Supreme Court Rules: Copyright Registration Required to File Suit

On March 4, 2019, the U.S. Supreme Court resolved an intriguing circuit split in Fourth Estate Public Benefit Corp. v. Wall-Street.com, LLC. Justice Ginsburg authored the unanimous decision, holding: “registration occurs, and a copyright claimant may commence an infringement suit, when the Copyright Office registers a copyright.” The Court rejected the argument by Fourth Estate that the registration requirement of the Copyright Act was accomplished by filing an application for registration. In its rationale, the Court leaned heavily on the language of the statute.

The Copyright Act (17 U.S.C. §411(a)) reads: “no civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title. In any case, however, where the deposit, application, and fee required for registration have been delivered to the Copyright Office in proper form and registration has been refused, the applicant is entitled to institute a civil action for infringement if notice thereof, with a copy of the complaint, is served on the Register of Copyrights.”

Simply put, the Court stated that, “if application alone sufficed to ‘make’ registration, §411(a)’s second sentence –allowing suit upon refusal of registration –would be superfluous.”

The Court examined other provisions of the statute to interpret the meaning of §411. The Court found that the phrase “after examination” in §401 meant that “registration,” as used in the statute, follows action taken by the Register. The statute provides an exception to the registration requirement before suit through preregistration of a work that may be “vulnerable to predistribution infringement –notably a movie or musical composition,” and permits the start of an infringement action prior to registration for some live broadcasts.

How will the fashion business be affected by the ruling? This being an industry that spans the world, many creators argued in amicus briefs that requiring pre-suit registration for U.S. authors and domestic works placed them at a disadvantage since such a requirement conflicted with the Berne Convention’s de-emphasis on copyright formalities. However, the Court’s decision noted that the U.S. Congress had the opportunity to amend the copyright statute in 1988, 1993, and 2005, but declined to remove the registration formality in each instance.

The Court also pushed back against Fourth Estate’s argument that the Copyright Office’s processing time for applications was too slow, and instead pointed out that expedited processing was available, albeit for an additional $800 fee. The Court also indicated that the Copyright Office’s slow processing times could be improved should Congress address budgetary and staffing shortages.

In practice, the amount of time the Copyright Office takes to process an application is less relevant once the registration issues.

Since copyright subsists from creation in tangible form, requiring registration prior to commencing a suit for infringement does not preclude copyright owners from recovering compensatory damages from infringement that occurred prior to registration. A registration within three months of first publication will relate back to the publication date for purposes of recovery of statutory damages and attorneys’ fees; and the effective date of the registration is the date on which the copyright application is submitted and completed with the submission of the deposit copy and payment of the registration fee.

The Court’s decision is understandable as it is compelled by the statutory language. But what does this mean for creators, practitioners, and other stakeholders? Only the future will tell the long term effects in the fashion industry, but the message remains clear: if a design that is protectable by copyright is important, register it as soon as you can, preferably before it is distributed or displayed to the public, if you want to obtain the best protection and the broadest remedies in the United States.

Credit: Candace R. Arrington

See post: Supreme Court to Resolve When Copyright Suit Can Commence


White Collar Overtime Exemptions in the Fashion Industry – Part II

Salary Thresholds Under New York State Law For White Collar Overtime Exemptions

In Part One of this article, we discussed tests for allowing exemption from overtime pay for “white collar” professional, executive and administrative employees under federal and New York State law.

Effective December 31, 2018, New York State’s salary basis threshold for exempt executive and administrative (but not professional) employees increased. Employers should periodically review the job duties, functions and salaries of those currently classified as exempt and, if they wish to maintain the exemption for those below the new thresholds, must increase their salaries accordingly. Here are the new minimum salary requirements to maintain exemptions from overtime for employers in New York State:

Employers in New York City

  • Large employers (11 or more employees)
    • $1,125.00 per week ($58,500 annually) on and after 12/31/18
  • Small employers (10 or fewer employees)
    • $1,012.50 per week ($52,650 annually) on and after 12/31/18
    • $1,125.00 per week ($58,500 annually) on and after 12/31/19

Employers in Nassau, Suffolk, and Westchester Counties

  • $900.00 per week ($46,800 annually) on and after 12/31/18
  • $975.00 per week ($50,700 annually) on and after 12/31/19
  • $1,050.00 per week ($54,600 annually) on and after 12/31/20
  • $1,125.00 per week ($58,500 annually) on and after 12/31/21

Employers Outside of New York City and Nassau, Suffolk, and Westchester Counties

  • $832.00 per week ($43,264 annually) on and after 12/31/18
  • $885.00 per week ($46,020 annually) on and after 12/31/19
  • $937.50 per week ($48,750 annually) on and after 12/31/20

New York State has no minimum salary for exempt “professional” employees, although most of those employees would still be subject to the federal salary minimum for exemption ($455 per week, or $23,660 annually). The U.S. Department of Labor (“DOL”) has not raised the federal minimum salary for exemption since 2004, but on March 7, 2019, the DOL published a proposed rule that would increase the salary threshold for managerial, administrative and professional white collar exemptions to $679 per week ($35,308 per year), to take effect on January 1, 2020.

New York Fashion Industry employers should review the job duties, functions and salaries of their employees whom they currently classify as exempt from overtime pay to insure compliance with both the job duties and salary requirements. For an employee whose salary falls below pay requirements, the employer will have to decide whether to increase the salary in order to be able to continue the overtime exemption or to reclassify the currently exempt employee as non-exempt and pay them overtime for hours worked over forty in a week.

For those currently exempt employees whom the employer decides to reclassify as non-exempt, the employer should insure that all their work time is accurately recorded as of the date of change and going forward. Finally, employers should make it a point to conduct regular reviews of the primary duties of those employees it wishes to continue as exempt, since merely paying the higher salaries will not be sufficient. To qualify for the overtime exemption, employers will be required to meet both the salary test and the job duties test.

SUMMARY

Federal and state overtime law are quite fact specific. Failure to comply can lead to expensive administrative and court proceedings. The statutes of limitations – that is, the look back periods the agencies and the courts may consider in calculating overtime pay deficiencies – are two years under federal law (three years if a willful violation is found), but are six years under New York State law. And both federal and state laws provide for liquidated (double) damages and for an employer to pay the legal fees of a successful plaintiff’s lawyer. Moreover, class and collective actions abound. In short, stay current on what you need to know and consult with employment counsel as needed and whenever in doubt; or be prepared to endure exceedingly painful, protracted and costly legal consequences.

Credit: Evan J. Spelfogel

See post…White Collar Overtime Exemptions in the Fashion Industry – Part I


White Collar Overtime Exemptions in the Fashion Industry – Part I

One of the most costly mistakes a fashion business can make is to misclassify an employee as overtime exempt regardless of the employee’s duties and functions. That creates the risk of substantial liability under both federal and state law.

The Federal Fair Labor Standards Act provides for several basic overtime exemptions. These include the executive, professional and administrative exemptions and are commonly referred to as “white collar” exemptions.

To be exempt from overtime pay, an employee must be paid a fixed salary regardless of hours worked of at least $455 per week ($23,660 per year) under federal law, and more than twice that amount under New York State Labor Law, and must have duties and functions that fall within the applicable duties test.

Executive Exemption Duties Requirements

To qualify as an exempt executive (high-level manager), an employee’s primary duties must relate to managing a business or a department within a business. The employee must regularly supervise at least two full-time employees or the equivalent in part-time employees, and must have the authority to hire, fire and discipline employees, or effectively to recommend such action. Secondary tests include interviewing and training employees, and assigning and directing their work. Typically, this exemption would attach to store and departmental managers.

Administrative Exemption Duties Requirements

To qualify as an exempt administrative employee, the employee’s primary duties must consist of the performance of office or non-manual work directly related to management policies or general business operations, including customarily and regularly exercising discretion and independent judgment involving the comparison and evaluation of alternative courses of conduct and making decisions, after consideration of the various possibilities, free from immediate direction or supervision.

Duties may relate to taxes, finance, accounting, budgeting, auditing, insurance, quality control, purchasing, procurement, advertising, marketing, research, safety and health, personnel management, human resources, employee benefits, labor relations, public relations, government relations, computer network, internet and database administration, and legal and regulatory compliance.

Factors may include whether the employee formulates, affects, interprets, or implements policies or practices, whether the employee may commit the employer in matters having significant financial impact, and whether the employee has authority to waive or deviate from established company policies and procedures without prior approval.

Professional Exemption Duties Requirements

An exempt professional employee is one who falls under the definition of either a “learned professional” or a “creative professional.” Learned professionals work in professions typically requiring an advanced degree (college or higher) and a prolonged course of specialized intellectual instruction such as law, medicine, accounting, engineering, teaching, or architecture. Primary duties must be intellectual and involve the regular use of discretion and independent judgment.

Creative professionals in the fashion industry include, among others, fashion designers, fashion stylists, textile designers, fashion public relations, fashion writers, fashion illustrators, garment technologists, graphic designers and artists, creative employees who are given only a subject matter or underlying concept of what they will create, and individuals who plan and direct the creative elements of new fashion and their advertising agencies. These individuals’ primary duty is performing work that requires invention, imagination, originality or talent, as distinguishable from work dependent merely on intelligence, diligence, and accuracy. Examples of non-exempt work in fashion include fabric cutters, sizers, copyists, re-touchers of photographs, and rewriters of press releases or advertising copy, and general fashion industry employees whose work is subject to substantial control.

In Part Two, we will review in detail the New York State salary thresholds for overtime exemption.

Credit: Evan J. Spelfogel

Evan is a senior counsel in the Employment & Labor Law Practice.

See post…“White Collar Overtime Exemptions in the Fashion Industry – Part II


Perfect Fit – Part II

An interview with Simon Crompton, creator of the blog Permanent Style

Photograph Copyright © 2018 by Alan Behr

In my last post, I reported on my conversation in London with Simon Crompton, who runs the website Permanent Style (www.permanentstyle.com), which is devoted to the world of bespoke (custom-made) menswear. We discussed elements of style for men, but when the conversation moved to the topic of how a website proprietor protects his own intellectual property, Mr. Crompton had some decidedly pragmatic ideas.

Permanent Style is authored almost entirely by Mr. Crompton, who, last year, was finally able to devote his full professional time to it. The site features the latest developments in bespoke, from tailoring to shirtmaking to shoemaking, around the world. It is supported by advertising, and it also promotes its own limited line of products, from surprisingly stylish watch caps (ski caps) to Oxford shirting for readers to provide their bespoke shirtmakers. Prominent on the site are reviews of makers of bespoke clothing and shoes, with Mr. Crompton serving as live mannequin and photographer’s model throughout, reporting on each step of the process.

I asked Mr. Crompton what kind of legal protections he employs for his work. Because his writing originates in Britain and not the USA, he is spared the unique (and to those of us who have done it for clients or ourselves, often frustrating) requirement of registering his copyrights. His pragmatic view: “It isn’t as if it is a novel or song lyrics. Anything on the site obviously comes from me, and no one is going to run out and say I’m Simon, I wrote this.”

As for protecting his brand, he holds to an equally pragmatic approach: be first out, keep a solid reputation, and you win. “The site has been up just over ten years, and it is well-known. That’s a very good position in the world relative to others who might be trying to establish themselves.”

Mr. Crompton also noted a key advantage to prose authored in Internet time: “What I write is so fast-changing, and there is such a high volume of it that it’s not that easy to protect, but at the same time, there is not much virtue in somebody copying. I already have the biggest traffic. If someone were to start copying my articles, that would never generate much traffic for him. He would still have to attract readers and then subscribers by offering something different, and unless that should happen, I would always do better on search engine optimization.”

That goes to the heart of a key debate in copyright circles—what utility is legal protection in a world in which almost everyone can read just about anything, and anyone can publish just about whatever he or she chooses to write, on platforms from Twitter on up? Registering the copyright, to say nothing of suing to stop infringement, can look old-fashioned in the context of a business (and social-media) model that values “reach,” often by free access, and loyalty for the generation of revenue more than it does traditional legal protections.

In short, Mr. Compton is conducting a very contemporary business to promote many very traditional crafts. If by so doing he helps craftsmanship flourish, we can only commend him-even if the model depends more on lawyers reading about dressing well (and, we hope, attempting to do so) than on offering legal advice. When it comes to what we do, however, lawyers can only continue to recommend to their clients that they reach out and consult with their counsel whenever making important decisions about their intellectual property. If you do not make these decisions yourself, the marketplace will very likely make them for you.

Credit: Alan Behr


#Influencers?

Social media influencer asking followers to like and subscribe

What do the Special Prosecutor and the New York State Attorney General have in common? If you answered fake social media accounts and social media bots inflating followers, likes, tweets and retweets, you would be correct.

At the end of January, 2019, Attorney General Letitia James announced she had reached a settlement with Devumi LLC, which she described as “the first in the country” to find that selling fake followers and likes on social media is illegal deception and using stolen identities from real people is illegal impersonation. The Attorney General’s investigation began under James’ predecessor in response to an article posted online by The New York Times on January 27, 2018, entitled “The Follower Factory”.  That article is the best source to understand the underlying facts.

Devumi operated a business through which individuals who wished to appear more popular and influential could purchase views on YouTube, plays on SoundCloud, endorsements on LinkedIn, as well as followers, likes and retweets on Twitter and other social media platforms. According to the Times, Devumi’s customers included the model Kathy Ireland, the former pro-football player Ray Lewis and even the Treasury Secretary’s wife. Engagement with the platforms was effected by using computer operated fake accounts, generally referred to as “bots”. In some instances, the social media personas of real people were “cloned” to create multiple accounts in multiple languages to create thousands of other accounts used to promote products or services, so-called “sock puppet” accounts. According to the Times, Devumi supplied customers with over 200 million followers, using 3.5 million accounts.

Reaction to the article was swift and resulted in Devumi ceasing operations when the publicity “caused a major decline in its sales”, according to the Attorney General. But Devumi is hardly the only entity or individual conducting similar questionable operations. A simple search for “Buy Followers” on Google will lead to links for many offering followers or likes for sale. The search is so common that Google has pre-programmed questions and answers related to the search as well as related searches targeted to specific social media platforms.

Fraud and deception related to influence on social media platforms are not limited to purchasing followers and likes. According to an article posed on-line by The Atlantic in December 2018, wanna-be professional “influencers” are also feigning sponsorship deals on-line to convince brands of their credibility as influencers—what the article aptly calls “faking it until you make it”.

While many athletes and performers have entered into lucrative endorsement deals with brands for many years, the influence they sell has been earned through a record of actual accomplishment in their professional fields. Roger Federer, for example, can endorse coffee machines and watches because he justly has earned fame based on long years of actual accomplishment playing professional tennis. The same cannot necessarily be said of professional “influencers” whose only claim to fame is an Instagram following that may or may not have been manufactured. So, when it comes to social media “influencers”, the watch word should be: let the buyer beware.

Credit:  Helene M. Freeman


Supreme Court to Resolve When Copyright Suit Can Commence

On January 8, 2019, the U.S. Supreme Court heard oral arguments in, Fourth Estate Public Benefit Corp. v. Wall-Street.com LLC. The court is expected to resolve a decades-old split of opinion among the federal Circuit Courts on whether the Copyright Act permits a lawsuit to be filed upon submission of a copyright application or not until the copyright registration certificate has been issued or refused.

The language in the statute is simple. 17 U.S.C. § 411 reads: “no civil action shall be instituted until … registration of the copyright claim has been made in accordance with this title.” The statute also provides that, “[i]n any case … where the deposit, application, and fee required for registration have been delivered to the Copyright Office in proper form and registration has been refused, the applicant is entitled to institute a civil action for infringement if notice thereof, with a copy of the complaint, is served on the Register of Copyrights.”

In this case, Fourth Estate sued Wall-Street.com when the website continued to publish Fourth Estate’s work after the expiration of the limited license that had been granted to the website. Fourth Estate filed copyright applications for the misappropriated online publications and then asserted a claim for copyright infringement; however, its claim was dismissed by the Eleventh Circuit because the Copyright Office had not yet issued registration certificates. As have the Courts of Appeal for the Third and Seventh Circuits, the Eleventh Circuit follows the Tenth Circuit’s “registration approach,” which requires the Copyright Office to have acted on an application for registration by approving or denying it prior to initiating a lawsuit. The Fifth and the Ninth Circuits, however, follow the “application approach,” which allows for the commencement of an action upon filing a copyright application.

The split among those courts has large implications for photographers, writers, musicians, and fashion designers. For instance, the Copyright Office application processing time is notoriously slow: it can range from six months to more than a year to issue a registration. Creators are forced to endure an unpredictable wait time – or avoid that delay by paying an additional $800 special handling fee for expedited processing. In a seasonal industry such as fashion, where trends evolve so quickly and styles head to market within just a few months from creation, a small company cannot afford to sit back and wait for its copyright applications to be processed if infringement appears to be a credible threat, but it may also find that filing multiple applications with very significant expedited processing fees imposes an unacceptably great financial burden.

The fashion industry is a multi-billion dollar international industry. It has been argued that requiring the issuance of a registration certificate (or a refusal to register from the Copyright Office) for American authors and domestic works before litigation can commence conflicts with the de-emphasis on copyright formalities established by the Berne Convention, which governs copyrights across the globe. For now, this is all in the hands of the Supreme Court. We will provide a follow-up post when its decision is rendered.

Credit: Candace R. Arrington