For the past few months, we've been following the whole Amazon / Hachette contract dispute that was full of ridiculous misinformation and economic ignorance. It was interesting to see such a fight play out in public, though it was also a reminder that oftentimes, such public fights become public due to misinformation campaigns.
Either way, the two companies have, well, buried the hatchet, though, as Nate Hoffelder points out, it's not clear in whose back it got buried. Hoffelder does note that from what's being said about the deal, it doesn't appear to be all that different from the one that Amazon recently signed with Simon & Schuster -- without such public anguish -- leading him to wonder what Hachette could have possibly gotten out of going toe-to-toe with Amazon in this battle in such a public manner.
In the end, it seemed like another fight about control and the future -- and, generally speaking, Hachette's desire to stave off where things are heading in the future for as long as possible. But, and this is the important bit, the future has a way of always winning out in the end, no matter how hard you negotiate against it.
We've been covering the saga of Roca Labs for a few days now. This is the company that claims to make an "alternative" to gastric bypass surgery in the form of some "industrial food thickening agents" that (the company claims) will fill up your stomach and make you not want to eat. These claims are not FDA reviewed and an examination of the claims by a doctor found them to be questionable (to say the least). We became aware of the company because it had sued Consumer Opinion Corp., the company that owns the site PissedConsumer.com. The issue? Roca Labs has a terms of service that offers everyone a "discount" on its product if you agree to never, ever, say anything bad about the product ever (you also have to agree to share success stories with Roca and allow them to publicize those stories). In short, the terms of service are designed to only show positive results, and gag any negative results. Roca claims that it has to do this because results may vary, and negative results could be caused by other factors. Of course, doesn't that also mean that positive results could be caused by other factors as well?
Either way, Roca Labs sued PissedConsumer on the hilarious legal theory that by offering a forum for unhappy customers to post their story, it was "tortious interference" because it encouraged people to break the terms under which people bought the product. As we noted, this legal theory is fairly laughable, and PissedConsumer's legal response makes that fairly clear as well.
However, Roca Labs and its lawyers are apparently busy. They're not just suing PissedConsumer, but they're actually suing a customer who complained to the Better Business Bureau for "breach of contract" and "defamation per se." While her filing with the BBB included some statements that might reach the level of defamation, amusingly, Roca Labs does not attempt to show that her comments were false in any way. Rather, it relies on yet another ridiculously questionable term in its terms of service, saying that if you post something negative, it will automatically be considered "defamation per se." Here's the term:
You agree that any such negative claim will constitute defamation per se
I don't think that's how defamation law works. At all. Even if this woman's comments to the BBB are defamatory (and I'm not saying they are), you can't just have someone sign a contract saying that if they do something, they'll be guilty of defamation.
Either way, all of this should make you wonder just what sort of company Roca Labs is in that it seems to not just sue its own customers for negative reviews, but to work so hard to stop negative reviews and to threaten and intimidate those who make complaints about their experience with the company.
One argument that we've seen in favor of copyright law is that it's no different than a contract: that is, if you agree to purchase something under copyright, it's no different than accepting the terms of a contract. And, as they say, if you "don't like the contract, don't do the deal." Thus, "if you don't like the copyright, don't buy the product." However, as Rick Falkvinge points out, copyright has some significant differences that actually serve to make it antithetical to the right to contract, in that it goes way beyond just the contracting parties to absolutely everyone.
Let’s look at what happens when Alice sells a DVD to Bob (possibly through an intermediary that, for all intents and purposes, mediates the contract), and the sale includes a written condition to not share the bitpattern on the DVD with anyone else, which Bob even reads, understands, contemplates, and signs.
In this case, Bob would be bound by contract to not share that bitpattern. So far, so good. But let’s assume he does anyway. He shares the bitpattern with Carol, who manufactures a copy of the DVD using her own parts and labor.
In this, Bob would be in breach of contract with Alice. But what about Carol’s copy? Carol has signed no contract with Alice whatsoever, and contracts aren’t contagious in the sense that they follow the original object, concept, idea, or pattern; they require voluntary acceptance from an individual, which Carol has not given. Carol has signed no contract, neither with Bob nor with Alice.
Thus, Carol would not be bound by the original contract in the slightest on a functioning free market, regardless of Bob’s breach, and she would be free to share the bitpattern of her own copy of the DVD as much as she pleased with David, Erik, Fiona, and Gia, who could all manufacture their own copies from the bitpattern that Carol shared, without any breach of contract having taken place.
But, of course, that's not what happens. Copyright isn't like a contract because all sorts of people who never agreed to any such contract are automatically and unavoidably bound by its terms. In fact, as Falkvinge points out, at this point, it has become the exact opposite of the freedom to contract, because it bars Carol from her own freedom to contract:
The copyright monopoly limits Carol’s rights to sign contracts in her turn regarding her property that she manufactured with her own parts and labor – the DVD with the bitpattern: it limits her ability to sign contracts with David, Erik, Fiona, and Gia regarding this piece of property, should she desire to do so. For example, with the copyright monopoly in place, she cannot even legally execute one of the simplest forms of transaction – a transfer of property. She can’t make additional copies of her own property and sell them, or even give them away without any terms whatsoever.
Whether or not you think such restrictions are reasonable, it seems clearly incorrect to argue that copyright is merely a form of the right to contract.
After Huffington Post was sold to AOL for $315 million, there was a really, really silly discussion among a small group of the volunteers who blogged on the site for free (again, voluntarily), who whined about how this was somehow unfair. They ignored the fact that they took none of the risk, spent none of the money, had no obligations to provide content and clearly agreed to receive no money for their actions -- but still, they whined. Some then went even further and filed a very silly lawsuit, led by Jonathan Tasini. Tasini, previously, had successfully sued the NY Times concerning that company's handling of freelance works. Of course, given that he's now sued two major publications which he freelanced for, what publication would ever allow him to write freelance pieces again? It seemed that his success in the NYT suit led him to be over confident with this lawsuit. There was simply no basis for it: he blogged on the site voluntarily, knowing that he'd receive no compensation for it. To then whine that the investors, who took all the risk, made some money selling the site when he had no equity stake in the site, isn't just sour grapes, it's legally ridiculous.
Thankfully, the district court smacked the case down pretty hard, and did so with prejudice, denying him the ability to refile an amended complaint. However, Tasini wasn't ready to give up, and appealed the original ruling. The appeals court has now taken its turn in smacking down the lawsuit, noting that Tasini's argument is simply ridiculous, as you can see in the full filing (also embedded below):
The problem with plaintiffs' argument is that it has no basis in their Amended Complaint. Nowhere in the Amended Complaint do plaintiffs allege that The Huffington Post represented that their work was purely for public service or that The Huffington Post would not subsequently be sold to another company. To the contrary, plaintiffs were perfectly aware that The Huffington Post was a forprofit enterprise, which derived revenues from their submissions through advertising. Perhaps most importantly, at all times prior to the merger when they submitted their work to The Huffington Post, plaintiffs understood that they would receive compensation only in the form of exposure and promotion. Indeed, these arrangements have never changed.
Though it is no doubt a great disappointment to find that The Huffington Post did not live up to the ideals plaintiffs ascribed to it, plaintiffs have made no factual allegations that, if taken as true, would permit the inference that The Huffington Post deceived the plaintiffs or otherwise received a benefit at the expense of the plaintiffs such that equity and good conscience require restitution.
In other words, Tasini's inability to accept the deal he made, and the fact that he apparently got jealous of Huffington's ability to sell the site, is not a legal issue at all. The court also re-affirms that the dismissal with prejudice was entirely proper. Maybe, instead of spending all this time on lawsuits, Tasini would be better served trying to build his own site. Of course, as was ironically noted after he filed his lawsuit, Tasini actually did that once and didn't pay the bloggers who blogged for him...
When Jonathan Tasini and a few others filed a lawsuit against the Huffington Post last year, we called it the dumbest lawsuit ever. Even though Tasini has had some luck in filing class action lawsuits against media properties, this lawsuit was completely and absolutely frivolous. Tasini (and many others) had blogged on The Huffington Post for free. That was the deal from the beginning and it was clearly laid out: Huffington Post provided them with a platform which they could use, and they could promote themselves however they wanted, but they didn't get paid. Huffington Post does have some paid reporters, but they have different rules and responsibilities (including requirements on how much they write, etc.) When the Huffington Post sold for $315 million, Tasini decided that he and the other volunteer writers deserved $105 million.
There were all sorts of problems with his argument, beyond just the fact that he agreed to basic terms and was trying to go back and change them afterwards. It also showed a complete misunderstanding of the nature of equity in a company. If Huffington Post had flopped and was in debt, would Tasini then be legally required to help cover the debt? Of course not. Ownership (equity) is a totally separate issue from compensation -- and the capital gains on equity have everything to do with the risk that the founders and investors put into HuffPo, completely unrelated to the question of direct compensation. But, of course, none of that matters because, again, Tasini agreed to the deal upfront in which he blogged for free. If he didn't understand the terms of the deal, that was his problem. The arguments in his filing were even more ridiculous, where (despite this not being a copyright issue) he pretended that the Copyright Clause of the Constitution meant that content creators must be "appropriately compensated." The whole thing was a complete joke.
It was made even more ridiculous when it later came out that Tasini himself had a blog... on which he had volunteer writers who he did not pay. Not only was the lawsuit stupid, but it was filed by a hypocrite who didn't understand the law and did the same thing he was angry at HuffPo for doing.
Thankfully, it appears the judge agreed. Not only did the court dismiss the lawsuit, but it did so with prejudice, meaning that Tasini can't just refile the lawsuit to make up for its failings. The judge is effectively saying that it doesn't matter what legal arguments Tasini makes, he has absolutely no case.
There is no question that the plaintiffs submitted their materials to The Huffington Post with no expectation of monetary compensation and that they got what they paid for — exposure in The Huffington Post....
Moreover, equity and good conscience plainly do not support the plaintiffs in this matter. No one forced the plaintiffs to give their work to The Huffington Post for publication and the plaintiffs candidly admit that they did not expect compensation. The principles of equity and good conscience do not justify giving the plaintiffs a piece of the purchase price when they never expected to be paid, repeatedly agreed to the same bargain, and went into the arrangement with eyes wide open.... Quite simply, the plaintiffs offered a service and the defendants offered exposure in return, and the transaction occurred exactly as advertised. The defendants followed through on their end of the agreed-upon bargain. That the defendants ultimately profited more than the plaintiffs might have expected does not give the plaintiffs a right to change retroactively their clear, up-front agreement. That is an effort to change the rules of the game after the game has been played, and equity and good conscience require no such result.
Tasini is apparently considering appealing, which would be a waste of time and money. Any court is going to smack this lawsuit down.
In the meantime, Tasini has now branded himself as someone who has twice filed major lawsuits against publications that published his writings. It makes you wonder: what publication would want to put itself at such risk in the future?
With Europe approving this ridiculous retroactive copyright extension, which has set off an angry public who is reasonably frustrated that they'll be paying the cost to support a few rockstars and dying record labels -- there's an argument that this fundamentally breaks copyright law. And, it's making me wonder if it actually should mean that copyright is null and void.
I've argued in the past that this constant expansion of both copyright and copyright enforcement has only served to make people respect the law less and less, because it gets further and further away from what people think is reasonable. Rather than making more people respect the law, it drives more people to ignore the law. Dirk Poot takes that argument a bit further, and suggests that with such things, we've actually gone full circle and copyright law has become exactly what it was originally designed to stop.
If you know your history of the Statute of Anne, one key goal of the system was to stop overarching monopolies among publishers, by granting them limited monopolies. But as we've moved further and further away from such limited monopolies, Poot argues that we've actually gone back to exactly what copyright law was supposed to be against:
It is clear that the copyright deal is dead. The perpetual monopoly that Queen Anne sought to end in 1709 has, for practical purposes been restored. From the public have been taken all the benefits which made the deal worthwhile to begin with; from a cultural perspective we are back in the late 17th century.
So where does that leave the public? The benefits are gone, and adding insult to injury, copyright lobbyists are actively forcing web-sniffing, packet-inspecting and blocking-technology upon society, willfully endangering basic human freedoms. What incentive, except the threat of massive litigation and draconian measures is there for the public to accept this farce of a copyright law? For how long will society put up with prohibitive fines and three-strikes legislation?
With the latest copyright extension, the EU may have dealt a deathblow to copyright. Internal enforcers like morals and ethics have been taken out; the only thing that copyright law still has going for it, is the empty threat of dire consequences.
Copyright law has lost its legitimacy; heavy-handed enforcement can only lead to uncomfortable questions about the validity of the underlying laws, and eventually copyright will be become a mere curiosity, not unlike the obligation for males to schedule in two hours of longbow practice each week.
But all of this got me thinking about this from a slightly different angle. When you're locked into a term-based contract with, say, a mobile phone provider, one thing that has become standard is that if they unilaterally change the terms, you are granted an out. You get to say "that's not the deal I agreed to, so I'm voiding the whole deal." So... um... shouldn't the public now be able to make that same argument with copyright law? After all, the government has unilaterally changed the terms of the deal. The original deal was a limited monopoly of specific length, in exchange for the work itself being created, and then being contributed to the public domain at the end of the agreement. But, if the length of time is changed unilaterally -- especially with the public not getting any compensation -- then hasn't the government effectively reneged on the entire deal? Couldn't an argument be made that the public should now have the option of "opting out" of the copyright regime, because the terms of our contract have changed?
Last month, we posted an excellent video by entertainment attorney Martin F. Frascogna of the Fascogna Entertainment Law firm, deciphering some of the tricks of the trade in a standard recording industry contract, and showing how a band could still end up owing $500,000 even after selling a million albums. Most of that discussion was theoretical, as most record deals are kept confidential. However, due to a legal dispute involving the band Breaking Benjamin, that band's full contract was filed as part of the court documents in the case (embedded below). We asked Fascogna if he'd like to analyze the actual contract, and he did us one better, and did a full analysis of the lawsuit itself as well. He also created a new video -- embedded in the story, about the role of trademark for bands. Enjoy.
Breaking Benjamin’s internal struggle has left the group in shambles. I promise this will only get worse, but, in the interim, the dispute has me mildly wanting more. Chalk this up to the fact that I didn’t know people cared so much about the group, nor did I know they had so many albums out on the market, which is partially the cause of their internal problems to begin with.
Internal disputes are commonplace in the music industry, and honestly I’m thankful -- otherwise I would be an unemployed attorney. Call it snooping but I decided to poke around into the vast 98+ page suit/band agreement/and recording contract. It’s a fascinating soap opera. The dispute is filled with villains, heroes, bad actors, flashes of comedic relief, and loads of drama. Before breaking down the intricate legal components, it’s important to first understand the players, potential players, and the significant roles each play.
Benjamin Burnley – The group’s front man put the entire controversy in motion. Essentially, Burnley was under the impression he fired fellow band members Aaron Fincke and Mark Klepaski. Stated in their Band Agreement, any internal dispute would be handled via arbitration. If you don’t know what this means, arbitration is a method of settling disputes outside of court. This route is extremely common in the music industry because arbitration records typically remain private unlike court documents that can be publicly accessed. Burnley, via his legal counsel Brian Caplan and Jonathan Ross, requests to activate the arbitration clause in the band agreement and demands an award of $250,000. More on the amount later.
Aaron Fincke and Mark Klepaski, through counsel, James Oschal of Rosenn, Jenkins and Greenwald LLP, claim the Band Agreement is null and void therefore making an arbitration clause irrelevant. They request that the Pennsylvania state court hear the case and dismiss the validity of the arbitration clause. At this time, they are not seeking any monetary damages. Believe me that’s coming.
Hollywood Records – Currently they are a non-factor but I promise they’ll become the star of this dispute in no time. Basically all the label wants is to release the album(s) allegedly agreed upon between the label and band. Sideline this thought for a minute as it will become a significant legal stance later on.
The time frame of events will also prove to be vital in this case.
January 2009 – Burnley, Fincke, and Klepaski enter into a Band Agreement.
March 2010 – Breaking Benjamin allegedly enter into a Recording Agreement with Hollywood Records.
March 2010 – Burnley allegedly communicates to band members, Fincke and Klepaski, along with the band's attorney, Nick Farrara, that he didn’t want to proceed with the Recording Agreement.
March 2011 – Burnley dismisses Fincke and Klepaski from the band.
June 6 2011 – Burnley seeks arbitration and a remedy of $250,000 from Fincke and Klepaski.
DATE UNCLEAR ON COURT DOCUMENTATION – Fincke and Klepaski request a declaratory judgment from the Pa. State Court.
There three principal legal issues in the dispute:
Is the Band Agreement valid because the Band Agreement essentially dictates who entered into a contract with Hollywood Records? Meaning – Did Breaking Benjamin as a collective group OR as Finckle and Klepaski acting as individuals and unauthorized representatives of the band sign the Recording Agreement.
Who owns the Breaking Benjamin trademark? The trademark dictates how the band proceeds with future recordings.
What happens to the Hollywood Records Agreement?
Bonus: Because label haters probably want me to dissect the Recording Agreement into a bloody carcass, due to the cyber-bullying and arm-pulling, I’ll reluctantly do so. However, I warn you that during this time of the legal dispute, the Recording Agreement is somewhat irrelevant as the Band Agreement and the Breaking Benjamin internal drama must unravel first.
THE BAND AGREEMENT:
Every major recording artist has an internal Band Agreement (if they don’t, they should). The agreement dictates how overall band business is handled in times of dispute, fund disbursements, etc. Courts traditionally look no further than the Four Corners Rule, meaning they only look at what’s taking place in the four corners of the legal document (i.e. – Band Agreement) that the group collectively signed. Sometimes the group’s intentions allude to one conclusion but the actual language interprets otherwise. In the Breaking Benjamin Band Agreement, it’s unmistakably clear that Burnley started the group, is the creative force behind the group and essentially dictates the group’s decisions. Evident in the agreement, Burnley can dismiss a fellow band member for “just cause.” This is interesting. This type of language is fairly standard in a “Band Agreement” but not so standard in a “Partnership Agreement.” These are two different agreements entirely. Some groups operate as a partnership, meaning each active member plays an equal role. For example if the group is made up of four members, each member essentially has a 25% stake and so forth. Here, through legal arguments stated by both sides, they use the language interchangeably – Band agreement and Partnership agreement. If the document is indeed a Partnership Agreement, this entire dispute could quickly end because Fincke and Klepaski, acting as a majority vote, could enter into band decisions on behalf of the group without Burnley’s authorization. Oddly enough, this legal stance hasn’t been made nor does it appear it’s going to be. The big city attorneys must know something I don’t. Because we’re led to believe the group has entered into a Band Agreement (as opposed to a Partnership Agreement), the contract’s four corners language will run the show.
The contract clearly states that Burnley can dismiss members with “just cause,” that disputes will be addressed via “arbitration” and that any “departed member has no right to ‘ID Materials License Terms’ nor shall they have the right to utilize the group trademark” as addressed in Section 5. Lastly, “all decisions must be collectively made,” which makes it clear we’re dealing with a Band Agreement. A Partnership Agreement would allow for a majority vote, not collective. In addition, apparently back when the group was friends, there is some language anticipating Burnley’s poor health and slew of unstable disorders and how it could affect the band’s income stream. For example, the agreement would become invalid should Burnley decease or become disabled prior to any studio album completion. Personally speaking, this is where the drafter of the contract went wrong because they didn’t identify what happens if this clause is activated, rather it just states that the contract becomes null and void.
Because the agreement in place appears to be a Band Agreement (not a Partnership Agreement), (a) no departing member has rights to a trademark, (b) all band decisions must be decided upon by all three members, and (c) Burnley could dismiss members with “just cause.” Therefore, since all three members agreed to these terms it appears (1) Burnley’s request for arbitration is valid, (2) Breaking Benjamin (as a group) didn’t enter into a Recording Agreement with Hollywood Records because Burnley, allegedly, didn’t agree to the terms, and (3) the dismissed members couldn’t enter into a Recording Agreement on Breaking Benjamin’s behalf because they weren’t authorized to make this decision.
WHAT HAPPENS TO THE TRADEMARK -
Because a band isn’t worth too much money if they don’t have a trademark, who will own the Breaking Benjamin trademark after this entire ordeal? For example, should it be Burnley, he could then hire new band members and continue touring, recording, promoting, etc. under the name Breaking Benjamin. Should it be Fincke and Klepaski, they may/may not be able to hire new members and keep operating under the name Breaking Benjamin without the group founder Benjamin Burnley. Trademark ownership is no joke because depending upon who legally filed for the mark (i.e. – the name on the registration form with the USPTO) and what the agreements say about the rightful owner(s), somebody will have to stop using the mark. Trademark ownership essentially means leverage and control because whoever owns the mark has both. To explain this further, I've created this video, which breaks down why trademark is important to music professionals.
Section 5 of the Band Agreement states: “Fincke and Klepaski hereby irrevocably assign to Burnley any and all rights, title and interest that Fincke and Klepaski may have in the band name “Breaking Benjamin” as well as any and all logo(s) and/or trademarks in any manner collected thereto.” Therefore, regardless of how the court interprets the contract (i.e. – Band Agreement v. Partnership Agreement), Fincke and Klepaski have assigned their rights to the Breaking Benjamin trademark to Burnley. Further meaning Burnley can be the only surviving member of Breaking Benjamin as Fincke and Klepaski, whether rightfully dismissed from the group or not, can NOT use the name Breaking Benjamin. If future albums are to be released, Benjamin Burnley must be on the album and must authorize the use of the trademark.
WHAT HAPPENS WITH HOLLYWOOD RECORDS?
The recordings being disputed are (1) a remake of “Blow Me Away”, and (2) the “Rarities” project. In order to be granted permission on these additional projects, Hollywood Records would have to secure the authorization of all the active members of Breaking Benjamin. Under this agreement, just as the previous Hollywood Records agreements with the group, Hollywood Records would be granted universal territorial rights with the recording, along with various other legal nuances such as trademark use, etc. Universe? Hollywood Records clearly anticipates a large expansion project. Oddly enough “universal territorial” rights are somewhat standard, as this got started when some overly cautious attorney was concerned about radio signals being sent out into outer space and who would legally own the music. Yes, I’m serious. Personally, I like to protect my clients throughout the galaxy just in case there is some intergalactic distribution system established during my lifetime, but that’s neither here nor there....
The Hollywood Records contract proves pretty standard for a Recording Agreement. They scream big numbers, make grand promises, etc., all while the actual language of the contract slowly chips away at Breaking Benjamin’s potential income stream.
Just as my earlier video states, you’ll see huge reductions with recording costs (Section 5), Reserves deductions, Advances, etc..
Honestly, the amount being disputed, $250,000, could actually be $0, because Breaking Benjamin has yet to make money off the new recordings, rather than just racking up debt. Within the Recording Agreement, which was originally entered into by Burnley and Hummel (a former band member), then later amended to include Fincke and Klepaski, “Hollywood shall NOT remix, edit, or materially alter without the BANDS consent.” This clause would leave one to believe Hollywood Records illegally released the new version of Blown Away, because they didn’t have the band's consent; and because they didn’t receive authorization from Breaking Benjamin’s entire band (i.e. – Burnley, Klepaski, and Fincke), they couldn’t release the “Rarities” project. Clearly this is the end of the story, right? Wrong. I anticipate Hollywood Records is getting revved up.
Carefully drafted and tactfully scattered throughout the Recording Agreement, Hollywood has built in an insurance policy to assure they don’t get left out in the cold. Individually, these clauses may not mean a lot but you have to piece them together like a puzzle to see the major effect. The Recording Agreement, much like all major label agreements, has four really sneaky language elements that assures they’ll never get screwed over:
“In our reasonable effort”
“Notice must be mailed”
“Members will be joint and severally liable”
This doesn’t appear to be alarming on its face, right? Unfortunately all of these statements pack a heavy legal punch. “In our reasonable efforts” is what’s referred to as cautious language. Let’s decode that statement to find its real meaning - “we’ll try really really hard (subjectively speaking).” Apply this language to the Hollywood contract and they have essentially agreed to make their best efforts to agree to the terms with Breaking Benjamin. They may not have to fulfill the contract, but they’ll try really really hard. Ouch, this is getting shaky already.
How about “unique services?” Contractually speaking, Hollywood acknowledges that the band is unique (i.e. – there is nobody else in the entire universe like them). What a great stroke of ego for a band, but what this means is if the group can’t carry out their contractual obligations due to the fact that they are so “unique,” the label will be unable to recover from such damages because they can’t find a comparable group which could mitigate the damages. Oh no, this is getting worse.
Perhaps the two silent killers come with the last two clauses. “Notice must be mailed” means that if a group can’t perform their obligations, they must provide the label with a written notice. Here, based upon their previous contracts with Breaking Benjamin, Hollywood Records could take the stance that they were under the impression they could move forward on additional projects plus they were under the impression based upon Fincke and Klepaski statements that they could do so. Because no formal notice was mailed, no breach occurred. Right? It’s a legal argument, which may play out soon enough. Finally, buried in the contract Hollywood states that each member will be held jointly and severally liable. This means that if one party has done something wrong, they will all be held accountable. This alone will hang the group.
Breaking Benjamin has some tough times ahead. As the courts will likely determine Fincke and Klepaski were rightfully dismissed from the group, that’s also about the time Hollywood Records will come calling with their own suit about Breaking Benjamin. At least that’s what I would do if I worked as counsel for Hollywood. Unfortunately Burnley, Fincke, and Klepaski will have to reunite to defend the case. It’s beside the point who’s a member of Breaking Benjamin and who isn’t at that point, because in Hollywood Record’s eyes, authorization by one member means authorization by all. If Fincke and Klepaski agreed to the project, so did Breaking Benjamin. The group will be sued and then Fincke, Klepaski, and Burnley will once again turn to the Band Agreement to determine who’s paying who.
While this case involves one of the many ridiculous lawsuits filed by individuals demanding insane sums of money from companies for no good reasons, there are some good points in here (also, like many of these lawsuits, it involves a plaintiff who has history of filing lawsuits). Apparently, a guy by the name of David Stebbins sued Walmart. To understand the basis of the lawsuit, you have to understand that he sent various companies a link to a "contract" on his MySpace page, which he claims presents a binding contract (if you're particularly risk averse, you may want to avoid clicking on that link, though it's difficult to believe any such contract is valid). Here are some snippets from the faux contract:
My name is David Anthony Stebbins, and I live in Harrison, AR. I am sending a link to this webpage to various companies to put you on notice: If you contact me in any way, shape, or form, you hereby acknowledge that you have read, understand, and agree to be legally bound by the terms below.
This will also take effect if I attempt to contact you, and, upon hearing my name, you do not cease communications with me on the spot.
You hereby agree to allow me to use, distribute, and sell the rights to your name, physical likeness, and any intellectual property that you may own, throughout the universe, for no fee, for all eternity.
You hereby agree to not request, nor accept any offer for, any third party to remove any material that I use that you feel that you own the copyright to.
You hereby agree that, for now and for all eternity, in the event that I ask you a question, you must answer it promptly, accurately, and truthfully.
You hereby agree to never
Interrupt me when I am speaking, for all eternity.
Hang up on me in any phone call, for all eternity.
Block my attempts to communicate with you, for any reason, for all eternity.
Ask me a question that I have previously answered, for all eternity.
Demonstrate any rudeness, annoyance, or disrespect, however petty, against me, for all eternity.
Accuse me of lying, or any variation thereof, for all eternity.
It goes on along those lines. Anyway, he sent the email to Walmart with the link to this contract. Walmart customer care sent back a standard, boilerplate reply suggesting he contact a different department, which Stebbins used to claim the contract had been entered into (in combination with him also buying a gallon of milk -- don't ask). He sent a letter to Walmart demanding arbitration to settle their "legal dispute." When Walmart failed to agree to arbitration within 24-hours, he claims that he wins and should get $600 billion (with a b):
"since Wal–Mart did not accept the arbitration invitation within twenty-four hours of receiving it, he automatically wins regardless of the merits of the case and is entitled to an award of six-hundred billion dollars."
Plaintiff maintains Wal–Mart accepted the contract by its “act” of replying to his e-mail....The e-mails from Plaintiff are self-serving documents that did not form the basis for any conduct or performance on Wal–Mart's part....In this case, Wal–Mart performed no act. It merely replied to two e-mails by directing the Plaintiff to the correct department. It performed no service and Plaintiff made no promise.
Obviously, this particular case is something of a joke, but given how often people seek to claim that a contract has been entered into on dubious terms (such as replying to an email), perhaps a bit of reasonable caselaw comes out of this...
Many people don't quite realize that almost any kind of "agreement" can be seen as an enforceable contract in the eyes of the courts. While some people think a contract has to involve a full written document and signatures, that's often not true at all. Take, for example, a case involving affiliate sales of e-cigarettes, in which a written contract was deemed to be modified by a simple instant messenger conversation. The affiliate company, CX Digital, wanted to remove the contractual limit of 200 referrals per day for sales of Smoking Everywhere's e-cigs, and the following IM conversation ensued:
[CX] (2:50:08 PM): We can do 2000 orders/day by Friday if I have your blessing
[CX] (2:52:13 PM): those 2000 leads are going to be generated by our best affiliate and he's legit
[Smoking Everywhere]: is available (3:42:42): I am away from my computer right now
[CX] (4:07:57 PM): And I want the AOR when we make your offer #1 on the network
[Smoking Everywhere] (4:43:09 PM): NO LIMIT
[CX] (4:43:21 PM): awesome!
Smoking Everywhere then tried to bail out on paying CX the affiliate fees owed, and claimed (among other things) that this didn't represent an actual modification of the contract which had the 200 per day limit stated. The court didn't buy it, noting that this is a perfectly fine example of an offer, counter-offer and acceptance, all encapsulated in instant messenger:
After the discussion between Touris and Soltani about switching the URLs, Soltani sends an
offer to Touris: "We can do 2000 orders/day by Friday if I have your blessing . . . . [a]nd I want the
AOR when we make your offer number one on the network." ... Touris responds,
"NO LIMIT." ... CX Digital argues that Touris accepted Soltani's offer by saying "NO LIMIT."
The Court agrees a contract was formed but clarifies that Touris's response acted as a rejection and
counter-offer that Soltani accepted by then replying "awesome!"
Here, Touris's response of "NO LIMIT" varies from the two specific terms Soltani offered
and so acts as a counter-offer. Soltani proposed CX Digital provide 2,000 Sales per day and that
CX Digital be the AOR or agent of record..., a term of art meaning the
exclusive provider of affiliate advertising on the advertising campaign.... Touris makes a simple counter-offer that there be no limit on the number of Sales
per day that CX Digital's affiliates may generate ... and makes no mention of
the AOR term. Soltani enthusiastically accepts the counter-offer by writing, "awesome!" ... and
by beginning to perform immediately by increasing the volume of Sales
So, for those of you interested in contract law, let this be a simple lesson in what it takes to form a contract... and, yes, it is kind of awesome.
Last year, we wrote about a ridiculous situation in which the Association for Information Media and Equipment (AIME) threatened UCLA, after discovering that the school had set up an online video service, that let UCLA professors put up legally licensed video clips so that students could watch them from their computers. AIME claimed that UCLA's license did not allow for such uses. UCLA claimed this was fair use. After initially taking down the videos, UCLA decided this was worth fighting over and put the videos back up last March. At the time, we thought a lawsuit from AIME would come quickly, but apparently it took until December. UCLA recently filed a motion to dismiss the lawsuit, setting up a few reasons why -- including the claim that, as a state university, it has sovereign immunity from copyright lawsuits and, also, that AIME is not the copyright holder in question, and thus has no standing.
However, as Kevin Smith (not the filmmaker we've been talking about recently, but rather someone at the Duke University Library) notes in the post above, there is an interesting claim in the motion, where UCLA suggests that the breach of contract claim (which comes under a state law) is preempted by federal copyright law. If I remember the details correctly (and you copyright lawyers out there, feel free to correct me), with the Copyright Act of 1976, that law basically superseded any state laws that covered the same grounds. Mostly, people have thought this meant that state copyright laws effectively were wiped out (though, as we've seen, some awful remnants of those laws remain).
However, what UCLA seems to be arguing, is that federal Copyright Law could also wipe out portions of state contract law as well, if those aspects are covered by copyright. It's a creative way of saying that you can't contractually give up aspects of copyright, such as fair use. Now, there are some areas where it's known you can't give up what copyright says via contract. You can't, for example, contractually give up your termination rights (which let you take back a copyright you assigned to someone decades later). Also, it's not quite the same thing, but the recent ruling in the Augusto case has suggested that there are situations where you don't give up copyright exceptions (in that case, first sale) -- but it's distinguished by the fact that the court effectively said there was no license on promotional CDs (despite a stamped on "license" text).
So rather than relying on something like that, UCLA seems to be relying on preemption of state contract law, to say that even if you signed a license agreement, fair use rights can still apply. It's an interesting point. I'm of a mixed opinion on whether or not it's a good thing, however. I am a fan of such copyright exceptions, and would be worried if we started to see fair use "licensed away" in more situations. However, would that also mean that we couldn't license away other aspects of copyright law? Would that cause trouble for certain types of licenses, like Creative Commons licenses?
I'm guessing that the court may skip over this issue entirely, in that it can just hand UCLA a victory on the sovereign immunity or lack of standing claims and just move on without addressing this issue. However, I do expect that it will show up again in other lawsuits at some point.