Friday, August 31, 2007

Union Disunity

Today's Hollywood Reporter leads with the news that AFTRA has moved its national HQ from NY to LA, in the same building that SAG occupies. That sounds nice - the actors' unions sitting next to each other like good friends in math class, passing notes (or texting each other) when the teacher's not looking.

All very fine, except for one thing: AFTRA and SAG aren't so friendly, it turns out. Technology is one reason why: the unions have overlapping jurisdiction in primetime shows shot digitally, and AFTRA makes deals with producers that undercut SAG's rates. Indeed, I advised a filmmaker once who was shooting a film in digital, and guess which union he chose to sign with?

(By the way, if you're a producer, talk to a lawyer first before signing with any union. There are some significant benefits, but also major pitfalls if not done right.)

The tension between the two unions may undercut their unity when contract negotiations with studios, producers and networks begin next year. In fact, SAG members on the joint SAG-AFTRA negotiating committee plan to bloc vote, which would undercut AFTRA's influence on negotiations. Tit for tat? Perhaps.

Meanwhile, the two branches of the Writers Guild of America (WGA) - East and west (the West-Coast branch insists on lowercase) - have never been close, but generally play well together. Not so the IA (International Alliance of Theatrical Stage Employees) and the WGA. They each claim jurisdiction over animation writers and reality TV writers, and the words between the two unions get nasty at times. The studios, meanwhile, take the position that there are no writers in reality TV at all, which is kind of a complicated question.

As for contract negotiations, while SAG's (and the DGA's) begin next year, the WGA's have already begun. Those talks are getting nowhere so far. All three unions have big issues: home video residuals (the formula, in place for 25 years, dramatically favors the studios), compensation and residuals for digital media, and, of course, two perennials, compensation rates and pension and health insurance rates.

SAG has observers on the WGA strategy team, while the Directors Guild of America (DGA) is a bit less aggressive in its posture with the studios. At the end of the day, though, the residual formulas in the three union's agreements with the studios tend to be similar, as do some of the other provisions as well.

The bottom line though, is this: studios and networks are stocking up on scripts, shows and movies, filling their larders today as insurance against possible multiple strikes next year. Even if none materialize, a de facto strike - i.e., a work slowdown imposed by the studios - seems certain. That's because, come next year this time, the studios and networks will find their cupboards overflowing with product, and will have little need for more until they've drawn down what they've got.

Moore's Law in Nano-Land

They don't teach Moore's Law in law school - well, they didn't used to - but it's a classic: the number of components you can cram on a single chip doubles every 24 months (some say 18 months). It's held true for over forty years, and roughly correlates to computer power. Very roughly, since your PC today crashes almost as often as last year's model.

Will Moore's Law ever peter out? After all, there is another law, called the law of diminishing returns. Thankfully, today comes news from IBM and HP that they are continuing advances in nano-computing, getting small clusters of atoms - and even individual atoms - to behave like little electronic components.

So, no end in sight for Moore's Law so far. Takes us one step closer to the day when lawyer-bots will read contracts and file lawsuits, while "wetware" lawyers can stay home and write blogs ...

Arbitration Takes a Beating

Arbitration allows disputes to be settled out of court, in front of a neutral arbitrator, sooner and more quickly than in court and with less procedural hassle. The flip side is that the parties give up some of their rights, and the results are often confidential and don't serve as precedent for later arbitrations. When it comes to disputes between companies, arbitration is often the right approach.

But what about disputes between companies and "just plain folks" - consumers, web users and employees? That's where arbitration benefits companies and may not help the little guy. Arbitrators sometimes award smaller judgments than courts, and arbitration clauses often preclude class actions - a procedure that allows many people's small claims to be aggregated into one lawsuit. That makes small claims worth fighting, which is why consumer-facing companies often prefer to avoid class actions.

Four California decisions in the last few weeks - involving AOL, ATT, t-Mobile, and now Circuit City - have all invalidated clauses of this sort. The takeaway: company-written arbitration clauses in these areas must bend over backwards to be fair to the individual, and these provisions require very careful lawyering if they have a hope of being enforceable.

Blu-ray v. HD DVD

Recently, it looked like Blu-ray was winning the format war in high-def DVDs. Sales were 2-to-1 in Blu-ray's favor, several studios were Blu-ray only (HD DVD had only one exclusive studio partner), and retailers were beginning to line up in that direction as well.

Last week, though, Blu-ray suffered a major reverse: Paramount, and sister studio Dreamworks, announced that they were dropping Blu-ray and going HD DVD only. Suddenly, the high def war is back in high gear. And today, reports Video Business, Canada’s Venturer Electronics announced a $199 Chinese-manufactured HD DVD player for Q4.

But while the industry fiddles, consumers do a slow burn. A very slow burn: most consumers aren't interested in any of this, and smart ones will stay away until the battle ends and one format prevails.

Don't hold your breath though: there's so much money in licensing fees at stake that we may not see a resolution for another year or two, at best. At that rate, standard def DVD will live on for a long time to come, at least until download to TV becomes a reality. Maybe the upcoming Vudu box will make that happen (I've seen it and it's pretty sweet).

Motorola v. Aruba

Motorola subsidiaries just sued Aruba Networks for patent infringement. Is there anything more to say about the case?

No, not yet. Motorola chose to provide virtually no details in its pleading. And guess what: under the federal rules, they don't have to. So, let's not form judgments on the merits of the case. Not only do we not know Aruba's side of the story, we don't even know Motorola's. Read more.

Oracle v. SAP

Not long ago, Oracle sued arch-rival SAP, accusing it of unlawfully downloading 10,000 (!) technical documents, software updates, and other files from Oracle servers, all in an attempt to better compete with Oracle. Read more.

SAP even admits to some of the allegations, and Oracle has also alleged that the downloading continued for a week after the lawsuit was filed. The parties filed documents two days ago that suggest that SAP desperately wants a settlement.

No surprise there. If the allegations are true, SAP's conduct is astonishing in its recklessness. I've represented Oracle customers, and can tell you that Oracle is extremely aggressive in protecting their IP. Theoretically, statutory damages in this case could amount to $1.5 billion. I predict Oracle will not make it easy for SAP to settle.

Yahoo! and Chinese Dissidents

Yahoo! is moving to dismiss a lawsuit by two Chinese dissidents which the company of facilitating their torture and unjust imprisonment by revealing details of their user accounts to Chinese police authorities. The lawsuit alleges that, as a result, the dissidents were arrested, tortured and sentenced to long prison terms at hard labor.

In the Motion to Dismiss, Yahoo! expresses sympathy for the dissidents, but argues that the case has "no place in the American courts." I don't agree.

Yes, Yahoo! has a corporate duty to maximize profits, but it also must have known what could happen to the dissidents if it helped the Chinese authorities. And, yes, Chinese law apparently required Yahoo! to provide evidence in the criminal case - just as U.S. law does - but U.S. law also prohibits torture, even overseas. (Tell that to the CIA.)

Bottom line: Yahoo! has to bear some responsibility for its actions. This is a tough case that will probably go to the Supreme Court, which will have to answer a troubling question: do profits matter more to us than liberty? Read more.

Viacom, YouTube, and a NC Local Politician ...

... those are the ingredients in a bizarre copyright dispute that reads like a law school exam question.

Apparently, the politician prepared a humorous campaign video, and uploaded it to YouTube. VH1 then apparently downloaded the video from YouTube without permission and (re)broadcast it on the VH1 Web Junk 2.0 program, with the program's host appearing in the foreground adding commentary.

The candidate, pleased with the exposure, made a copy of the Web Junk clip, and uploaded that to YouTube. And, in response Viacom ordered YouTube to take down the video!

Now, remember, Viacom is already suing YouTube/Google for massive copyright violation related to all the uploading of clips from Comedy Central, VH1 and other Viacom properties.

So - no surprise - YouTube took down the clip - and even warned the politician that he'd lose his YouTube account if he continued to violate copyrights!

Was the politician was in fact infringing Viacom's copyright? It seems ridiculous, but there's an argument that he was. After all, Viacom owns the copyright in the Web Junk program, the host's commentary, etc.

What's more, Viacom's use was transformative - they added commentary - whereas the politician's wasn't. He just posted the clip unaltered. That makes a difference in copyright law; advantage Viacom.

But come on - this sure looks like fair use to me. Speech about government and politics is one of the most highly protected areas of the first amendment. By posting the clip, the politician was engaged in politicking - advancing his career. And, don't forget, most of the clip was his content anyway.

But if you want to finish this little law school exam, there's more: in the clip, the politician at one point shows a Star Wars-type Death Star destroying a little red school house. (The pol is a local school board member.) So, were Lucasfilm's copyright and trademark rights violated? Let's not even go there. Back in the Reagan days, there were plans for a missile defense system that everyone called Star Wars. Lucas sued over that, but lost.

And who shot the video anyway? If it wasn't the pol, he may not even own all rights to his own video - the production company might, depending on the terms of the agreement between them, or if there even was an agreement. Even if the production co. and the politician have a proper written agreement, the videographer might own the rights, if he/she was a freelancer and had not signed a written agreement with the production company.

Lawyers call this "chain of title" - the links in the chain of ownership from one person or entity to another. Non-lawyers may call it a nightmare, but for lawyers, well, it's just plain fun. Read more.

Column in Script Magazine

I write a column in Script Magazine on entertainment law issues for screenwriters. It's titled "Q&A: Ask the Experts." You can subscribe or view archived copies.

How to Write LOIs and Term Sheets

I recently updated an article I wrote on how to write Letters of Intent and Term Sheets. Take a look.

Taiwan Teaching Trip

Earlier this year, I taught a week-long Masterclass at Taipei National University of the Arts. The subjects: U.S. entertainment business, law and technology.

Welcome ...

Welcome to my long-overdue blog. Like the description says, it's about the latest news in the law of digital media, traditional entertainment, and technology, with random jaunts off-topic as well. So, now, excuse me while I get writing.