By Kim Kennedy

The Stop Online Piracy Act (“SOPA”) is a bill that Rep. Lamar Smith of Texas introduced in the United States House of Representatives in October, 2011. The bill is intended to help law enforcement agencies in the United States fight the distribution and sale of copyrighted intellectual property, like music, movies, and software and also of counterfeit goods. While that sounds good, the negative side effects of these expanded government powers far outweigh any good that might come of the bill’s passage.

SOPA would allow the US Department of Justice (“DOJ”) to obtain court orders against any website, whether domestic or foreign-based, if that website is accused of enabling, or facilitating copyright infringement. The DOJ then would have several tools to take action against that website, such as requiring advertisers like Google and payment services like Paypal to cease doing business with the site, or even requiring Internet Service Providers (“ISPs”) to block internet users in the United States from being able to access that site. Additionally, the bill would make unauthorized streaming of copyrighted content a felony.

How would this work? Well, if a copyright holder decides a website is infringing or harming their intellectual property rights in some way, they can send a notice to the services and advertisers that site relies on, such as Google, Visa, Paypal, etc. The services have 5 days to cut off that website or they risk being held liable as well. The website has only 5 days to file an appeal, which might be difficult given the complex legal questions inherent in web content and also because their revenue stream has been cut off. This applies to the entire website, not just the infringing page or pages. Keep in mind that no judge or jury has found the website guilty of anything. In fact, no charges have even been filed in a court of law. Service providers and advertisers would be forced to become the judge and jury, with the threat of liability themselves if a court disagrees with their conclusion.

SOPA is not the first or only tool the judicial system has to deal with online piracy. The Digital Millenium Copyright Act (“DMCA”) was passed in 1998 by a unanimous vote in the senate, and brought the US in line with the World Intellectual Property Organization, (“WIPO”) which is an international body tasked with developing international intellectual property laws and standards. It also provides immunity to ISPs who comply with court-ordered subpoenas for their user’s identity, and for complying with court-ordered takedown notices for infringing work.

The House Judiciary Committee will continue its debate on SOPA when Congress returns form its winter recess. Opponents of the bill including Google, Yahoo!, Facebook, Twitter, AOL, LinkedIn, eBay, Mozilla, Tumblr, the Brookings Institute, the Wikimedia Foundation, The Library Copyright Alliance (including the American Library Association) and human rights organizations such as Reporters Without Borders, the Electronic Frontier Foundation, the ACLU, and Human Rights Watch have already spoken out against it.

Want to get involved? Here is a good website to get more information on the bill, and how you can make your voice heard: http://americancensorship.org/.

Kim Kennedy is a paralegal with Bay Oak Law in Oakland, CA.

By Andrew K. Jacobson

In an era of ultra-tight budgets, getting something for less is appealing. One such temptation is hiring someone to be an independent contractor, instead of as an employee. The Legislature and Governor Brown, however, have added to the downside of that calculation.

Hiring someone as an independent contractor instead of as an employee has its advantages: the employer doesn’t have to withhold taxes, and doesn’t have to pay the employer’s portion for medicare (1.45% of a paycheck) or social security (6.2% of a paycheck, up to $108,600 annually). They are also less subject to labor regulations, like minimum wage, twice-monthly paychecks, overtime and the like. The California government discourages independent contracting, because independent contractors are far less reliable in paying taxes, while being far more vulnerable to employer abuses.

The California Labor Commission frequently upholds claims of independent contractors who contend that they should have been classified as employees. This results in back taxes paid by the employer, plus penalties. Businesses required to pay thousands of dollars in back taxes and penalties for each worker are frequently crippled, in some cases, permanently. However, the Legislature and the Governor felt that a heavier penalties were needed, and passed new Labor Code sections 226.8, and 2753, effective January 1, 2012.

Willful Misclassification Prohibited. Cal. Labor Code § 226.8 prohibits an employer from willfully misclassifying someone as an independent contractor, charging civil penalties of $5,000 to $15,000 per violation, and those with a pattern of violating the independent contracting rules can be subject to civil penalties of $10-25,000 each. Further, the Contractors’ State License Board can initiate disciplinary actions, up to disbarment, against general contractors who have been found to have willfully misclassified workers as independent contractors. Cal. Labor Code § 2753 provides that non-attorneys who conspire with an employer to misclassify workers as independent contractors can be jointly and severally liable for these penalties.

What is an Independent Contractor? California common law defines an independent contractor as someone who is responsible to the employer only for the results of the work, and not how the work is done. When Bay Oak Law needs plumbing services, we leap to the phone to call our favorite plumber and let them to the work. We don’t stand over them, telling them what wrench to use, or how deep a hole to dig: we trust their expertise. That is a true independent contractor: temporary assignment, using the contractor’s own tools, doing something that is not the regular business of the employer, but is the specialty of the independent contractor.

Using a set of tests from a case called S.G. Borello & Sons v. Dep’t of Industrial Relations, 48 Cal. 3d 341 (1989), an employer can guess whether a worker would qualify as an independent contractor:

1. Is the worker engaged in an occupation or business different from that of the employer?
2. Is the work different from the regular business of the employer?
3. Does the worker supply the tools, and the place where the work is done?
4. Does the worker have an investment in the equipment or materials required?
5. Are there special skills required in the worker’s occupation?
6. Is the work usually done by a specialist without an employer’s supervision?
7. Can the worker profit depending on his or her managerial skill?
8. Is the work limited in time?
9. Is the method of payment per job, or a part of the job?
10. Do the employer and the worker believe they are not creating an employer-employee relationship?

An answer of “no” to one or two of these questions is not likely to result in a finding that the worker is an employee; plumbers, for example, usually work where the plumbing is, but they are still usually classified as independent contractors. California law recognizes that “individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.” Borello, 48 Cal. 3d at 351. However, the more negative answers to the checklist above, the more likely the worker is to be found to be an independent contractor.

A useful rule-of-thumb for California employers is that independent contractors should be the exception, not the rule. The costs of a mistake are much higher come January 2012, as the California government’s addition of penalties of willful misclassification has raised the stakes.

Yes, they do go to jail. The law has very sharp claws.

Would you encourage your employees take a five-fingered discount from the office supply store? Probably not. Would you cheat a hard-working employee by not paying her? Of course not. However, in the press of the Great Recession, software piracy is still prevalent, and lax controls on software may be jeopardizing your company.

When buying new computers, it is easy to forget that there is more than just the cost for the hardware – you have to buy software, too. From word processors and spreadsheet programs to customized programs for your industry, it is tempting to copy programs with a single license onto multiple computers. Because after all, since you have the original media, you can do what you want, right? And who is going to check, anyway – the software sheriff?

There are two problems with this scenario, besides the fact that it is illegal. First, many programs today are subject to constant updating, and most updating is done only once per license. Your program may be missing important parts that keep it secure and let it work right. Second, there is a “software sheriff” around – the Business Software Alliance, or “BSA.” BSA’s members include some of the world’s leading software companies, like, Microsoft, Adobe, and Cisco.

Why Should You Care? The BSA is actively offering “rewards” to those who disclose illegal use of software. All a competitor or disgruntled ex-employee needs to do to mess with your business and cost you thousands of dollars and many hours of time is to contact the BSA and claim that your company is using unlicensed software. BSA is getting companies to pay $100,000 or more for their unlicensed software. This does not count the time you, your company and your counsel spend dealing with this unproductive hassle. You will save a lot of money by ensuring that you do not get stung. If your company gets taken to court for copyright infringement, your company can be held liable for up to $150,000 for willful infringement of each registered copyright, plus the attorneys’ fees and costs of the plaintiff, which can be even more substantial. Your company would also be stuck with paying for its own legal counsel, and the lost hours of employees and managers as they are called to participate in the litigation.

What to Do on Your Own. A preliminary step can be done by your own company: do a quick inventory of the software on a few computers. Select those computers that have been around the longest. Do not trust the employee using the computer to report the software – have someone else catalog all the software on each computer. Many programs are licensed for free, like Adobe Reader or Dropbox, and can be quite useful for many tasks. Others, like Adobe Photoshop or the Microsoft Office Suite can cost hundreds of dollars a copy, and are the type of software that the BSA is on the lookout for. Other common programs that are unlicensed are Symantec Antivirus programs and Microsoft Server. Match a license for each program installed. If you find an unlicensed copy or two, delete it and, if the program is needed, buy a new, licensed copy. If there is are a lot of unlicensed copies, stop and contact legal counsel for the next step.

(Incidentally, the software inventory can also turn up some other issues, such as BitTorrent clients like uTorrent, Deluge, or Vuze. Unless there is a legitimate purpose for using such software, such as distributing very large files within your business, an employee is probably using the bit torrent client to illegally copy and distribute music and movies. Since your company’s internet protocol (“IP”) address appears as the downloader, it will probably subject your company to liability. That is a nightmare you want to avoid.)

What to Do If The BSA Contacts You. If the BSA contacts you, or your preliminary inventory discovers a lot of unlicensed software, do not wait and hope that your company or your local computer guy can handle the problem. IT professionals do not have the legal background to understand the details of software licenses, which are written by legal professionals to bore and obfuscate. More importantly, your employees, or an IT professional that you employ to investigate, can be called as a witness against you if your company is sued for copyright infringement. The last thing you want is to give unfettered access to your computers to someone who can then be subpoenaed to reveal everything on your computers. If an IT professional is necessary, let your counsel do the hiring. Then the professional’s work is protected by the attorney work product doctrine or the attorney-client privilege. These concepts give attorneys and their clients private space to determine what to do, without the threat of those facts and discussions being revealed.

What Bay Oak Law Can Do for You. The sooner we are called in, the sooner we can cloak the investigation under the attorney work product doctrine and attorney-client privilege. We can manage the process to protect your data that might be demanded in a later lawsuit; if that information is destroyed, the modern trend in e-discovery is to sanction the party doing the destruction. Our lawyers have represented companies in many copyright infringement cases over the years. We can perform or supervise the license reviews. If necessary, we can assist in directing you to places where your company can buy properly licensed products. We can also assist in putting together the proper procedures to minimize future problems, including updating your employee handbook on this and other issues, like social media use.

Taking software is not cost-free – it can destroy your business. Paying for your software rewards those who work hard to develop the software, and is really much cheaper in the long run. If you have questions, call us at 510-208-5500, or contact andy@bayoaklaw.com.

A Federal Express envelope arrives addressed to you as the head of your business. However, it is from a law firm that you have never heard of. You already have counsel – you spoke to them just last month. As tempting as it is to throw the entire envelope, unopened, into the recycling bin, you open it and find a letter addressed to you. You have received a cease-and-desist letter, also known as a “C&D letter.”

You learn that the law firm is telling you to cease and desist from doing something that infringes upon the intellectual property rights of that law firm’s client. It might be a patent issue, or perhaps it has to do with their client’s trade secrets. The C&D letter may claim that your firm is infringing upon their client’s copyright, or their trademark. You are sure your firm hasn’t done anything wrong – you know your business. As tempting as it might be to resume the pitching of the envelope into the recycling bin, this C&D letter means you have to start doing some things right now.

Quickly Acknowledge the Letter. One of the chief causes of increased damages is willfully ignoring claims to stop. A mistake about using someone else’s intellectual property can elevate a minor problem into a serious disaster. Even if you are sure that you are doing nothing wrong, make sure a response is promptly sent, saying that you are beginning an investigation. Give yourself a generous end date for a comprehensive response of two weeks to a month. Don’t wait on sending the initial response letter until the conclusion of the investigation, and do not make any representations that may come back to haunt you later. The response can be from yourself or be from your counsel. Counsel’s response shields you from directly communicating with your adversary, and decreases the possibility of something being used against you. Counsel is usually better placed to investigate the overall reputation of the party and counsel claiming intellectual property infringement, and can smooth the way for you.

Begin a Low-Key, Objective Investigation of the Facts. If someone in your organization messed up, that person will not want to reveal his mistake, but your company’s survival may depend on learning that right away. Be low-key but objective in the investigation. Eeven if those employees used the intellectual property your adversary claims, there may be many reasons why your firm could do so. Again, counsel can be of great assistance, because counsel can frame the issues early on that maximize your advantage.

Consult Your Insurance Policy. Depending on what happened and how your business liability policy is written, your firm may qualify for insurance coverage for the legal costs associated with the dispute. Some business liability policies cover allegations of “advertising injury,” and might thus cover claims like trademark infringement, copyright infringement and trade secret misappropriation. Notify your insurer right away – that is what the insurance is there for. Informing your insurer about an event is not an admission that your firm did anything wrong, and the insurer cannot begin bearing part of the cost until the insurer learns of the claim. Have your counsel review the policy as well – some insurance companies like to avoid the need to pay on claims until they are called on their bluff by counsel.

Can Your Firm Seek Indemnification? Someone else may be liable for your alleged wrongdoing. If a product (including things like software) that your company purchased is alleged to contain infringing elements, your firm may have a claim against the seller. The Uniform Commercial Code (codified in California as 2312(3) of the California Commercial Code) imposes a warranty that products are free of claims by third parties. Like insurance, the sooner the seller learns of the claim, the sooner the seller can begin assuming financial responsibility.

Begin Protecting Documents, Both Paper & Electronic. As your firm now knows of an alleged infringement, you need to take whatever steps are necessary to preserve documents. That includes electronic documents like invoices, emails, and electronic receipts. Besides being the law, it is common sense: those documents may clear you as much as they may hurt you. Electronic deleting of emails or shredding of files could both prevent you from recovering information that could help you, and could create a claim for spoliation of evidence. That leads to an assumption that whatever was destroyed was helpful to the other side your case could be over with before it starts.

Respond Fully. Once your firm has looked at all the facts by the deadline you previously gave, have your counsel fully respond to the original C&D letter in the time frame that you originally mentioned.

Confronting such claims head-on will be cheaper in the long-run than burying your head in the sand. A cease-and-desist letter is a code for starting things right away.

The Guardian newspaper in London reported on our lawsuit on behalf of the origami artists.

One of the joys of working this case is the quality of our clients. They are always polite, encouraging, and engaged, even though we sometimes need to use four different languages (English, Japanese, Spanish, and Italian). Their creativity and good humor are astounding. You can check out their creations by clicking on their names:

Robert Lang

Sirgo Manuel Alvarez

Nicola Bandoni

Jason Ku

Toshikazu Kawasaki (who will be featured speaker at the Origami USA convention in late June)

Noboru Miyajima

Here is the best 3 1/2 minutes of your day. Make sure your speakers are on, and enjoy the high definition view of The Arctic Light.

The latest kerfuffle in copyright is about the use of a reproduction of Mike Tyson’s facial tattoo on another character in the movie The Hangover: Part II.  S. Victor Whitmill, the man who tattooed Tyson back in 2003 has sued, claiming copyright infringement. Last week there was a hearing in St. Louis to see if there would be a temporary injunction until the case is fully heard. I haven’t been able to find a copy of the decision yet, but knowing that the court ruled against imposing an injunction, there are some things we can divine from the result:

An Injunction Wasn’t Likely. To get an injunction, a plaintiff has to show (1) irreparable harm, (2) a likelihood of success on the merits, (3) the balance of equities tips in favor of the plaintiff, and (4) the injunction is in the public interest. The first and fourth hurdles of irreparable harm and public interest were probably enough to sink this motion. Irreparable harm includes harm that cannot be compensated at the end by monetary damages. I do not see how plaintiff is harmed in a way that cannot be compensated by monetary damages later on. On defendants’ side of the scale, we have to add the harm that would be caused to the movie theaters that would show the movie, and to the general public. Despite extremely lukewarm reviews, the movie grossed $86 million it’s opening weekend. There will be money for plaintiff, should he win.

Should Plaintiff Win? The larger question is whether the plaintiff should win. He has at least two hurdles. First, while he put the tattoo on Tyson’s face in 2003, it would normally be a work-for-hire — Tyson, presumably, paid him to put it there. In cases of work-for-hire, the employer (Tyson) owns the work. News reports state that the plaintiff claims the reserved rights to it, and since the suit was filed, we can assume that at some point, the plaintiff was able to obtain a copyright registration.

However, the unresolved question is whether the tattoo was sufficiently original. It is apparently based upon a Maori design, and the Maori are already concerned with the taking of their religious and cultural symbols. If the tattoo is merely “inspired” by Maori culture, then it might qualify for protection, but if it is a close copy of Maori symbols, then it might not.

Fair Use? The next question is whether the movie fairly used the tattoo. The news reports suggest that the court was skeptical about that, as it used a virtual copy. Amount and substantiality of the portion used is an important factor in a fair use analysis. A larger issue is the impact upon the commercial value of the original work. I do not see how it is negatively affected. It may even be a net positive impact for Mr. Whithill, although that doesn’t count in the larger analysis.

The court has scheduled a hearing on a permanent injunction in June. I suspect the case will settle before then and Mr. Whithill will get something to soothe his tortured wallet.

UPDATE:  We’ve re-filed the case in the United States District Court for the Southern District of New York. You can find the updated complaint here, and the exhibits here.

Bay Oak Law and Haims Valentino LLP have filed a copyright infringement lawsuit against artist Sarah Morris, who used the crease patterns of at least six different origami artists. She did so without attribution or licenses.

The plaintiffs are Robert Lang, Manuel Sirgo Alvarez, Noboru Miyajima, Nicola Bandoni, Toshikazu Kawasaki, and Jason Ku — some of the most renowned origami artists in the world today. Click here for Robert Lang’s take on the case.

More than 11 million people in the State of California have property — usually money — owed to them, that is just sitting in accounts with the California Controller. The cost to you is filling out and mailing a form. I got about $25 a few years ago, from an insurance refund that occurred just after I moved. To find out if you can claim something, click here.