The 10 Legal Commandments of Entrepreneurship

“Stained Glass Window Full of Light and Color” by Stock Photos for Free from Flickr (Creative Commons License)
Link to www.stockphotosforfree.com/

Since becoming a lawyer in 2011, I’ve had the privilege of working with businesses on a variety of legal issues. Looking back at some of the most cringe-worthy moments I’ve experiences I’ve had and heard about from other business and intellectual property lawyers, I’ve come up with a list of the 10 legal commandments of entrepreneurship:

 

1. Thou shall have a business entity.

When you start a business, create a business entity – an LLC or corporation. Your accountant can tell you which option is best for you. By separating the business from your personal assets, you limit your personal liability if the business is sued. If you open a business without an entity (aka a sole proprietorship), you don’t have this layer of protection.

 

2. Thou shall maintain your corporate veil.

Creating a business entity is how you begin to limit your liability, and you perfect that protection with a “corporate veil.” This means having a separate bank account and credit card for the business, and the business accounts pay for business expenses and your personal accounts pay for personal expenses. This creates a clear delineation between where the company ends and the person begins in terms of your finances. If the company is sued and loses, it’s clear which assets belong to the company and your person assets are protected.

 

3. Thou shall have a signed contract at the beginning of a business relationship.

When you are hired by a client or hire someone, start with a signed contract. A contract is a relationship-management document. It is your master document that puts everyone on the same page regarding their responsibilities. This will help you avoid confusion and resolve problems. When a client comes to me with a problem with a customer, I often start by asking “What does your contract say?”

 

4. Thou shall be thoughtful and careful about looking online for a contract template.

Looking at templates online is a good place to get ideas about terms you might want to have in your contract, but don’t indiscriminately use any contract you find. You don’t know where it came from or whether it’s suitable for your needs.

 

5. Thou shall take the time to fully read and understand a contract before signing it.

Never be afraid to ask questions or request changes when considering a contract offered to you. Don’t sign anything you don’t understand, because if you sign it and later regret it, you may be stuck with it.

 

6. Thou shall respect others’ copyrights.
Do not use others’ work without permission. Create your own original content. It’s ok to be inspired by and quote others, but add something to the conversation. If we’re talking about images, do not pull any image you find using a regular Google search. Seek out sources that provide licenses for use, including images available under Creative Commons. If there is an image you want to use that’s not available, contact the copyright holder and ask for permission. To date, I’ve never had anyone say, “No.”

 

7. Thou shall check the USPTO before branding a company or product.

When entrepreneurs think “branding,” lawyers think “trademark.” The United States Patent and Trademark Office (USPTO) has a database where you can see what company names, product names, and logos others have applied for and registered for their products and services. You don’t want to fall in love with, or invest a lot of time and money in, a branding idea to find out that it’s already been claimed by someone else.

 

8. Thou shall outsource your taxes.

Every entrepreneur needs an accountant. Let them do what they’re good at.

In the time it would take you to try to do your own taxes, you could make more than enough money to pay an accountant to do your taxes for you.

 

9. Thou shall consult thy attorney.

Even when you want to do things yourself, talk to your lawyer to make sure you’re not setting yourself and your business up for future problems. My most cringe-worthy moments as a lawyer have been problems clients created for themselves that we could have helped them avoid completely if they had told us what they were thinking about doing. It is easier and cheaper to prevent legal problems than to fix them.

 

10. Thou shall act with integrity.

Put your energy into your own business, creating quality products or services for your audience.

You don’t need to stoop to bad-mouthing the competing, using trademarks that are confusing similar to others, or ride other’s coattails by doing things like using a web domain that will allow you to pull an audience based on someone else’ popularity (e.g., cybersquatting). Be so good at what you do that you don’t need to use others to make a name for yourself.

One last note: If you’re an entrepreneur, don’t be afraid to ask for help. Accountants help you make money, lawyers help you keep it, and your peers will share their experiences so you can learn from them. If you are an entrepreneur, or have plans to become one, I hope you have people around you who can help you be successful.

If you want additional information about the legal dos and don’ts of starting and running a business, I maintain a mailing list where I share my thoughts about being a lawyer/entrepreneur, updates about projects I’m working on, upcoming speaking engagements, and I may provide information about products, services, and discounts. Please add yourself if you’re interested. You can also contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn.

Getty Images Skirts $1B Lawsuit

Victory by Quinn Dombrowski from Flickr (Creative Commons License)

Victory by Quinn Dombrowski from Flickr (Creative Commons License)

Earlier this year, Getty Images was sued for $1 billion (yes, that’s billion) by photographer Carol Highsmith.

Getty Images had sent Highsmith a letter and a bill, claiming that she was using one of their images without buying the requisite license. (Getty’s known for doing this.) It turns out Getty sent her a bill for using an image that she had taken herself. In fact, Getty was selling licenses for thousands of her images. Highsmith responded by suing Getty for $1 billion for violating her rights under the Federal Copyright Act and state level laws related to licensing.

Highsmith donated over eighteen thousand images to the Library of Congress and made available to others to copy and display for free starting in 1988. Her claims were based on the fact that Getty used her work without attribution and added their own watermark. In my previous post about this case, you can see the math that shows that $1B is a reasonable amount to request for damages given the number of photos in question.

I previously wrote that this will be a fun case to watch, assuming it goes to trial and doesn’t end a settlement with a non-disclosure agreement. But alas, it wasn’t meant to be.

The Court granted Getty and the other Defendants’ Motion to Dismiss the federal claims, leaving on the state-level claims in the case. The Parties apparently came to an agreement amongst themselves, with a non-disclosure provision, and stipulated to having the remaining claims dismissed with prejudice (meaning Highsmith can’t file this lawsuit again for these claims). The dismissal also directs each side to be responsible for their own attorneys’ fees and costs.

Judge Rakoff wrote that he will release a memorandum explaining his ruling “in due course.” I expect it will be an interesting read.

I feel for Highsmith. Not only did she feel like her rights were violated, but the Court disagreed with her and told her she had to pay her attorneys’ fees. That’s the risk a person runs when they pursue a lawsuit – the Court could say you’re wrong, and you had to pay possibly thousands or tens of thousands of dollars to get that answer.

So what does this mean for future cases that are similar to this? It’s hard to say, though it appears that the fact that Highsmith made her work available for public use impacted her argument that she had rights in the images in question. I don’t expect this to effect artists who retain their copyright rights and make their work available for free through Creative Commons and similar means. (Thank you to all the artists who do this. I am forever grateful for your generosity.)

There are a lot of issues that come into play surrounding photography, image rights, and copyright. If you want to chat more about these topics, you can contact me directly or connect with me on TwitterFacebookYouTube, or LinkedIn. You can also get access to more exclusive content that is available only to people on my mailing list, by subscribing here.

Be Leery of Free Image Sites: You May Inadvertently Commit Copyright Infringement

Palm Sunset by Lawrence Rayner from Flickr (Creative Commons License)

Palm Sunset by Lawrence Rayner from Flickr (Creative Commons License)

I cringe every time I hear people says they use Google Images to find pictures for their websites because I know most of them are using anything they find in the search results without adjusting the settings to only show images that give them permission to use them. And I love it when people, especially entrepreneurs, use Creative Commons, seek out other sources for free images, or purchase a license to use images from iStock. Unfortunately, there are times when business owners think they are doing everything right, and they don’t realize they’re not until they’re threatened with legal action.

I have heard about a few situations over the years when someone has stolen images from a photographer and made their work available for free without the artist’s permission. Sometimes the person who steals the original image cuts off the photographer’s watermark or signature before posting them online. These photo thieves may post these images on their own site as free images or wallpaper. You might download this work and use it on your site, thinking that you are acting within the limits of the law.

When the photographer realizes that their work has been stolen, they’ll probably be angry – and they might send letters than demand payment or threaten legal action to every site where their work has appeared without their permission. And rightfully so – as the copyright holder, they have exclusive right to control where their work is copied and distributed. The fact that you didn’t know that you were doing anything wrong will not absolve you. If you’ve used an image where the watermark or other copyright notice was removed, they could accuse you of committing copyright infringement (punishable by up to $150K in statutory damages per violation) and removing the copyright management information to facilitate the infringement (punishable by up to an additional $25K per violation).

So what do you do if you receive one of these demand letters? Contact a copyright lawyer immediately. You want to verify that the claim is legitimate and strategically plan your response. If the claim is legit, the artist likely wants you to pay their licensing fee and/or stop using their image. It’s probably best to let your lawyer respond on your behalf but if you choose to respond to the letter yourself, it’s a good idea to have your lawyer at least review your response before you send it to make sure that it’s thoughtful and reasonable.

What should you do to avoid this type of problem in the first place? Be leery of free wallpaper sites. I have more faith in images I find through Creative Commons – though it is possible that someone could steal another’s image and make it available with a Creative Commons license. You can always run the image you want to run the image through the Google Image search engine to see where else it is being used online. That may help you determine if the image might be stolen. If there ever is an image that you want to use on your site and you’re unsure if you have permission to use it, explicitly ask the artist for their permission.

If you want to learn more about copyright issues on the internet, please check out my book The Legal Side of Blogging: How Not to get Sued, Fired, Arrested, or Killed. It has several chapters dedicated to copyright. You can connected with me on TwitterFacebookYouTubeLinkedIn, or you can email me. You can also subscribe to the Carter Law Firm monthly newsletter.
Please visit my homepage for more information about Carter Law Firm.

Highlights on Copyright & Publishing from the Indie Author Conference

Rockin' my Magic Red Chucks at the Changing Hands Indie Author Conference - Photo by Jeff Moriarty (used with permission)

Rockin’ my Magic Red Chucks at the Changing Hands Indie Author Conference – Photo by Jeff Moriarty (used with permission)

I had the pleasure of speaking at the Changing Hands Indie Author Conference over the weekend. It was a day packed with sessions for indie authors and aspiring indie authors on how to publish and market a book. I did two sessions called “Legally Speaking” on how copyright applies to book writers. Here are the top 10 highlights from my presentation and the audience’s questions.

1. You have copyright rights in your work the moment your ideas are captured in any tangible medium (paper, computer file, etc.). You still have your rights even if you forget to put a copyright notice in your book.

2. Having a copyright gives you the exclusive right to copy, display, distribute, perform, and make derivative works based on your work. These rights last for the duration of your life, plus 70 years if your work was created after January 1, 1978.

Close-up of my Magic Red Chucks - photo by Pam Slim (used with permission)

Close-up of my Magic Red Chucks – photo by Pam Slim (used with permission)

3. You don’t have to register your copyright with the U.S. Copyright Office to get your rights. You do have to register if you want to sue for infringement.

4. You should submit you application to register the copyright in your book before you make it available for sale.

5. If you live in a community property state (like Arizona), copyrights acquired during the marriage are community property unless you have a prenuptial agreement or spousal agreement that states otherwise.

6. Make sure you understand the difference between a copyright assignment and a copyright license. In the former, you give away your copyright rights; in the latter you retain copyright ownership but grant someone permission to use some of your rights.

7. If you are incorporating other works, characters from existing works, or trademarked products, consult an attorney to make sure you understand what legal risks you’re taking with your project.

8. You will need works made for hire contracts or copyright assignments for artists who contribute to your book (i.e., illustrations, graphics, forward or afterward by another writer, cover art) to give you the copyright in what they create. Consider adding a provision to the contract that states the contributor indemnifies you if you’re accused of copyright infringement because of their contribution.

9. When you create a budget for your book, plan to pay for a lawyer for a few hours to draft or review your contracts. Use a copyright lawyer, not your lawyer buddy who specializes in personal injury law.

10. If you have a publisher, read your contracts carefully to make sure you understand what rights you’re giving up (if any) and how and when you’ll be paid. Don’t sign anything you don’t understand because you’ll probably be stuck with the contract as long as it’s not illegal. Never be afraid to ask for clarification.

If you want to chat more about this topic, please can connected with me on TwitterFacebookYouTubeLinkedIn, or you can email me. You can also subscribe to the Carter Law Firm monthly newsletter.
Please visit my homepage for more information about Carter Law Firm.

Burning CDs and Copyright Law

CD Reflections by spcbrass from Flicker (Creative Commons License)

CD Reflections by spcbrass from Flicker (Creative Commons License)

One of my favorite minimalists shared a post by Lindsay Schauer about the eight things you can live without on Twitter last week, and it kicked off a legal discussion and he asked me to comment. One of the things Lindsay said to get rid of is your CD collection – burn them to your hard drive and get rid of the physical CDs themselves. That makes a lot of sense. A single CD doesn’t take up much space but a collection of jewel cases does.

I put my CDs in a CD binder and chucked the cases years ago, but can you legally copy a CD you own and keep that instead of the disk?  Probably.

The copyright holder (likely the record label or the artist) controls when/where/how their work is copied, distributed, and performed. When you buy a CD, you only purchase the tangible object – not the intellectual property rights. Just like when you want to get rid of an old book you can give it away, throw it away, or sell it to a second hand store, the same is true for CDs. However, you can’t make a photocopy of the book so you can keep the original for yourself and give a copy to a friend. The same is true for CDs. (Yes, all those copies of CDs you burned from or for your friends are probably illegal.)

CDs by borkur.net from Flickr (Creative Commons License)

CDs by borkur.net from Flickr (Creative Commons License)

If you legally purchased a CD, you can make a copy of it for “archival” purposes. This prevents you from having to buy a new one in the event the CD gets lost, damaged, broken, or used as a Frisbee, coaster, or for an art project. The same rule applies for making a copy of computer software that you’ve legally purchased.

So can you take Lindsay’s advice and copy all your CDs to your hard drive and chuck the originals? Yes, if you legally purchased the albums. You can only make one copy for yourself. You can’t make copies for your friends.

The purpose of the copyright law is to give artists rights in their work and allow them to profit from selling it. An archival copy is supposed to be a backup for the original, so some copyright holders may frown on people who make an archival copy of a CD and sell the original. (You’re starting to look like the guy who sells a book to a friend but keeps a photocopy of it for himself.) There’s an argument that you’re committing copyright infringement; however, the amount you’re making isn’t really cutting into their profits, and the artist might be happy that more people are being exposed to their music. If someone is concerned about their rights and maximizing profits, they might be less upset if you throw the CD away or repurpose it into a coaster so anyone else who wants the album has to buy it.

The good news in copyright infringement cases is the only person who can come after you for copyright infringement is the copyright holder. If they don’t know what you’re doing or don’t care, they will never come after you.

If you want to chat with me about this or any other topic, you can connect with me on TwitterGoogle+FacebookYouTubeLinkedIn, or you can email me.
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Please visit my homepage for more information about Carter Law Firm.

Creepy New Facebook Terms of Service Coming

Facebook’s Infection by Ksayer1 from Flickr (Creative Commons License)

When I got the notice that Facebook was updating its Statement of Rights and Responsibilities and its Data Use Policy, I didn’t think much of it. If you want to use their service, you’re stuck with their terms of service. I just made a mental note to verify that my privacy changes hadn’t changed when they roll out the new policies go into effect. But then a friend told me about some of the changes that made me take a closer look.

Facebook says, “Your privacy is very important to us.” That doesn’t mean they care about keeping your information private. That just means they’re telling you how they’re using it.

Facebook previous terms of service put us on notice that they treat your name and profile picture like public information and they basically track all of your activities on the Facebook site and mobile app – this includes when others’ tag you in a photo, status update, at a location, or if someone adds you to a group.  And don’t think about creating a profile with fake information because that’s against the rules too. When you post a photo on Facebook, you give them a “non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use” it however they want. If you delete a photo, the license ends, unless it’s been shared with others and they haven’t deleted it.

Facebook: The privacy saga continues by opensourceway from Flickr (Creative Commons License)

Facebook: The privacy saga continues by opensourceway from Flickr (Creative Commons License)

Now here’s something interesting, the old rules state you can’t tag anyone on Facebook without their consent. When’s the last time your friend asked for your permission to tag you? Facebook says tell your friends if you’re ok with them tagging you and if they refuse to respect your desire not to be tagged, then block them. (Blocking = no tagging for you)

So what’s going to be changing with Facebook? Well, they’re going to add a facial recognition program that will scan people’s photos and suggest friends to tag by comparing the photos to others’ profile pictures and other photos where you’ve been tagged. Does that sound a little Big Brother to anyone else?

I’m guessing this change is going to piss off a lot of people who know about it. I get hits on the law firm’s website every day from people who want to know if and how others can post pictures of them online or whether they can post pictures of others online. Every day.

I wonder how many people are going to change their profile picture to a photo of their pet and disallow all other tagging to avoid Facebook suggesting friends tag them when others post pictures of them. I bet more people will talk about this idea more than will actually do it.

And I don’t think this is a change but more of a clarification. The new rules say, “[Y]ou permit a business or other entity to pay us to display your name and/or profile picture with your content or information, without any compensation to you.”  It’s their site and their rules, and they probably don’t care if you don’t like it.

If you don’t like these changes, you can bitch about it but accept it or delete your account. Unlike deactivating your account, this completely removes it from Facebook.

If you want more information about the legalities of social media, please check out my book The Legal Side of Blogging: How Not to get Sued, Fired, Arrested, or Killed. If you need information or advice about a situation involving your Facebook, please contact a social media attorney in your community.

You can connect with me on TwitterGoogle+FacebookYouTubeLinkedIn, or you can email me.
You can also subscribe to the Carter Law Firm monthly newsletter.
Please visit my homepage for more information about Carter Law Firm.

How Work Made for Hire Contracts Work

Photographer Devon Christopher Adams at Ignite Phoenix #10, photo by Joseph Abburscato used with permission

Photographer Devon Christopher Adams at Ignite Phoenix #10, photo by Joseph Abburscato used with permission

If you have ever hired a third party to do photography, video work, web design, graphic design, or to create website or marketing materials for your company, you should check your contracts. If you didn’t draft it correctly, there’s a good chance you don’t own the copyright in what they created.

When you hire a freelancer or a company to create this type of content for you, you need a work made for hire contract. This contract should state that the person being hired is a contractor (not an employee) that they are being hired to create a works made for hire, and that you will own the copyright in everything they create under the terms of the contract. This contract needs to be in writing and signed before the contractor begins work on your project.

If you don’t do this, you will not own the copyright in the work. You will only have an implied license to use the work in ways specified in your verbal or written agreement. The contractor will still own the copyright in the work. If you repurpose the work in another way without the contractor’s permission, there’s a chance that you will be infringing on the contractor’s copyright. The contractor could sue you for copyright infringement or force you to buy another license to use the work. They could offer to sell you the copyright in the content too, which basically means, from your perspective, you’ll have to pay for the same work twice.

I work with companies and freelancers on both sides of this issue. I encourage companies to make sure they have a proper works made for hire in place with their contractors and to not let their contractors lift a finger until that contract is signed. I often suggest that they have provision in their contracts that states the contractor will indemnify the company against any infringement claims made against the company because of the contractor’s work. The company should make the contractor cover the attorneys’ fees and any damages if it turns out the contractor ripped off someone else’s work instead of creating the work themselves.

On the flip side, I frequently write contract templates for freelancers to ensure that they understand what rights they are retaining and which ones they are giving up. Many freelancers want contracts that give the hiring party the copyright in their work and that also give the freelancer a license to put a copy of their work in their portfolio so they can use it to obtain other jobs.  Without this license, the contractor can’t use their work in any way without risking violating the copyright that the company now owns, even though they created it.

If you are a freelancer or a company who hires third parties to create content, please contact a copyright attorney to make sure your rights and interests are protected by the terms of your contracts. You can connect with me on TwitterGoogle+FacebookYouTubeLinkedIn, or you can email me.

You can also subscribe to the Carter Law Firm monthly newsletter.
Please visit my homepage for more information about Carter Law Firm.

Jonathan Coulton v. Glee – Legal Rip Off or Copyright Infringement?

Jonathan Coulton by Dan Coulter from Flickr

Jonathan Coulton by Dan Coulter from Flickr

I’ve been reading up on the Jonathan Coulton/Glee controversy over Coulton’s arrangement of “Baby Got Back” by Sir Mix-a-Lot and all I can think is “What the fuck, Glee?!?”

Sir Mix-a-Lot is the artist behind the original “Baby Got Back.” When indie singer-songwriter Jonathan Coulton wanted to record a cover of it, he did the ethical and legal thing and purchased a license to use the song. Whenever he sells a copy of his version, Sir Mix-a-Lot gets a royalty payment.

The TV show Glee is about a high school glee club that does covers of popular songs. When they wanted to do a version of “Baby Got Back,” they got permission from Sir Mix-a-Lot to do it, but according to Coulton and his fans, they blatantly ripped off his arrangement without any attribution. It was likely completely legal for Glee to do this, but it was an asshat thing to do.

Here’s how copyright works when it comes to music. When a musician writes a song (think sheet music), he gets the exclusive right to copy, distribute, display, perform, and make derivative works from it. Covers are derivative works, which is why Coulton needed a license to do his own arrangement of the song. He used the same lyrics with a few modifications, but the accompanying music is totally different.

When the musician makes a sound recording of their song (think mp3, CD, etc.), he gets a separate copyright in that. In this case, Coulton may not have a copyright in the arrangement he wrote for “Baby Got Back,” but he does have a copyright in his sound recording of his arrangement of the song.

When “Baby Got Back” aired on Glee, Jonathan Coulton and his fans recognized it as his arrangement instantly, and they rightfully asked, “What the fuck?” No one informed Coulton that they’d be using his arrangement and they didn’t give him credit for it on the show. The show reportedly responded that he should be happy for the free exposure. What exposure did they give him since they didn’t give him the attribution for his work?!

Some people are now questioning whether Glee used some of Coulton’s sound recording on the show. Coulton may not have legal recourse for them using his arrangement of the song, but he would if they used his recording instead of recreating it themselves. We’ll see where the chips fall on this one.

In the meantime, Coulton is doing something totally awesome in response to this situation. He released his version of “Baby Got Back” (in the style of Glee) and he’s donating the profits to The VH1 Save the Music Foundation and The It Gets Better Project. Go buy it! (I did!)

So what’s the lesson from this: Always give an attribution when you use another artist’s work, even if you’re not legally obligated to do it.

You can read more about this story on CNN, Wired, and Forbes. Apparently other artists are also coming forward and saying that Glee did the same thing to their arrangements as they allegedly did to Coulton.

You can connect with me via TwitterGoogle+FacebookYouTube, and LinkedIn, or you can email me.
Please visit my homepage for more information about Carter Law Firm.