment involves creation of negative association of goods and services of the original famous mark thus creating trademark dilution and causing significant loss of good will to original trademark. American idle produces a show that is both inferior and uses derogative language and also the presentation of the show is a mockery of the original trademark (American idle). Also the slogan of the show “keeping it fake, dog” tarnishes the original intent of the American idle slogan “keeping it real, dawg”. Therefore there exist plausible cause to pursue a trademark dilution suit under the Trademark Dilution Revision Act of 2006 (H.R. 683): if the plaintiff shows the defendants mark is likely to cause dilution . . 16 分   问题 23 . In 2017, the Southeastern University Masters in Music Industry Leadership Program published a directory of its illustrious alumni. It was able to do so because the Assistant vice Director of Alumni Affairs’ assistant spent the entire summer scouring through the SEU records to ascertain the names of graduates, and then compiled an accurate list of their present whereabouts by “googling” each name.  The purpose of the exercise was to enable the Assistant vice Director of Development to contact said alums in order to put the bite on them for a donation to the SEU enlargement project. In addition, the information was printed and bound in red leather (well maybe it was plastic), and offered for sale at $100, enabling SEU to make an immediate profit of $75 from each book.  Professor Minenow, now retired, springs for the $100, scans it, reprints it, and offers for sale a leather-bound version on his web site ripoffs.com for $75, content to make a more modest profit. The Board of Trustees of Southeastern University sue to enjoin the sale of Minenow’s version of the Alumni volume and for damages in the amount of $75 for each book Prof Minenow has sold. Should they prevail? In writing your answer, address the following: What principles of intellectual property law can be applied to this case? What defenses can professor Gotcha assert? Disputes between competing private interests: an author against someone who has copied the authors work without permission are covered in the copyright law. According to the 1976 Copyright Act, copyright protection "subsists … in original works of authorship fixed in any tangible medium of expression, now known or later developed" (17 U.S.C.A. § 102(a)).for material to be copyrightable it must meet the principles of material form, originality, substance, expression and not ideas. The infringement of copyright occurs when the copyright owner is deprived of one or all of his exclusive rights; the right to reproduce the work, the right to derivative works, the right to distribution, the public display right, and the public performance right. Professor Minenow has infringed on the copyright of the southeastern university by violating its exclusive rights in the reproduction of the directory. In the case of Kinkos, it was ruled that Kinkos violated the Copyright Act of 1976 (17 U.S.C.A. § 101 et seq.), through failure to secure permission to reprint the excerpts and were susceptible to pay authors of the copyrighted material Basic Books v. Kinkos Graphics Corp., 758 F. Supp. 1522 (S.D.N.Y. 1991). Also the fact that he gained financial advantage in reproduction of the directory is evidence of violation of the copyright act. However professor mine how can base his defense based various exceptions of copyright. The first is fair use that allows the reproduction of copyrighted material if intended for limited purpose of teaching, reviewing or literary criticism. His case would not hold as he benefited financially form the reproduction and distribution. The second defense would be based on Public Domain that covers items excluded in copyright law either because the copyright has expired. Can professor Minenow prove beyond reasonable doubt that the directory is not under copyright law. The third defense would be in reference to Non-Copyrightable Works such as facts or ideas. However, if material or facts are compiled in a book, partial or full copying of the book constitutes copyright infringement. . 10 分   问题 24 . For the next two questions, assume you are the producer of a new Colombia Pictures film currently in production. Your director has decided to "use" a song in the film. The song will have a prominent influence in the storyline of the film. The song has been recorded and released by Asylum Records (part of Warner Elektra Asylum). You seek to "use" the recorded version. The song is listed as "Desperado" (D. Henley/G. Frey) Warner Bros. Music Corp. /Kicking Bear Music ASCAP. What kind of licenses do you seek for ALL exploitations of the movie (e.g., not simply the initial integration of the song into the audio visual work but think of as many exploitations for the film as you can in the future)? . A license or grant license gives permission to exploit an intellectual property. The owner of the Intellectual Property right transfers the right to exploitation to another while retaining its ownership. Licensing is done through legal agreements commonly referred to as a license agreement. License – out, license – in Intellectual Property or cross licensing agreements are some of licensing schemes a company is privy to. Firms are increasingly relying on external sources of knowledge and technology to complement their internal innovation competence. This approach entails collaboration in research and in-sourcing of technology from external organizations, through use of technology licenses or the acquisition. Technology inclusive of other kind of expression of human creativity if not protected prevailing Intellectual Property Rights of that country, is not owned and licensing will not arise. Intellectual property right invokes licensing. The licensor gains the benefit of Simultaneous use by many, Freedom to operate, Expand manufacturing, Earn revenue, Expand into geographic markets, Expand into product markets, stick licensing, Create standard. On the other hand the licensee gets freedom to operate, advantage over competitors, despite lack of R&D, access to new technologies and know how, Possibility of creating innovative products, Settle infringement dispute, and Manufacture standardized product. However licensing may create competitors, bad choice of licensee could damage reputation or loss of control of proprietary information. The Licensee incurs added cost from Royalties, Secrecy requirements, Administrative burdens – from audits and reports and obligations to grant back improvements. The grant clause specifies "who gets what" and could be more comprehensive and detailed, giving the licensee the right to be exclusively entitled to exploit a patented invention, or market a product using a trade-mark. The object of the grant clause is to grant permission to the licensee to use certain intellectual property rights of the licensor. A license may be: exclusive, sole or non-exclusive. An exclusive license excludes the right to use the intellectual property to everyone but the licensee. The licensor is excluded from continued use the stated intellectual property. It is synonymous to assignment of the intellectual property right however the licensor may retains ownership. This would be very suitable in the case of using the music in the movie as it gives Columbia Pictures Film rights to both future and current reproductions and use. A sole license may also be good for Columbia pictures film as it can use the film solely where the owner (licensor) is cautious in giving exclusive licensing. 10 分   问题 25 .  What are the considerations of the licensors in considering granting the licenses for the use of "Desperado"? Hint: Remember the 5 exclusive rights of copyright and the 4Cs. be thorough and complete. The copyright law affirms the right to reproduce the work, the right to derivative works, the right to distribution, public display right, and public performance right as the sole rights of the owner of the copyright. The licensor in licensing the licensee must ensure the grant clause does not grant "all right, title and interest in and to the intellectual property as an exclusive license may explicitly state. Such a clause would constitute an assignment or of the intellectual property rights making licensee the new owner of these rights, even to the exclusion of the purported licensor. A license may be considered exclusive, sole or non-exclusive. An exclusive license, excludes the licensor from claiming the intellectual property rights. A “sole” license, once granted, prevents the licensor from licensing the intellectual property to anyone else however the licensor retains the right to use the intellectual property. A "non-exclusive" license can be granted as often by the licensor to as many licensees as desired. Licensing is an essential tool in the commercializing inventions. The licensor must ensure that the license does not infringe on his copyright. Therefore the license must confer credit to the copyright, trademark or patent owner while at same time ensuring he maintains control on the use of product. However as per the terms of the contract use may be subject to the licensee’s interests. The compensation due to the royalties accruing to the exploitation of intellectually property must be clearly stated in the license agreement from mutual consent of the licensee and the licensor. 10 分   问题 26 . Question what is a Most-Favored-Nation’s clause? Who would be more likely to favor a MFN clause, a producer (the licensee) who wishes to use a recording for a film or the owner (the licensor) of a master recording to be included on the film? Why? . 按 Tab 键可进入内容编辑器。对于工具栏，请按 ALT+F10 (PC) 或 ALT+FN+F10 (Mac)。 . Most-favored-nation (MFN) invokes the extension of equal treatment of other people.  Parties cannot discriminate between their trading partners as per the WTO agreements, which a supplier concedes to treat all customers equally without undue preference. Special favors (such as a lower customs duty rate for one of their products) granted to one participant have to be advanced to other WTO members. Most favored nations clauses are contained in General Agreement on Tariffs and Trade (GATT) that applies to goods, the GATS and TRIPS which cover all World Trade Organizations interests in trade. They can be conditional or unconditional. Unconditional MFN treatment ensures that all eligible countries enjoy the benefits of past and future concessions and this may be the basis around which multilateral trading regimes are organized from bilateral agreements. Goods and services under these agreements are provided at same prices to all consumers. In effect it reduces the uncertainty of potential price fluctuations, the transaction costs of both initial and later bargaining and transfer risk of opportunism. Contracting parties accord favorable tariff and regulatory treatment to all like product of conjoined parties. Most favored nation clause (MFN) commitment is to maximizing potential benefits and consequential elimination of its potential pitfalls. Both the licensor and licensee share a mutual benefit of the MFN through moderate control in the distribution of the item. The MFN clause offers assurance of lower prices to the buyer. The US Court of Appeals for the 7th Circuit describes MFNs as enabling buyers to bargain for better if not considerably lower prices which is distinguishable from price fixing (Blue Cross & Blue Shield United v. Marshfield Clinic, 65 F.3d 1406, 1415 (7th Cir. 1995)). Compounded with this are the benefits of Uncertainty for the contracting parties when faced with flux market prices, unexpected fluctuations in prices or a new product or arrangement that emerges creates difficulties in setting of an initial price and lastly the risk of opportunism where an MFN ensures that the seller does not exploit investments through sale at lower prices. Therefore we can observe mutual benefits to involved parties. However MFNs are considered to raise issues when viewed from the perspective of Section 1 of the Sherman Act (Section 1); agreements that unreasonably restrain trade, Section 2 of the Sherman Act (Section 2), and The Robinson-Patman Act. It is of note that inclusion into an MFN clause is not free but based on some preconceived policies. Most producers eschew from guarantees placed writing, but may state them orally or in emails or side-letters. The MFN guarantee may extends to the credit accorded to the actor as previously negotiated. It may stipulated: compensation, credit, royalty, etc. 10 分   问题 27 .  What is the difference between a royalty rate and the royalty base in a contract? Royalty is the amount paid for the right to the intellectual property. The royalty when tied to revenues or sales is expressed as a percentage the defined monetary value. royalty rates as applied to business or industry on similar technology is based on, Research and development costs in developing the technology, Capital costs of licensee to implement, Nature of technology (inclusive of breakthroughs and improvements) and state of technology (whether prototype or actual), Cost, risk and delay in litigating, Nature of granted rights; exclusive vs. non-exclusive, field of use restrictions, bare patent license vs. know-how, Expected market penetration and volumes, Method of payment (e.g. upfront royalty vs. running royalty). Both the royalty rate and royalty base upon which rate will be applied are components of the royalty provision in a merchandise license agreement the royalty will mostly be based on Net Sales. The royalty rates, in any licensing deal depends on Consumer recognition of the licensed property, Television, movie, publishing or other current or anticipated exposure for the licensed property, The licensed products on which the licensee will be authorized to use the property, The territory and channels of distribution offered to the licensee, The extent to which there are other supporting licenses in place, The start date and term of the license, Retailer interest in the licensed property and/or licensed products, Advertising commitments by the licensor, licensee or other licensees The royalty rate is an agreement between the interested parties. The licensor and the licensee will agree on a mutually acceptable. There exists three potential ways for sale licensed products which have significant implications on the royalty rate. The first are Domestic or Regular Sales that utilize local intermediaries who aid in the recoupment of initial costs, the second are F.O.B. Sales that target retailers who directly and assume shipping costs without the licensee bearing any costs thereby reducing retailer price. The licensor requests for higher royalty rate on F.O.B. sales. The third category is Direct Sales to consumers, in private stores, websites or mail order. The licensee assumes the roles of wholesaler and retailer. The licensee asks for a royalty rate with respect to direct-to-consumer sales that constitutes one-half of the royalty rate for regular domestic sales. The sale of the licensed product is influential in negotiation of license agreement as it provides proper estimation of royalty rate. Royalty base is of greater importance as compared to the royalty rate (on which merchandise agreement negotiations are focused) as it is the value against which the rate is applied. It mostly viewed in terms of Net Sales whose derivation are based on Returns on which The licensee does not expect to pay and therefore are deducted, provided the license agreement permits sales on a returns basis. Taxes are also important because if the licensee collects tax from accruing sale, tax in its entirety is included in the gross invoice price and is deductible, and payable to the authorized governmental agency. Most sales by licensees are wholesale sales, and therefore taxes are usually not an issue. Shipping costs borne by the purchaser are deductible, as are Discounts and Allowances. The royalty base and the royalty rate are important for both licensors and in negotiating a deal. From the excerpt it is seen that difference in royalty rate and royalty base are on their individual contributors. In class we discussed different structures of 360 deals, including: A. (i) Exclusive music publishing deals, exclusive merchandising deals, exclusive booking agency deals as compared to: (ii) passive income participation�what are the characteristics of option (i) and option (ii) and what are the pros and cons of the different approaches from both the record company�s and artist�s perspectives? The 360 deals entitle a record label to all revenue gained from artist’s activities other than the label itself. The record label enjoys privileges to a portion of income gained from previously artiste exclusive categories of earnings such as touring, endorsements, publishing, sale of merchandise, books written by artists, movies and fan clubs they create in addition to record sales income that labels have always been privy to. Therefore a 360 deal makes the record label a beneficiary of artist accomplishments. The record company may demand a percentage of gross revenues. The artist maybe obliged to relinquish up to 50% of revenues from sources excluding record sales. Cross-collateralization is another feature of 360 deals. However 360 deals are prone to conflicts of interests either in cases of sponsorship from competing entities, deferring of commissions as often practiced by managers and artiste to finance tours and roadshows. A record companies Ability deal with fiduciary obligations to their artists will tested. 360 deals are viewed by Labels as investments as multiple rights increase profits. Passive income participation is money accruing to the record label without necessarily being actively involved in the artistes overall activity. Labels relinquish control over rights involved and get a percentage of the net income generated from record and non-record sales. Under these terms the artist is free to contract third parties minus the approval of the label. B. Cross-collateralization. What is it? Whom does it benefit? Why? Why is cross-collateralization particularly important in the context of 360 deals? Cross collaterization is a clause in recording and publishing agreements that empower the recording or publishing company to recoup outstanding advance balances from one album release with revenues from the next forthcoming release(s) and/or in the case of a multiple rights deal (i.e., a 360 deal) from various sources such as music publishing royalties, concert fees, merchandise sales. The record company gains most from cross collaterization as it can use future prospects to recover previous investments. Under “cross-collateralization” clause in the record company contract an artiste would not be entitled to royalties for Album B if they owed the record company money for Album A. therefore in utilizing 360 deals, record companies will aim to draw up a cross-collateralization clause to more than just an artiste’s album. The artist will also get a greater advance but at a higher charge in favor of the record label company. References Cameron M., D. (2010). “Chapter 13: Licensing”. Cameron’s Canadian Patent and Trade Secrets Law. Donald M. Cameron. Retrieved December 10, 2014, from http://www.jurisdiction.com/patweb13.pdf Read More