What Rights do Artists Have in Publicly Displayed Works?

 “Traveling Musician,” By SEVEN

“Traveling Musician,” By SEVEN

Calling all mural and tattoo artists, you officially have your day in court!

Actually, several ongoing cases involving publicly displaying artists are defining not only the rights of artists and traditional property owners (i.e. building owners subject to graffiti), but also movie and video game publishers, car manufacturers, and political organizations. Before diving into the details, let’s take a stroll through the lovely, inspiring, and weird land of art law. To fully appreciate the sights and sounds of our journey, we need to reference our field guide for some examples of what may be considered publicly displayed art.

What are the different types of public works?

For starters, consider the various types of commissioned works. These may include publicly installed sculptures or personally canvassed tattoos. For the handful of cyborgs out there, they could even include neuromodulators. In each illustration, you have someone who conceptualized and/or created a work upon some request and for a fee, and subsequently may in principle claim limitations upon its subsequent use. The extent of those limitation rights are determined circumstantially by the nature of the work, how it was contracted, where and how it is displayed, etc.

Not every artist commands a commission per se for his or her display of a creative work. A graffiti artist may not be paid to tag a billboard or paint a mural, but may nevertheless derive acclaim from people who see her work; or, respect according to the brazen placement of it. An artist in the vein of Olafur Eliasson may wish to place tree trunks or miniature icebergs in the middle of a city sidewalk just to see how people interact with it. In an impromptu or otherwise non-commissioned work, an artist may also but to a lesser extent hold limitation rights against the actions of others.

Some publicly displaying artists, let’s just call them PDA’s, are closet utilitarians, such as the man who designs an abstract bike rack. The man through the reduction of his inner turmoil might also hold rights against others, depending upon the sequential manifestation of his Jekyll and Hyde. Was it his art adopted as a bike rack, or did he intend to make an abstract and interesting sort of rack?

What are some ways that a public artist might be injured by the actions of others? 

Once we grant a PDA rights and limitations upon others in a publicly displayed work, we are as well to consider how the artist’s rights might be violated. Perhaps the injury occurs through the whitewashing of an illegally etched mural, whitewashed by a property owner or city authority acting in its best interest. Perhaps it occurs through assessments of fees and taxes characterizing the art as something purely mechanical.  Perhaps it occurs through government censorship or giddy selfie. Obviously, intentional exploitation qualifies.

What types of lawsuits are being filed by artists over their copyrighted works?

Several PDA’s or holders of artists rights are currently litigating their alleged injuries. In Solid Oak Sketches, LLC v. 2k Games, Inc., 1:16-cv-00724 (S.D.N.Y., Sept. 21, 2018), a company acquired copyright rights from tattoo artists that had inked a handful of NBA players, and then sued the maker of the popular NBA 2K series video games for depicting realistic images of those tattoos within the game without permission from the holder of the rights. In Kapoor v. National Rifle Association of America, 1:18-cv-01320 (E.D. Va. Oct. 23, 2018), artist Anish Kapoor sued the National Rifle Association for using his famous art installation (Cloud Gate aka the Bean in Chicago) in a 2017 video called “The Clenched Fist of Truth.” And in Falkner v. General Motors Company et al, No. 2:18-cv-00549 (C.D. Cal. Sept. 18, 2018), a graffiti artist known as Smash 137 brought a copyright infringement and DMCA action against General Motors for its unauthorized depiction of his mural in alongside a G.M. manufactured car in social media ads.

What rights does a public artist or property owner have against others who monetize images or recordings of art on, attached to, or connected with buildings and other types of architecture?

Thanks to artists like Banksy and Revok, graffiti is increasingly recognized as a fine art that. (Before its fantastic shredding, a framed copy of Banksy’s iconic mural Girl with Balloon sold for over $1 million.) Despite its exposure to the public and natural elements, the graffiti artist may in some cases enforce copyright rights against unauthorized destruction or reproduction of the work. In Falkner, a federal district court in California recently denied G.M.’s summary judgment motion (i.e. a quick end to the case), focusing on key undisputed facts: (1) the artist was one of a group of mural creators invited to paint the parking garage; (2) the artist was allowed to choose where in the garage to paint his mural, and was afforded complete creative freedom with respect to the mural, having been given no aesthetic to match and not told of any function that the mural should play; (3) instead of selecting a theme consistent with the building’s function or any other suggestive study, the artist chose to create the mural using themes and motifs that were similar to those used on the paintings that he had exhibited at a solo show long before hearing of the mural project; and, (4) the architecture of the parking garage and accompanying building were already complete before the artist started painting.

In denying summary judgment, the district court wrested with the application of Leicester v. Warner Brothers, 232 F.3d 1212 (9th Cir. 2000), a Ninth Circuit case concerning the limitations placed on copyright assertions to pictorial, graphical, or structural works connected to architectural works under 17 U.S.C. § 120(a). Under § 120(a), “[t]he copyright in an architectural work that has been constructed does not include the right to prevent the making, distributing, or public display of pictures, paintings, photographs, or other pictorial representations of the work, if the building in which the work is embodied is located in or ordinarily visible from a public place.” In other words, § 120(a) has been interpreted to mean that the public may freely depict buildings in public spaces without the need to fist ascertain copyright status and thus seek prior permission.

Leicester arguably includes three separate opinions to the issue of whether the 1990 amendments to the Copyright Act, extending copyright protection to architectural works but separately limiting their potential enforcement, fully subsumed the doctrine of conceptual separability, whereby certain non-utilitarian aspects of buildings might be granted independent copyright protection. Essentially, the Leicester court had to determine whether an ornamental feature of a building, that before 1990 might be copyrightable and fully assertable as separate and distinct from its unprotectable host building, would now be indistinguishable from the rights and limitations concerning the architectural work as a whole.

Judge Rymer in the majority opinion focused on the district court record and largely dismissed any consideration of conceptual separability based on a finding of a single, unitary architecture.

Judge Tashima in a concurring opinion disagreed with Judge Rymer’s reading of the district court record, and stated that the district court observed the surviving doctrine of conceptual separability but that it was limited to aspects not involving architectural works.

Judge Fisher in a dissenting opinion stated that § 120(a) did not limit the protections of pictorial, graphic, or sculptural works that could be considered both a part of the overall architecture but independently entitled to copyright protection.

The Falkner court avoided the issue of trying to apply a somewhat convoluted opinion about whether conceptual separability survives § 120(a), denying summary judgment on the easier question of whether the graffiti mural could be considered part of the architecture of the parking garage. Based on the key facts outlined above, the court found that the mural concept did not necessarily integrate with the concept of the garage, that it was not designed to appear as part of the building, and that it did not serve a functional purpose related to the building.

Separately, the Falkner court granted summary judgment in favor of General Motors in defense of the DMCA claim. Falkner/Smash had argued that GM’s agent photographer had intentionally removed or altered copyright management information by photographing the mural from a particular angle so as to avoid the artist’s signature. The court distinguished framing of a scene from cropping or editing of an image for satisfying purposes of 17 U.S.C. § 1202(b).  

A key takeaway here is that in the Ninth Circuit at least courts still question whether certain ornamental enhancements of a building, for instance a mural, moss wall, or fountain, if independently copyrightable, have superior protections against unauthorized recording over more generic and integrated aspects of the building, which, even if copyrighted as an architectural work, does not permit enforcement against unauthorized recording.

Okay, so what’s the pitch?

Of course there’s a pitch! Why else would we write this :)

Oddly enough, the Falkner court did not discuss the shifts in technology and social sharing that enables greater potential for recording and monetization of public works. If you are planning a destination photo shoot or video production, it is best to consult with an attorney concerning all rights and licenses necessary for downstream display, reproduction, and distribution of your recordings.


10 Things to Think (think>crowdsource) About When Crowdfunding A Capital Raise

 ©Henry Keith

©Henry Keith

If you're considering crowdfunding a capital raise, here are 10 things to keep in mind.

It’s October 2018. By now, most everybody knows or should know what it means to crowdfund an idea. By its own account, Indiegogo has launched over 800,000 ideas through a network of over 9 million users throughout 235 countries. And that’s just one platform.

As we’ve written before, there’s a difference between donation-based, or ‘rewards’ crowdfunding, and securities-based crowdfunding. With donation-based crowdfunding, you may be able to launch a new company or new product line by more or less enticing donors through promises of first distribution; to early adopters, nothing is sexier. With securities-based crowdfunding, you look to scale your company through debt or equity transactions offered through similar mechanisms as donor funding, but with additional strings attached.

As entrepreneur-attorneys who have lived the valley-of-death experience, we love the reformed securities laws and the technological advances that encourage greater funding potential for more small businesses. Notwithstanding, we can’t stress enough that securities-based crowdfunding should be pursued patiently and with sound counsel. The Securities and Exchange Commission (SEC) offers a number of investor-facing guidelines for responsible crowdfunding investing.

Note: Based on our recent review of FINRA regulated securities-based platforms, we offer the following additional cautions. As you may have expected, we offer the customary legal disclaimers that what we say is nonsense not legal advice, that we’re not your lawyers, you were never present with this document alongside Colonel Mustard and a candlestick, and that basically you should forget you ever read this.

Now, here are those 10 things to consider when crowdfunding a capital raise.

1) Be careful of direct communications with potential investors.

A typical equity raise may involve a handful of direct, often in-person talks in pre-scheduled, dedicated if not formal environments. When crowdfunding a capital raise, this could involve responding to questions through your smartphone while little Jimmy with a bucket on his head chases littler Sally around the kitchen with a plunger. (Just lifesourcing here.) And by setting low buy-ins, e.g., $1k, you may be inviting dozens or even hundreds of inquiries channeled through the platform. Take every question and response seriously. Try not to answer anything through your smartphone. Think of every communication as a regulated communication.

2) Be careful of communications with potential and actual investors that can be accessed by third parties.

We recently heard a crowdfunding employee on a panel mention reviewing a communication history between an investor and investee upon completion of a raise without any particular legal purpose. That, in my mind, is scary. Investor communications should be private affairs, and not accessible by platform employees without direct and explicit authorization. Make sure you are abundantly aware who can access your investor communications and the purpose of such access.

3) Be careful of misleading representations caused by popularity type indicators.

If you are reading this, you are probably human. You could be a bot, but I’m sure as a bot you have better things to do. We humans all engage in groupthink, and we are all wooed by the power of the herd review. Amazon, Facebook, Google, Yelp, and many others exploit this star lust to unprecedented profit margins. You can see it operating in crowdfunding platforms through the percentage raise indicators. Who wants to be the first investor in a company when others on a given site have 10%, 50%, even (gasp) 90% funded status? We heard a platform owner recently state publicly that she had kicked off a couple of the platform’s newest companies with seed investments. We find this concerning, with great potential for manipulation. If companies are receiving anonymized contributions by platform owners, future investors could argue that they were misled as to the soundness/popularity/demand/viability of the company. While the gazillion risk disclaimers (but see below) of crowdfunding sites are designed to prevent claims like these, this is nevertheless new territory in securities law.

4) Be careful of click-wrap due diligence processes.

The Jobs Act allows the Average Joe to invest a small amount of money in your start-up throughout your various capital raising phases. The SEC opened this door accompanied by stringent disclosure requirements to protect the new onslaught of unaccredited investors. This means you (and the portal you choose to run your campaign on), need to be cautious as to how your disclosure materials are conveyed. Make sure your documents are easily accessible and presented in a way that encourages their careful review. For instance, we’d suggest thinking twice before allowing investors to scroll through your page and invest on their phone.

5) Be careful not to herd too many cats as shareholders.

Angel and Venture fund managers do the business of aggregating investors. You are assuming this duty in securities crowdfunding. You may be tempted to offer a low buy-in of $1,000, thinking that a few early adopter $1k investors will prime your campaign for a $100k investment from a corporate champion or trust fund baby / passively supported entrepreneur. You may be wrong. You may end up with 250 new shareholder friends, many of whom will be clueless as to officer-shareholder degrees of separation. What you start with, you stick with, and being stuck with a large group of investors could require large legal and/or newly created employee fees to administer the corporate responsibilities to such shareholder. Additionally, under traditional corporate law, each equity shareholder represents an opportunity for shareholder suit or other distracting activity.  

6) Be careful of negotiations that can drive up your legal costs.

Ideally, you’ll be using a tried and true debt/equity instrument like a KISS or SAFE agreement to close an investment. (Of course, SAFE agreements may have their drawbacks.) However, if you open that agreement to negotiation, you risk increasing your legal costs on the front end during negotiation, or on the backend, if you decide to DIY it. There may be even more legal back-and-forth stemming from traditional promissory notes or other customized agreements.

7) Be careful of negotiations that can significantly impact the validity of your contracts.

If you’re working from a KISS or SAFE, it’s only as good as its terms and structure that you respect and maintain. If you are using any other form agreement, be careful of negotiating its terms without the advice of your attorney. We regularly cross paths with startups who bootstrapped themselves right into various agreements they downloaded from anonymous or unreliable sources. (We’ve even seen an agreement between two Tennessee individuals who agreed to resolve any dispute in New York.) You must take this seriously from the beginning, using a genesis instrument that is fair and enforceable. Beyond that, don’t create a house of 100 calico cats by negotiating terms arbitrarily with too many small-time investors.

8) Be careful about creating a cap table that can adversely affect future fundraising.

When issuing convertible notes through securities crowdfunding, you are effectively diluting your ownership position(s). Crowdfunding a capital raise creates the potential for abnormally large groups of early-stage investors, and you will need to recognize these interests on your cap table and have a good narrative built around this table for downstream financing.

9) Be careful of risky disclosures.

Should you fail when crowdfunding a capital raise, you can’t simply erase the fact that it happened. Any unnecessary and unrealized disclosures you made will be relied upon in your next, perhaps better-positioned capital raise. You should have a firm understanding of your value proposition, operations, markets, risk, etc., before creating a permanent bookmark.  

10) Be careful about being too careful.

Sometimes you have to ignore everything that the experts say, including attorneys. Dr. Seuss was rejected by dozens of publishers before reinventing childhood. The North Face, Patagonia, and Royal Robbins were all launched by passionate homeless guys innovating from a van. Burt of Burt’s Bees put in his time living in a chicken coop.

Probably one of the biggest complaints against lawyers involves the phrase “it depends.” Another popular one involves lawyers who identify a million risks in a given scenario but summarize with “of course, every situation is different, and you may determine these risks are acceptable blah blah blah.” In other words, “we’ve met our malpractice requirements by highlighting the risks, now please disregard so we can have your business.”

That’s not really what this is. We’ve identified possible consequences of using securities crowdfunding sites, or at least in deviating from best practices of using such sites. If you are a certifiable, wouldn’t-miss-it-for-the-world crowdfunder, be sure to shop the different FINRA platforms mindful of our careful-crowdfunder-checklist before committing to any particular one.

Happy selling!

Kevin Christopher is a corporate and intellectual property counsel with RVL. Not badass enough to be an astronaut or underwater welder, he helps clients protect and monetize proprietary assets, structure deals, and scale primary, joint, side and incognito ventures.

Crowdfunding: My Company Needs Money, What are the Options For Public Investment?

Crowdfunding: My Company Needs Money, What are the Options For Public Investment?

You may be thinking, “my company isn’t public, so there’s no way SEC regulations apply to me.” They do. In the past ten years, however, your crowdfunding options have expanded significantly. But before you start e-mailing your subscribers to purchase shares in your company consider the available options and their requirements. I’m going to give you an overview of all three.