TCOSC Digital Data Revolution Program

Here’s the announcement in original PDF format.

The deal was announced on 23 March and includes the licensing of the Looney Tunes, Superman, Batman and Penelope Pitstop characters among others. Hopi Hari will not only have the rights to use these characters in rides but will also be able to develop merchandise inspired by them.

This is Warner Bros’s largest licensing agreement in Latin America.

Here’s the announcement in its original PDF format.

One of the shortest and simplest legal agreements is the nondisclosure agreement, sometimes called “confidentiality agreement.” A good nondisclosure agreement can be one page in length. It generally exists to cover just two scenarios: (the obvious one is to prevent the disclosure of a party’s confidential information to third parties (and to anyone who does not really need the information); and the less obvious one is to prevent the use by the recipient for anything but the limited purpose for which the disclosure has been made. If the nondisclosure agreement covers both of these scenarios adequately, it probably is a decent agreement. But many nondisclosure agreements do not fully protect the discloser.

The nondisclosure agreement can be mutual, protecting against disclosure and unauthorized use of confidential information by either party as recipient. In other words, a mutual nondisclosure agreement anticipates that there will be a flow of confidential information in both directions between the parties entering into the agreement, so each is subject to obligations that should be parallel or nearly so. A one-way nondisclosure agreement means that it is anticipated that one party will be disclosing confidential information to the other party (the recipient), and so only the recipient is obligated to protect the confidential information from disclosure or from use that is broader than permitted under the nondisclosure agreement.

First, “confidential information” must be defined. In part, that definition might be context-specific. For example, if you are representing the inventor of a watch that also keeps golf scores, the definition might specifically reference “inventions, including without limitation those relating to watches and timepieces.” A good general provision might define confidential information as “any nonpublic information, technical data or know-how, including that relating to research, business processes, inventions, software programs, technical documentation, specifications, designs, drawings, engineering, products, services, customers, markets, or finances of the discloser.” To the extent practical, confidential information should be marked as such.

If it is disclosed orally, this should be confirmed in writing (even by e-mail) within 30 days of oral disclosure.
But the definition of confidential information must acknowledge that there are various exceptions and carve-outs: a piece of confidential information might become public and therefore no longer be confidential information; the recipient might already know or possess the confidential information because it has developed it or has received the information from another source. In the latter case, the recipient should be able to demonstrate this. Finally, the recipient needs the right to be able to disclose confidential information if required to do so by court or administrative order, subject to certain restraints.

Because the nondisclosure agreement is a dual purpose agreement that aims to prevent unauthorized disclosure and unauthorized use, the scope of use/disclosure has to be defined. A good nondisclosure agreement begins with a strong purpose clause. The more specific the purpose clause, the more unauthorized use/disclosure can be prevented. However, often the purpose of the disclosure is to permit the evaluation of a business relationship between the parties, or perhaps an investment in the discloser by the recipient. In such cases, the disclosure should be limited to “those employees (or subcontractors) of the recipient having a need to know the confidential information in order to achieve the purpose and who are subject to written confidentiality agreements that protect the confidential information of discloser as much as this agreement, and the attorneys and accountants of the recipient having a need to know.” It would be dangerous to permit the recipient to share what may be quite a novel concept with any third party. If the recipient wishes to disclose confidential information beyond a narrowly defined circle, the express written authorization of the discloser should be required.

Additional requirements of the good nondisclosure agreement include the following:

• Survival of the obligations of confidentiality should run from the date of disclosure (or the date of termination of the nondisclosure agreement), depending on the nature of the confidential information disclosed, often for a period of years. Since nondisclosure agreements may have no certain term and my agreements often protect technological disclosures, I prefer a formulation such as “The obligations set forth in this agreement shall survive for five years from the date of disclosure of the confidential information, except for obligations regarding trade secrets, which shall endure for so long as a trade secret is protected as such.” Many nondisclosure agreements have a survival clause of indefinite duration, but when representing a recipient, it is always advisable to avoid contingencies that are unlimited in time.
• Return of confidential information should be required whenever requested by the discloser, and upon termination of the nondisclosure agreement.
• Ownership of confidential information remains with the discloser; the recipient is granted no rights beyond the review rights stated in the purpose clause. No rights are granted under any patent, trade secret or copyright of the discloser. The confidential information should be provided “as is” without warrant of any kind.
• The parties should agree that any unauthorized disclosure or use of the confidential information will be informed to the discloser by the recipient, and that monetary damages may not be sufficient in the event of unauthorized disclosure. Therefore, equitable remedies such as an injunction will be required.

Two other issues merit discussion. First, often the party that you most want to agree to your nondisclosure agreement has no interest in signing it. Take the watch you have invented that keeps golf scores: if Seiko agrees to sign your nondisclosure agreement, it may mean that Seiko, which could have a watch with similar functionality under development, will be inviting a lawsuit from you when it releases its own golf watch. Indeed, Hollywood is quite wary of your brilliant screenplay for the same reason; the studios wish to avoid idea-submission lawsuits when they release a film or launch a series that seems inspired by your screenplay or other media concept. So you may be forced to balance your desire to have a given company review your idea against their unwillingness to sign your nondisclosure agreement.

Finally, there are many companies that try to neuter your nondisclosure agreement by including a “residuals” clause. They try to exclude from the ongoing confidentiality obligations of the recipient/evaluator any information retained in the memory of recipient personnel. These are disturbing provisions if you represent the discloser/content creator in a transaction. At the very least, the provision should state “unaided memory” and should have other qualifiers such as “provided that recipient does not violate any of discloser’s intellectual property rights or otherwise violate this agreement.” It is a matter of your leverage in the transaction as to whether you can eliminate or modify a “residuals” clause.

A good nondisclosure agreement, if you can convince the other party to agree to it, should be your first line of defense in protecting your interest and investment in your invention, concept or content.

“Fair use” of copyrighted works is one of the least understood concepts in American jurisprudence. Users of others’ works implicitly understand that there are certain uses that they can make of copyrighted works without violating the owner’s or author’s copyright. Indeed, Section 107 of the U.S. copyright law provides a list of fair use purposes, including criticism, comment, news reporting, teaching, scholarship and research. It is a concept linked to both knowledge advancement and free speech. However, many people tend to make logical or result-driven assumptions about a complex concept that often is not intuitive, and their assumptions generally are wrong.

One client assumed that he could make use of another’s copyrighted work provided he did not use the work to make money. His was an e-commerce business largely supported by advertising. Another client who had no profit motive whatsoever wanted to condense the works of a little-known modern philosopher to make them more accessible to the public. A third client had heard that as long as she copied less than 10 percent of a literary work, she was within her “fair use” rights. A fourth thought he was protected when he prominently attributed his taking of portions of the work to the author.

In fact, it is doubtful that any of these examples benefit from the fair use defense. Fair use, which is an affirmative defense if one is sued for copyright infringement, has a fairly long definition in U.S. copyright law. Section 107 contains a list of the various purposes for which the reproduction of a particular work by a third party may be considered “fair” or acceptable, such as criticism, comment, news reporting, teaching, scholarship, and research. If a use is not a fair use, then the author’s permission must be obtained. This section also lists four factors to be considered in determining whether or not a particular use is fair: the purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes; the nature of the copyrighted work; the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and the effect of the use upon the potential market for, or value of, the copyrighted work.

The determination as to whether a given user can benefit from fair use, and not obtain permission, involves a weighing of these factors, which themselves are not readily understandable. The court in the recent Harry Potter Lexicon case (Warner Bros. Entrt. & J.K. Rowling v. RDR Books, 07 Civ. 9667 (RPP) (USDC, SDNY Sept. 8, 2008), stated that “The evaluation of these factors is ‘an open-ended and context-sensitive inquiry,’” and must be decided on a case by case basis. There is no specific number or percentage of words, lines, or notes that may safely be taken without permission. Moreover, acknowledging the source of the copyrighted material does not substitute for obtaining permission.

The analysis proceeds on the basis of a number of presumptions. The first presumption is that if one is in business for profit, i.e., not a non-profit organization or non-profit educational institution, it will be an uphill struggle to establish fair use. It does not matter that you just like the look of her drawing on your e-commerce Web site, and that the drawing itself is far removed from the subscription model (or advertising model) that generates revenues for your business. One must assume that in a for-profit business, the drawing was placed there to draw potential customers. Virtually everything that a for-profit business does can be presumed to have a profit motive.

But as stated, the lines are not clear. Newspapers are for-profit businesses in most cases, and they run critiques and commentaries that do benefit from fair use. It may be fair use when a price-comparison Web site such as PriceGrabber.com borrows from product descriptions to offer commentary or critiques, but it is more likely that product descriptions do not have the requisite originality to benefit from copyright, in other words, it is not really a fair use issue at all. And it most likely is not fair use if someone offers a condensation of a copyrighted work to the public without any profit motive, because condensation or abridgement is not considered sufficiently transformative.

This leads to the two dominant considerations in determining whether a certain use is fair use or not. First, is the work transformative, a word that does not even appear in the fair use description of Section 107, but is considered at the heart of “the purpose and character of the use” factor. Courts consider this concept the most critical fair use factor: the more a work serves the same purpose and has the same character as the original work, and merely replaces it, the less transformative it is. An easy example would be if you use the cover of Kurt Vonnegut’s “Slaughterhouse Five” in a pictorial collage about famous authors who attended Cornell, that would be a transformative use of the book’s cover, a use entirely different than the purpose of the novel itself. But if you take three chapters of “Slaughterhouse Five” to include in a compilation of antiwar fiction, that really does not transform the work, and it most likely would not be a fair use, also because it uses what feels like too much of the original work. Similarly, a parody of a work is considered transformative.

Of course, the analysis should begin with whether or not “Slaughterhouse Five” still benefits from copyright protection (it does), or whether it has passed into the public domain, like the works of William Shakespeare, where there need not be any worry about fair use, because there is no longer any copyright protection.

The other dominant consideration is really the fourth bullet point listed above: how does the allegedly fair use affect the market for the original work, or its value? If a publisher wanted to offer an abridged version of “Slaughterhouse Five,” that might seriously undercut the market for the original work. That would never be considered a fair use of “Slaughterhouse Five.” In addition, as mentioned above, an abridgement is not considered sufficiently transformative.

In California, with so many creative workers producing films, television programming and video games, the fair use issue arises all the time. For example, on the sets of television shows, walls are often free of art, and if they have art, it often is not identifiable. Unless the art is in the public domain, the show’s use of the art would not be a fair use, and the production company or network does not want to be sued. Large studios have personnel and even departments focused upon permissions, often to grant, deny or negotiate permissions to their own works, as well as to chase down permissions for all of the copyrighted works that may be used in any studio production. But some permissions, such as for art on the wall of a set of a television episode, may not be worth chasing or buying, so it is easier to proceed without identifiable art.

Fair use is a fascinating concept. It comes into play in many contexts, but as noted above, it takes careful analysis to determine whether or not one can proceed with the assumption that a use is covered by fair use and the user is “home free.” Unless you have a full understanding of the concept, it is best to obtain permission, or seek professional advice.

One of the most fought-over issues in technology development and licensing agreements concerns intellectual property ownership. Superficially, who owns the intellectual property should be easy to resolve. The developer or publisher of a proprietary computer software program virtually always owns the computer program (except for possible open source components). Nobody contests Microsoft’s ownership of Excel, or Autodesk’s ownership of AutoCAD.

At the other end of the spectrum, when a large company commissions a development house or even individual developer to do custom development for it, whether of a Web site or of computer or systems code, and the client pays for such development, generally, the company that commissioned the development owns it. In most cases the developer will sign an agreement stating that the developed code is “work for hire” or “work made for hire” under U.S. copyright law, which means that the recipient of the custom development will be deemed the absolute owner of such development. The developer will have no further rights to use any of it.

The difficulty lies in the enormous gray area between these two easy cases. Generally, the issue surfaces when a talented systems integrator or developer, often renowned in a narrow area of development (e.g., Flash Web development, or data integration development), is asked to do some development for a large company. These contractual relationships sometimes are called professional services relationships or consulting arrangements or even customer services agreements. The company that needs some custom development or systems integration work done is calling upon a developer with great expertise in the area. The expertise has derived from doing similar work for many customers, just as you would want your laser eye surgeon to have performed at least 500 operations before your eyes are touched.

This expertise carries forward from job to job, until the expert developer runs into certain large customers, such as a major studio or telecommunications company or bank, whose in-house lawyers often are trained to insist on ownership of everything, regardless of the merit of such a position. Why? Because they can. They argue that they are paying for the development, and they know that developers or integrators need prestigious studio and other marquee clients. Generally there is no argument over the developer’s ongoing ownership of “preexisting works” that it plans to deploy in the work done for the large client. If the developer lists computer programs or functions that it has developed previously, even studio lawyers generally will concede that the developer owns such works.

Those of us who represent developers and professional services providers often spend a lot of time explaining that the client has hired this developer because of its expertise. If this developer does some systems integration for a large client, the developer will employ methodologies, code, techniques and best practices that the developer personnel have developed and learned on prior jobs. Obviously the client does not want to pay for the developer to learn his or her craft on this specific job. However, if the prestigious client insists on absolute ownership of all such development, technically this might be the last job that the developer can perform in this area. Often, there may not be 10 different ways to skin this particular cat, the scope of the engagement may be narrow, and repetition of prior work by the developer or service provider may be inevitable.
To give the large clients their due, they do not want any restrictions on their ability to sell or transfer the custom work done, whether because they may in the future dispose of a business unit or sell the company. They cannot be in a situation where their desire to transfer their computers and software (including all related development) infringes some developer’s rights. And this freedom of action is a right they should have.

The logical solution is easy in concept: Any development done that is paid for by the client and cannot be reused by the developer because it is so client-specific should be owned by the client. Any development that draws on the developer’s expertise and can be reused by the developer on similar engagements should be owned by the developer, but the client should be given a perpetual right to use, modify and transfer such custom development. In this manner, the client is not at risk of infringing or violating the developer’s intellectual property rights. And the developer can continue to do the sort of custom development that has been at the heart of its business. Alternatively, it is possible to give ownership to the client, with a perpetual license in favor of the developer. The key factor is to ensure that both parties have the right to pursue their business models without violating the other party’s intellectual property rights.

When a marquee client is entirely unreasonable on this issue, which happens not infrequently, the developer has various options. Refuse the assignment and walk away. Identify very broadly and in detail the code elements that are preexisting works, so that the scope of the code or other custom development being produced for the client is as narrow as possible. Sign the onerous agreement, do the development, grant ownership to the client, and do what has to be done in the future. Many service providers and developers do this. While this “no harm no foul” approach may infringe upon the client’s ownership rights, in most cases, the future development that the developer will do for others is undetectable by past clients, and tied up by nondisclosure agreements and confidentiality provisions in any event.

One context deserves special discussion: If a Web developer is developing a Web site for a client, the client needs the assurance that it either owns, or has perpetual license rights, to the Web developer’s creation. Sometimes the Web developer is also the webhost, and in the future, the client may want to use a different webhost. Therefore, regardless of which party owns the developer-created portions of the Web site, the client needs the contractual right to exercise dominion over the entire Web site, including the right to move the Web site to any other webhost, or bring it in-house, and to be assured of the cooperation of the original webhost and/or Web developer.

Another less technology-focused scenario deserves mention also. I have encountered the situation where an advertising agency that created ad copy for a client intentionally failed to assign the copyright to the client, and the agency sued when the client stopped using the ad agency and continued to use the ads, on the basis that it (the agency) still owned the ad content. Therefore, in many contexts relating to creative content, the client must be careful to secure an assignment of copyright along with the ad copy. Unlike obscure software coding, ad copy is very visible to the public, and the creator generally does not have, and probably should not have, the right to own and reuse it with other clients.

Finally, there is a category of computer software code that grew up around the Linux platform, open source code. This code is used in conjunction with many proprietary software programs, and is governed by special license provisions (GNU General Public License, Apache license, etc.). Open source or “free” software is software whose source code is published and made available to the public, enabling anyone to copy, modify and redistribute the source code without paying royalties or fees. Open source code evolves through community collaboration. This code must be excluded from the assertions of ownership by either the developer or the client discussed in this article. In general, clients need not fear open source code, but care must be taken to identify such code so that it can be separated from proprietary code, and follow its license terms.

In negotiating ownership of technology development, so often size matters, and large clients prevail over the more practical needs of developers and integrators. However, reasonable compromises along the lines discussed in this article should break logjams in negotiations and allow each party to achieve its objectives and to maximize its utility.