Fashion and Copyright: Will the U.S. Supreme Court (SCOTUS) Address the Dress?

Here is a link to the Copyright Blog about the intersection of fashion designs, copyright, protection of useful articles, design patents for the ornamental design of a functional item, and the Supreme Court of the United States (SCOTUS): http://copyrightlitigation.blogspot.com/.  Enjoy.

The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors

For guidance on classifying employees and independent contractors, please check out the U.S. Department of Labor’s Administrative Interpretation Number 2015-1: SUBJECT: The Application of the Fair Labor Standards Act’s “Suffer or Permit” Standard in the Identification of Employees Who Are Misclassified as Independent Contractors, found at http://www.dol.gov/…/workers/Misclassification/AI-2015_1.pdf.

“Documenting The Deal: How Quality Control and Candor Can Improve Boardroom Decision-Making and Reduce The Litigation Target Zone”

Here is a link to an excellent paper that all corporate lawyers (and board members) should download, read, and absorb, by the Honorable Leo E. Strine, Jr., Chief Justice of the Delaware Supreme Court: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2514520.

Doing Business in California: The Franchise Tax Board Definition

Many people ask about incorporating or forming an LLC in a state other than California. California law changed a few years back, and made it more clear what it means to be “DOING BUSINESS IN CALIFORNIA.” The California Franchise Tax Board (FTB) has provided guidance on the subject, which can be found at . The following is a brief summary:

“For taxable years beginning on or after 1/1/2011, a taxpayer is doing business in California if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California or if any of the following conditions are satisfied:”
 The taxpayer is organized or commercially domiciled in California.
 Sales of the taxpayer in California, whether by the taxpayer or its agents or independent contractors, exceed an indexed amount, which in 2013 was $518,162, or 25 percent of the taxpayer’s total sales.
 Real and tangible personal property of the taxpayer in California exceed an indexed amount, which in 2013 was the lesser of $51,816 or 25 percent of the taxpayer’s total real and tangible personal property.
 The amount paid in California by the taxpayer for compensation exceeds an indexed amount, which in 2013 was the lesser of $51,816 or 25 percent of the total compensation paid by the taxpayer.

All of the above items include the taxpayer’s pro rata or distributive share of pass-through entities (partnerships, an LLC treated as a partnership, or an “S” corporation). Indexed amounts for 2014 are not yet available from the FTB.

The law affects out-of-state corporations, LLCs, and pass-through entities (partnerships, S corporations, LLCs treated as partnership) and their partners/shareholders/members that have property, payroll, or sales in this state. An out-of-state taxpayer that is considered to be doing business in California will need to file the appropriate tax return and pay the appropriate tax and fees.

Keep in mind that there are two basic tests. An out-of-state taxpayer that has less than the threshold amounts of property, payroll, and sales in California may still be considered doing business in this state if the taxpayer “actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California.”

The FTB guidance contains several examples, some of which include the application of exemptions to the rules. This is an important change in the law, of which all businesses formed or operating in other states should be aware.

Please let us know if we can be of assistance in this or any other business-related legal matters. Matthew I. Berger Law Group, A Professional Corporation: (805) 456-1200.

Securities and Exchange Commission Provides Broker-Dealer Relief for M&A Brokers

The Securities and Exchange Commission (SEC) recently provided advice in a “no-action letter” that it would not recommend enforcement action against an “M&A Broker” that is involved in advising privately held companies in M&A transactions where the M&A Broker, as defined by the SEC, failed to register as a “broker-dealer” pursuant to Section 15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). In the past, the SEC had taken the position that third parties who participated in M&A transactions involving securities through advising, negotiating, or receiving transaction-based compensation should be subject to the traditional broker-dealer rules. According to the no-action letter, M&A transactions include mergers, acquisitions, business sales, and business combinations.

The SEC defined an “M&A Broker” as a person engaged in the business of effecting securities transactions solely in connection with the transfer of ownership and control of a privately-held company through the purchase, sale, exchange, issuance, repurchase, or redemption of, or a business combination involving, securities or assets of the company, where the buyer will actively operate the company or the business conducted with the assets of the company. A buyer could actively operate the company through the power to elect executive officers and approve the annual budget or by service as an executive or other executive manager, among other things. Other examples of when a buyer is deemed to have the necessary control include where the buyer (or group of buyers) has the power to directly or indirectly direct the management or policies of the company, and such control is presumed to exist if the buyer(s) will have the power to vote, sell (or direct the sale), or receive upon dissolution of the company, 25% or more of the voting securities or capital of the company.

A “privately-held company” for purposes is a company that does not have any class of securities registered, or required to be registered, with the SEC under Section 12 of the Exchange Act, or with respect to which the company files, or is required to file, periodic information, documents, or reports under Section 15( d) of the Exchange Act. This would not apply to a “shell” company, but would apply only to an operating company that is a going concern.

The no-action letter applied to a company based on several representations, some of which include:
• The M&A Broker did not have the ability to bind the party to an M&A transaction;
• The M&A Broker did not provide financing for the M&A transaction directly or indirectly;
• The M&A Broker at no time had custody, control or possession of the securities or funds issued or exchanged in the transaction;
• The M&A transaction did not involve a public company; and
• The securities received by the buyer were restricted securities within the meaning of Rule 144(a)(3) of the Securities Act of 1933.

It should be noted that Congress recently has made some effort to address this issue, and it is not clear what effect, if any, the no-action letter would have those efforts. See H.R. 2774, January 14, 2014, passed by the House of Representatives on January 14, 2014, and S. 1923 currently pending, both of which would amend the Securities Exchange Act of 1934 to exempt M&A brokers from the broker-dealer registration exemption with different applications.

The no-action letter can be accessed here: http://www.sec.gov/divisions/marketreg/mr-noaction/2014/ma-brokers-013114.pdf.

Click to access ma-brokers-013114.pdf

Some Legal Issues About Websites

Most every business now has a website, among the purposes of which are to attract customers, disseminate information to attract customers and inform the population, provide the means for customers to purchase products and/or services, and to become better known as a credible expert in a chosen field, ultimately to attract customers. A brief survey of websites reveals some similarities, broken down into two categories: those with Terms of Use and Privacy Policies, and those without.

It may seem like a small thing, but the consequences of not having Terms of Use and Privacy Policies on the webpages may have serious repercussions. This is especially so when the website provides an opportunity for its visitors to leave Personal Identifiable Information (PII), such as an e-mail address, when subscribing to a blog; or name, address, telephone number, and credit card information when purchasing a product through eCommerce. California and Federal law each impose various requirements, and additional requirements are imposed when there is a likelihood that children 13 and under may visit the site. There are other areas that require compliance, such as rules promulgated by the Federal Trade Commission (FTC) regarding endorsements and testimonials, as well as misleading and deceptive advertising.

The Womens’ Economic Ventures (WEV) maintains an online library of webinars and other materials, including a webinar that the Matthew I. Berger Law Group presented on the Legalities of Websites. The following are the links that will begin the download of the files for the audio portion: http://wevonline.org/index.php/about-wev/learning-library/doc_download/352-legalities-of-web-sites, and the PDF file containing the slides: http://wevonline.org/index.php/about-wev/learning-library/doc_download/351-legalities-of-web-sites-pdf. If you would like to merely browse the library, click here: http://wevonline.org/index.php/about-wev/learning-library/cat_view/48-main-categories/49-thrive-in-five/37-webinars

Please feel free to contact us if you have any questions about the many areas of compliance for all aspects of eCommerce, the Internet, and websites. Our phone number is (805) 456-1200 You can find us on the web at www.mbergerlaw.com.

Author’s Guild Case Against Google Dismissed

The case brought by the Author’s Guild and others against Google for copyright infringement relative to the Google Books and Library Project has been dismissed by the Court following the grant of summary judgment for Google.  The case sought damages on behalf of authors arising out of Google’s scanning of more than twenty million books, the delivery of digital copies to participating libraries, the creation of an electronic database of books, and the making of text available for online searching through the use of “snippets.”  Most of the books were protected by U.S. Copyright Law, and Google did not obtain permission from the copyright holders.

The Court (Circuit Judge Chin of the the United States District Court for the Southern District of New York [Manhattan]) granted Google’s Motion for Summary Judgment (and denied the Author’s Guild’s Motion for Partial Summary Judgment).  Assuming that the Author’s Guild had established a prima facie case of copyright infringement against Google under 17 U.S.C. section 106, the Court found that Google’s effort provided significant public benefits and, upon consideration of the four Fair Use factors set forth in 17 U.S.C. section 107, ruled that Google’s actions were Fair Use.

The entire opinion, which contains a very good analysis of the Fair Use defense, can be found through http://www.pacer.gov/, and likely will be posted by others soon.  The case name and number are Authors Guild v. Google, 1:05-cv-08136. More news articles are available on the Internet for your information.

We shall see whether the ruling is affirmed on appeal.

Barry Levine, Co-Founder of Radical Studios, Story

Barry Levine, co-founder of Radical Studios (http://radicalstudios.com), finally has a part of his story told.  Follow this link: http://radicalpublishing.com/2013/11/barry-levines-radical-journey-from-rock-photographer-to-hollywood-producer/.  Radical’s next film is Hercules, starring Dwayne “The Rock” Johnson, scheduled for release by MGM/Paramount in July 2014.  Check out Radical’s site for more up-to-date information about a great multi-media studio.

Federal Trade Commission Rules: Endorsements & Testimonials on the Web: Watch What You Tweet

The Federal Trade Commission has issued rules regarding disclosures required for endorsements.  As can be seen, these rules apply to Twitter tweets, as well as Facebook, individual websites, and the like.  This article is very instructive and should be heeded by everyone who posts endorsements of products, investments, or services: http://www.martindale.com/labor-employment-law/article_Haynes-Boone….Endorsements on the Web.