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Legal Update
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Spring 2003
Do Copyright Laws Provide Real Protection For Advertising And Sales Promotions?
By Robert M. Waxman
Retailers and, in particular, automobile dealers, frequently put on special promotional sales events. These promotional events run the gamut of IRS sales, national acquisition sales, national acquirement sales, target pricing sales, tent sales, slasher sales, slash-it sales and the like. In order for retailers to create traffic for these promotional events, they will often invest a great deal of time, energy and money into coming up with the “right” advertisement for each event. As a result, the creators of theme related advertisements frequently try to protect their work from copying by others in the industry through the use of federal copyrights. Do federal copyrights provide real protection for these theme-related advertisements?
Surprisingly, the answer is no, according to two recent cases that dealt with this very issue in the automobile industry. Johnson v. Automotive Ventures, Inc., 890 F.Supp. 507, 510-14 (W.D. Va. 1995) is one of these decisions. In Johnson, the District Court explained that “[a]s a general proposition, advertisements may be copyrighted provided that their material is otherwise copyrightable.”1 The Johnson Court then went on to hold that even though the plaintiff automobile promotion company had copyrighted its advertisement for “test market pricing,” the copyright laws did not prevent others from using that phrase since “courts have refused to extend protection to short phrases.” Nor did the copyright laws provide protection for Johnson’s use of “prominent banner headlines,” along with information concerning the value and number of vehicles subject to the promotion, and/or “the use of such concepts as limited promotional duration or nonnegotiable pricing.” The fact that each of these elements routinely appeared “either in newspaper advertisements in general or in automotive newspaper advertising specifically,” left them outside of the realm of copyright protection.
This same rationale was followed in R. Ready Productions, Inc. v. Cantrell, 85 F.Supp.2d 672 (S.D. Tex. 2000). In the Cantrell case, the District Court once again was confronted with the issue of what portion of a copyrighted advertisement for an automobile dealership’s special promotional sales event was protectable under the copyright laws.2 The District Court’s answer went directly to the heart of the matter—virtually nothing was protected even though the plaintiff vehemently argued that the terms “no phony gifts, no gimmicks” were new and deserved protection. The District Court disagreed, stating that “[t]he phrase merely conveys in a direct manner the marketing concept that no gifts will be given out to customers at the sale, such that ‘expressions [which] are standard, stock, common or common to a particular subject matter or are dictated by external factors are not protectable under copyright law.’”3 The District Court then explained that the same analysis applied to numerous elements from the plaintiff’s advertisement, including phrases such as “a giant summer clearance sale,” “if you are currently in the market for a new . . . or a quality preowned vehicle, don’t miss this,” “each vehicle will be assigned a special discount from M.S.R.P.,” “no negotiation will be necessary,” “the greatest sale of the season,” “rock bottom prices,” “with immediate credit approval,” “your trade-in (paid off or not),” and “payoff on your trade.” In short, the copyright provided no protection at all. The rule from these decisions is that retailers cannot rely on federal copyright law to provide real protection for special promotional sales events despite the legal principle that advertisements are copyrightable. This is a significant problem for the retailer who creates a theme-related sale that works, only to see it copied by others. Accordingly, retailers caught on the horns of this dilemma must look to other areas of the law to protect their promotional sales events, including using trademarks and exploring common law concepts of unfair competition.
1. The landmark treatise on copyright law also concludes that “advertisements are . . . copyrightable.” 1 Nimmer on Copyrights, §2.08 [G][4], p. 2-138 (2002). In order “to prove a case of copyright infringement, [the plaintiff] must prove both ownership of a valid copyright and infringement of that copyright by invasion of one of five exclusive rights.” Dr. Seuss Enterprises, L.P. v. Penguin Books, 109 F.3d 1394, 1398 (9th Cir. 1997).
2. Generally, in order “to satisfy the infringement test, [the plaintiff] must demonstrate ‘substantial similarity’ between the copyrighted work and the allegedly infringing work.” Dr. Seuss Enterprises, L.P. v. Penguin Books, supra, 109 F.3d at p. 1398.
3. The concept of “substantial similarity refers to similarity of expression, not merely similarity of ideas or concepts.” Dr. Seuss Enterprises, L.P. v. Penguin Books, supra, 109 F.3d at p. 1398. In order to demonstrate “substantial similarity,” the works must “share significant similarity in protected expression both on an objective, analytical level, and a subjective, audience response level.” Id.
Estate Planning Bits And Pieces
By Reeve E. Chudd
Asset Information
One of the most difficult tasks for those who have lost a loved one is the process of assembling a full financial picture of their departed relative’s assets. In today’s world of busy schedules and greater asset diversification, the challenge of maintaining up-to-date records is sometimes overwhelming, but the availability of computer software aids (such as Quicken) can make this task less intimidating. Yet we would all hope to spare our loved ones the trying experience, during the early days of mourning, of reviewing our daily mail, cabinets of personal records, tax returns and other documents in order to assemble this necessary data, which can be especially difficult when the person who died was the member of the family in charge of this valuable information. Our advice is that, aside from the traditional estate planning documents (will or trust), you should prepare and update a memorandum to your survivors which provides an inventory of your bank, securities and mutual fund account numbers, contact persons and telephone numbers, life insurance, pension and IRA information, monthly payment requirements and credit card numbers (to be cancelled), as well as burial instructions and any other matters which you believe they should know about.
Beneficiary Designations
Life insurance death benefits, pension plans and individual retirement accounts (IRA) are available upon the death of the insured/participant to a designated beneficiary or beneficiaries. Often the beneficiary designation is declared when the insurance policy, pension plan or IRA is created, and more often than not the insured/participant does not maintain a record of the named beneficiary. Further, a beneficiary designation made at one time may be inappropriate at a later time. For example, we quite often encounter divorced individuals who maintain life insurance policies that have their deceased or ex-spouse as primary beneficiary (although some of these policies are kept in force to secure spousal or child support obligations should the payer die) and do not name a contingent beneficiary (the party or parties who would receive the benefits if the primary beneficiary has already died). It is extremely important to your survivors that you periodically review your designated beneficiaries of life insurance policies, pension plans and IRA’s to determine if your designations remain appropriate and that you maintain an accessible written record of this information.
[Estate Planning Bits & Pieces is a regular feature in Legal Update. For information regarding your estate plan, call Marvin Lewis at (310) 281- 6302, Melvin Spears at (310) 281-6303 or Reeve Chudd at (310) 281-6308.]
Partner Profile: Gary Q. Michel
Gary Q. Michel is the co-chair of ECJ’s Health Care Department and a partner in ECJ’s Business and Securities Law, Real Estate and Taxation Law Departments. Gary earned his Juris Doctor degree from the University of California, Los Angeles in 1975 where he became a member of the Order of the Coif. He also was on the Board of Editors of the UCLA Law Review, 1974-1975. He earned his Bachelor of Arts from UCLA in 1972, where he graduated Cum Laude.
Gary has 25 years of extensive experience in health care acquisitions, mergers, divestitures and financing, as well as compliance with federal and state illegal remuneration and self-referral prohibitions. He has been instrumental in the acquisition of several major integrated health systems, including the conversion of “not for profit” to “for profit” facilities. Mr. Michel was lead counsel in the acquisition of Providence Memorial Hospital in Texas, Hialeah and North Shore Medical Centers in Florida, St. Louis University Hospital and Deaconess Incarnate Word Health Systems in St. Louis, Missouri and Queen of Angels - Hollywood continued on page 4 Presbyterian Medical Center and Desert Hospital in California.
Gary is a member of the American Health Lawyers Association and Beverly Hills Bar Association, where he was past chairman of the Taxation Committee. He is also the author of “The Doctrine of Cash Equivalency As Illustrated by Land Sale Contracts and Notes Received for Services Rendered,” 22 UCLA Law Review 219, 1974, and was a speaker at the State Bar of California Taxation Committee and California Society of CPA’s Discussion Group of Burbank/North Hollywood, California, where the topic was “Final Partnership Allocation Regulations.”
Gary and his wife, Ellen, live in Los Angeles with their three sons, Adam, Noah and Brian, who currently is enrolled at University of California San Diego.
SEC Uses $1.4 Billion Crowbar to Separate
Analysts and Bankers
By Benjamin S. Lehrer
On April 28, the Securities and Exchange Commission announced that it had settled enforcement actions against ten prominent Wall Street brokerage firms and two individual analysts over conflicts of interest between the firms’ research and investment banking activities. The firms are required to disgorge $387.5 million in profits and pay $487.5 million in penalties, as well as pay $432.5 million to fund independent research and $80 million to promote investor education. The total price tag is roughly $1.4 billion.
Two former high-flying analysts, Henry Blodget, formerly of Merrill Lynch, and Jack Grubman, formerly with Salomon Smith Barney, were singled out for individual fines of $4 million and $15 million, respectively. They were also barred for life from the securities industry.
The $387.5 million in profits that is being disgorged will be put in ten distribution funds (one for each of the settling firms other than Merrill Lynch and one for Henry Blodget) to be administered by a court-appointed administrator. The disgorgement process will use the “don’t call us, we’ll call you” model, where the fund administrator will review the information provided to it by the brokerage houses to identify investors and determine payouts from the funds. The SEC has advised that this process may take up to 18 months after an administrator is appointed. The SEC has also advised that there is no guarantee that everyone who suffered losses will be able to obtain a payment from one of the funds, although the settlements do not preclude investors from bringing their own suits against the brokerages. Further information about how the funds will operate, the requirements investors will need to meet in order to receive a payout from the funds and what investors should do now can be found in a questions and answers press release posted by the SEC at http://www.sec.gov/news/press/globaldistqa.htm.
The settlement brings to a close claims by the SEC, the New York Attorney General’s office and the major national exchanges that leading analysts published research which puffed up moribund stocks in order to funnel more business to their firms’ investment banking wings. E-mails and other internal documents revealed that stocks described internally as “turkeys” and “pieces of [expletive]” were being touted to the public as “Buys” and “Strong Buys” in response to pressure from the firms’ investment banking wings in order to generate or preserve their underwriting business. In the year 2000, analysts employed by brokerage firms gave 100 “Buy” ratings for every one “Sell” rating—and the Nasdaq dropped 41% that year.
As part of the settlement, brokerage firms are required to take steps to insulate their analysts from the influence of investment bankers. However, a complete separation, as was required between auditors and consultants in the wake of the Enron and Arthur Anderson scandals, was not mandated.
The settlement envisions a world that apparently didn’t exist before, where analysts will be compensated based on the quality of their analysis rather than their ability to drum up investment banking business. Investment bankers will have no role in reviewing analysts’ performance or in choosing which stocks are followed. In addition, the brokerage firms must contract with no fewer than three independent research firms for a five-year period and make the independent research available to the firms’ customers. Finally, analysts will not be allowed to participate in bankers’ pitches and roadshows.
The SEC is also attempting to put the kibosh on another shady practice common in the tech-bubble days, where brokerage firms would allocate portions of hot IPOs to executives of other companies in exchange for a chunk of their own underwriting business.
The settlement is only the beginning, of course. Individual managers and officers are under investigation, and the documents released in the process will be fuel for class action lawsuits and arbitrations brought by disgruntled investors who made investment decisions based on the rose-colored reports analysts churned out at the bankers’ behest. Many state regulators, including those in California, also are proposing new regulations to deal with the investment banking community. While many of these proposals will likely mirror those adopted by the SEC, it is possible that the end result may be a hodgepodge of conflicting state regulations.
Reaffirming the age old adage that you can’t always believe what you read, the lesson here for individual investors is to be sure to look beyond the hype and do your own independent investigation before deciding to invest.
ECJ Client Richard Kipper is National Chairman of Alzheimer’s Association
Like the family of former President Reagan, many of us are caring or soon may care for a parent or loved one with Alzheimer’s. As yet, there is no cure. But thanks to the generosity and support of ECJ clients like Dick Kipper, there is hope.
“I got involved with the Alzheimer’s Association when my own father was diagnosed, and I saw what a heart-wrenching disease it can be,” said Richard Kipper, chairman of the Alzheimer’s Association national board of directors. “But due to the generous support of millions of Americans and the tireless efforts of researchers worldwide, we at the Alzheimer’s Association are making great progress towards understanding the causes and progress of the disease. That will lead us to more effective treatments, preventions, and eventually a cure.”
ECJ salutes the hard work and dedication of clients like Dick Kipper who continue to contribute to society after their retirement. After successfully selling his company, AFSA Data Corporation (now a subsidiary of Affiliated Computer Services, Inc., a Fortune 500 NYSE company) some years ago, Dick has brought his considerable business talents and experience to bear on a challenging and very worthy cause.
Founded in 1980, the Alzheimer’s Association is the premier source of information and support for the four million Americans with Alzheimer’s disease. Through its national network of chapters, the Association offers a broad range of programs and services for people with the disease, their families and caregivers. It also represents their interests on Alzheimer-related issues before federal, state and local government and with health and longterm care providers. The largest private source of funds for Alzheimer research in the United States, the Association has contributed $136 million toward research into the disease.
Donations can be directed to the national organization or to the local chapter:
Alzheimer’s Association
919 North Michigan Avenue, Suite 1100
Chicago, Illinois 60611-1676
(800) 272-3900
www.alz.org
Alzheimer’s Association
Los Angeles, Riverside and San Bernardino Counties Chapter
5900 Wilshire Boulevard, Suite 1700
Los Angeles, California 90036
(323) 938-3379
www.alzla.org
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If you would like to receive a complimentary copy of ECJ's Legal Update, please e-mail Cynthia Kaiser at ckaiser@ecjlaw.com.
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