tag:blogger.com,1999:blog-58776722024-02-08T09:09:19.947-08:00Entertainment Law Resources BlogEntertainment Law Resources for Film, TV and Multimedia Producers by author and entertainment attorney Mark Litwak provides in-depth information to assist those who finance, produce and distribute motion pictures. Copyright 2010 Mark LitwakMark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comBlogger198125tag:blogger.com,1999:blog-5877672.post-12196723452382563142013-10-29T16:33:00.001-07:002014-12-14T18:30:47.142-08:00NEW BLOG<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: red;">We have moved the Entertainment Law Resources blog to our newly redesigned website: </span><span style="color: red;">www.marklitwak.com</span></h2>
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<span style="color: red;">For the most recent updates visit the new blog.</span></h2>
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<span style="color: red;"><br />The Blog can be reached at <a href="http://www.marklitwak.com/blog.html" target="_blank">New Blog Link</a></span></h2>
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<span style="color: blue; font-size: large;"><br /></span></div>
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<span style="color: blue; font-size: large;">also note our new address: <b style="font-family: Arial, sans-serif;">11766 Wilshire Blvd., Ste. 270 | Los Angeles | CA 90025</b></span></div>
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<b><span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">SEC Proposes
Crowdfunding Rules<o:p></o:p></span></b></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">By Mark Litwak<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">The
Securities and Exchange Commission (“SEC”) has finally proposed, for comment,
new Regulations for Crowdfunding to implement the requirements of the Jumpstart
Our Business Startups Act (“JOBS Act”), enacted on April 5, 2012. More than one
year overdue, the SEC has released a 585-page comprehensive report with its
proposed rules and underlying rationale. <o:p></o:p></span></div>
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<span style="background: white; font-family: "Times New Roman","serif"; font-size: 16.0pt;">The public has 90 days to offer </span><span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">comments<span class="apple-converted-space"><span style="background: white;"> </span></span><span style="background: white;">on the rules. Therefore, it is likely that
entrepreneurs seeking to raise capital will have to wait at least another six
months or so before the agency finalizes its rules. The proposed regulations
prescribe a rigorous registration process for portals, handled by both the SEC
and the Financial Industry Regulatory Authority (“</span>FINRA”)<span style="background: white;">, Wall Street’s self-policing body. The rules also
establish record-keeping and anti-money laundering procedures.<o:p></o:p></span></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast;">Under
existing regulations, it is difficult and expensive for a company to legally
raise small amounts from ordinary investors. </span><span style="font-family: "Times New Roman","serif"; font-size: 16.0pt; mso-fareast-font-family: "Times New Roman";">Crowdfunding
will allow investors with an annual net income or net worth of less than
$100,000 to invest up to five percent of that amount, or $2,000, whichever is
more, every 12 months. Investors with an annual income or net worth exceeding
$100,000 can invest up to ten percent of their annual income or net worth every
12 months. On the other hand, promoters are limited to raising $1 million during
a 12-month period. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">Until
now, crowdfunding has been generally limited to donations. Websites such as Kickstarter
have been very successful in raising funds for various artistic endeavors, like
films. However, these sites do not offer equity or profit sharing in the
business. Typically, donors receive T-shirts, an invite to the wrap party or
festival premiere, a screen credit, or some other nominal benefit; however,
they do not share in any revenue derived from the movie. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">Under
the recommended rules, transactions must be conducted through an intermediary
that is registered as a broker or is registered as a new type of entity called
a “funding portal.” The rules would require these intermediaries to deliver
educational materials that explain how the offering process works and the risks
associated with investing in crowdfunding. The materials could be in any
electronic format, including videos. Investors will be required to represent
that they have reviewed the materials and understand the risks they are taking.
The portals would also be required to obtain a fidelity bond and maintain
coverage for the duration of its registration.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">The
proposed rules will restrict advertising by directing investors to the portals,
which will contain more specific information and various disclosures. They will
also restrict intermediaries from promoting an offering unless they clearly
disclose any past or future compensation every time that there is a
communication. Likewise, the portals must disclose to potential investors how
they are compensated. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">The
suggested rules would promote online social media by requiring intermediaries to
provide the means, for investors who have opened accounts, to post comments
about the offering on the portal, which would be available for both investors
and the public to see. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">Portals
would be required to notify investors that they have 48 hours to cancel their
commitment to invest. Moreover, funds would be directed to banks where they
would be held until the offering was completed or cancelled. If a target amount
is not raised, the funds would be returned to the investor.<o:p></o:p></span></div>
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<div class="MsoNormal" style="margin: 0in 0.1in 0.0001pt 0in; text-align: justify;">
<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">Surprisingly,
the SEC intends to allow funding portals to be based outside the United States.
</span><span style="font-family: "Times New Roman","serif"; font-size: 16.0pt; mso-fareast-font-family: "MS Mincho"; mso-fareast-theme-font: minor-fareast;">The
recommended rules would require a non-resident funding portal to appoint an
agent for service of process in the United States, and to certify and provide
opinion of counsel that the funding portal can provide the SEC with prompt
access to its books and records and can submit to onsite inspection and
examination. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">There
are a growing group of companies that have already indicated they intend to
become funding portals. According to FINRA, approximately 36 companies have
already submitted the voluntary Interim Form for Funding Portals indicating
their intention to act as funding portals under the JOBS Act.<o:p></o:p></span></div>
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<span style="background: white; font-family: "Times New Roman","serif"; font-size: 16.0pt;">Overall, the SEC has struck a sensible balance between
protecting investors and assisting startups in seeking a cost effective way to
raise funds through crowdfunding. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">The
proposed rules can be reviewed at: <o:p></o:p></span></div>
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<a href="http://www.sec.gov/rules/proposed/2013/33-9470.pdf"><span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;">http://www.sec.gov/rules/proposed/2013/33-9470.pdf</span></a><span class="MsoHyperlink"><span style="font-family: "Times New Roman","serif"; font-size: 16.0pt;"><o:p></o:p></span></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 16.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;">To submit comments,
go to: </span><span style="font-family: "Calibri","sans-serif"; font-size: 11.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><a href="http://www.sec.gov/cgi-bin/ruling-comments?ruling=s70913&rule_path=/comments/s7-09-13&file_num=S7-09-13&action=Show_Form&title=Crowdfunding"><span style="font-family: "Times New Roman","serif"; font-size: 16.0pt; line-height: 115%;">http://www.sec.gov/cgi-bin/ruling-comments?ruling=s70913&rule_path=/comments/s7-09-13&file_num=S7-09-13&action=Show_Form&title=Crowdfunding</span></a></span></div>
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-65157243853351269382013-09-05T15:44:00.001-07:002013-09-05T15:45:57.671-07:00Film Finance Webinar September 20, 2013 12:00 PM to 1:00 PM with Mark Litwak<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="background-color: white; color: #2a2a2a; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 18px; line-height: 27px;">I will be participating in a one hour Webinar for the California State Bar Entertainment and Sports Law Interest Group. </span><br />
<br style="background-color: white; color: #2a2a2a; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 18px; line-height: 27px;" />
<span style="background-color: white; color: #2a2a2a; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 18px; line-height: 27px;">The panelists will describe basics and potential benefits of various finance structures, highlighting practical experience and advice. The presentation will cover significant securities law requirements and recent developments, including donation-based efforts and proposed crowdfunding rules under the JOBS Act.</span><br />
<span style="background-color: white; color: #2a2a2a; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 18px; line-height: 27px;"></span><br style="background-color: white; color: #2a2a2a; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 18px; line-height: 27px;" />
<span style="background-color: white; color: #2a2a2a; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 18px; line-height: 27px;"></span><span style="background-color: white; color: #2a2a2a; font-family: Georgia, 'Times New Roman', Times, serif; font-size: 18px; line-height: 27px;">Panelists: Mark Litwak, Law Offices of Mark Litwak and Associates and John Cones, Law Offices of John W. Cones. Moderated by Adam Brezine, Bryan Cave.</span><br />
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Presented by t<span style="line-height: 1.5; text-indent: 0.5in;">he State Bar of California, Intellectual Property Law Section. Open to lawyers and non-lawyers alike. Lawyers receive MCLE credit. </span></div>
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<span style="line-height: 1.5; text-indent: 0.5in;"><a href="http://bit.ly/1fCDClf" target="_blank">To Register or for more info click here</a></span></div>
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-40566072517745821512013-08-03T09:06:00.001-07:002013-08-13T16:52:14.138-07:00<div dir="ltr" style="text-align: left;" trbidi="on">
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Mark Litwak was interviewed about the movie industry on the KBeach radio show the Kaine Perspective on August 1.<br />
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The entire show was recorded and can be listened to: <a href="http://yourlisten.com/thekaineperspective/the-kaine-perspective-812013" target="_blank">Listen to Radio Interview</a><br />
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-82034170192077910402013-07-20T15:35:00.000-07:002013-07-20T15:35:24.086-07:00Midnight in Mississippi William Faulkner v. Sony Pictures <div dir="ltr" style="text-align: left;" trbidi="on">
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<b>By Mark Litwak</b><o:p></o:p></div>
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In 2011 Sony Pictures Classics released the hugely popular
movie “Midnight in Paris,” written and directed by Woody Allen. The story
centers on the character Gil Pender, a disillusioned Hollywood screenwriter who
longs to be a serious novelist.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>Pender, played by Owen Wilson, is on vacation in
Paris with his fiancée, played by Rachel McAdams. <span style="mso-spacerun: yes;"> </span><o:p></o:p></div>
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Pender feels he is living in the wrong time, and soon is magically
transported to the Bohemian Paris of the 1920s, where he meets such luminous
figures as Ernest Hemingway, Gertrude Stein, F. Scott Fitzgerald, Pablo Picasso
and Salvador Dali. This gives him the occasion to talk to his artistic heroes
about his own work. <o:p></o:p></div>
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At one point Pender accuses his fiancée of having an
affair. Incredulous, the finance asks where he came up with such a notion. He mentions
Hemingway, Fitzgerald and Gertrude Stein, which even his fiancée realizes are
long dead, and she scorns the notion. Pender replies, “The past is not dead!
Actually, it’s not even past. You know who said that? Faulkner. And he was
right. And I met him, too. I ran into him at a dinner party.” <span style="mso-spacerun: yes;"> </span><o:p></o:p></div>
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The inclusion of this short quote in the movie motivated Faulkner
Literary Rights, LLC (“Faulkner”), which manages the Faulkner’s literary estate
to bring suit for copyright infringement and unfair competition against Sony in
federal court in Mississippi. <span style="mso-spacerun: yes;"> </span>The quote
is from the Faulkner book Requiem for a Nun set in the fictional Yoknapatawpha County,
Mississippi.<o:p></o:p></div>
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It is unusual for a copyright infringement lawsuit to be based
on the use of such short quote in a movie. Granted, Faulkner is a famous, acclaimed
author, but what was borrowed here was an eight-second line of dialogue in a 94-minute
movie. The movie is not based on the plot of any of Faulkner’s stories, but is an
original creation from the imagination of Woody Allen. <o:p></o:p></div>
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Sony did not contest any of the facts as alleged in the
lawsuit and moved for the court to summarily dismiss the complaint. A motion to
dismiss challenges the legal sufficiency of a lawsuit, and the court needs to
decide, assuming all the facts pled are eventually found to be true, whether
there is a plausible legal claim. If the plaintiff is unable to prevail, even
if it can prove all the facts it has alleged, there is no point in trying the
case before a jury, and the court can decide the outcome as a matter of law.<o:p></o:p></div>
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Under the fair use doctrine, copyright law allows the right
of the public to draw upon copyrighted works to produce separate works of
authorship. Such uses include fair comment and criticism, parody, news
reporting, teaching, scholarship, and research. Thus, a movie or literary
critic does not need permission to include a small quote from a work being
reviewed. It is sometimes said of writers, that if you borrow extensively from
another’s work, you are a thief; but if you borrow bits from thousands, you are
a scholar. Of course, the scholar adds value by synthesizing information from
prior works and creating something new. This is what known as a “transformative
use.” Here, however, Woody Allen’s use of the Faulkner material is not part of
a literary review or news reporting. Woody Allen is borrowing the quote for use
in an entertaining movie, which was a huge commercial hit, grossing $151
million at the box office. <o:p></o:p></div>
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In determining whether the use of a copyrighted work is a fair
use, courts weigh four factors: 1) the purpose and character of the work; 2)
the nature of the copyrighted work; 3) the amount and substantiality of the
portion borrowed in relation to copyrighted work as a whole; and 4) the
potential adverse effect on the market for, and value of, the copyrighted work.
<o:p></o:p></div>
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In applying these factors to a specific factual situation,
it can often be difficult to predict whether a use will fall within the
doctrine. Generally speaking, a greater amount of material may be borrowed from
non-fiction works than from fictional works. Clearly, a writer can borrow
historical facts from a previous work without infringing upon the first
author’s copyright, because of both the fair use doctrine and because
historical facts are not copyrightable. Moreover, since factual works, unlike
works of fiction, may be capable of being expressed in relatively few ways,
only verbatim reproduction or close paraphrasing will be an infringement.<o:p></o:p></div>
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One encounters a lot of grey areas in applying the fair use
doctrine. It is safe to say that a schoolteacher will be protected if she
photocopies a Newsweek article and distributes it to her class on one occasion.
If the schoolteacher, however, photocopies an entire textbook and distributes
it to her students in order to save them the expense of purchasing their own
texts, this would not be a fair use. But there are many situations that lie
between these two extremes; and in those cases it can be difficult to predict
whether the fair use doctrine will be an adequate defense. <o:p></o:p></div>
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In one case a biographer paraphrased large sections of
unpublished letters written by the famous author J.D. Salinger. Although the
public could easily read these letters at a university library, the author had
never authorized their reproduction. Salinger brought suit and succeeded in
prevented their publication<span style="font-size: 8.0pt; line-height: 115%;">.<a href="http://www.blogger.com/blogger.g?blogID=5877672#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><span style="font-family: Calibri; font-size: 8.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span><!--[endif]--></span></a><o:p></o:p></span></div>
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In another case, publisher Larry Flynt made disparaging
statements about the Reverend Jerry Falwell on one page of Hustler magazine. Without
permission, the Rev. Falwell reprinted several hundred thousand copies of the
page and distributed them as part of his own fund-raising effort. Flynt then
sued Falwell. Here the court found this was a fair use, perhaps because the
copying did not reduce sales of the magazine, which was already off the market.<span style="font-size: 8.0pt; line-height: 115%;"><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><span style="font-family: Calibri; font-size: 8.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;"><a href="http://www.blogger.com/blogger.g?blogID=5877672#_ftn2" name="_ftnref2" style="mso-footnote-id: ftn2;" title="">[2]</a></span><a href="http://www.blogger.com/blogger.g?blogID=5877672#_ftn2" name="_ftnref2" title=""><!--[endif]--></a></span></span><o:p></o:p></div>
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After reviewing all the facts, Michael p. Mills, chief judge
of the United States District Court Northern District of Mississippi, found in
favor of Sony and dismissed the complaint. The Faulkner quote at issue was
considered to be “of miniscule quantitative importance to the work as a whole… [and]
no substantial similarity exists between the copyrighted work and the allegedly
infringing work.” Moreover the judge said that it was: <o:p></o:p></div>
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…highly doubtful that any relevant markets have been
harmed by the use in Midnight. How Hollywood’s flattering and artful use of
literary allusion is a point of litigation, not celebration, is beyond this
court’s comprehension. The court, in its appreciation for both William Faulkner
as well as the homage paid him in Woody Allen’s film, is more likely to suppose
that the film indeed helped the plaintiff and the market value of Requiem if it
had any effect at all. <o:p></o:p></div>
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The court found that Sony’s use of the quote was a fair use.
However, the fact that Sony had to incur considerable legal fees to defend itself,
might will discourage an independent filmmaker with modest resources to rely on
the fair use doctrine. <o:p></o:p></div>
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<span style="font-weight: normal;">The full decision can be read at:</span> <a href="http://www.scribd.com/doc/154578618/Faulkner-Requiem" target="_blank">Decision</a> </h2>
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<i><span style="font-family: "Times New Roman"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Salinger v. Random House</span></i><span style="font-family: "Times New Roman"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">,
811 F.2d 90 (2d Cir. 1987).<o:p></o:p></span></div>
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<i><span style="font-family: "Times New Roman"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Hustler Magazine, Inc. v. Moral Majority, Inc.</span></i><span style="font-family: "Times New Roman"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">, 606 F. Supp. 1526 (C.D. Cal. 1985).</span><span style="font-family: "Times New Roman"; font-size: 12.0pt;"><o:p></o:p></span></div>
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-6132888875657351922013-06-24T09:15:00.001-07:002013-06-24T09:15:42.487-07:00Trouble from People Portrayed in Your Work, Part II<div dir="ltr" style="text-align: left;" trbidi="on">
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The right of publicity is the right of individuals to
control the use of their name and likeness in a commercial setting. You cannot
place an image of another person on your brand of pickles without their
permission. Celebrities can earn large fees from this right by endorsing
products. Some celebrities earn more money from licensing their name or image than they can earn from their career. According
to Forbes magazine, Tiger Woods made in excess of “$100 million in annual
off-the-course earnings” in 2009, compared to $21 million on the golf course.</div>
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The right of publicity is similar to the appropriation form
of invasion of privacy. The principal difference is that the right of publicity
seeks to ensure that a person is compensated for the commercial value of his
name or likeness, while the right of privacy seeks to remedy any hurt feelings
or embarrassment that a person may suffer from such publicity. <o:p></o:p></div>
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Celebrities may have difficulty making an invasion of their
privacy claim because they necessarily sacrifice some solitude and privacy by
virtue of their fame. How can a celebrity claim that the unauthorized use of
his likeness on a product embarrassed and humiliated him while at the same time
that person willingly appears in television commercials? By thrusting
themselves into the public eye, celebrities waive much of their right of
privacy. On the other hand, celebrities have an especially valuable property
right in their names and likenesses. Most courts have held that the Right of
Publicity extends to everyone, not just celebrities. But clearly the right is
most valuable for celebrities because they can license their rights for large
sums. <o:p></o:p></div>
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Under either a publicity or privacy theory, subjects can
recover for some unauthorized uses of their names and likenesses. A problem
arises, however, when one person's publicity/privacy rights come in conflict
with another person's rights under the First Amendment. Suppose a newspaper
publisher wants to place a picture of Cher on the front page of its paper
because she has done something newsworthy. Is her permission needed? The answer
is no.<o:p></o:p></div>
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Although Cher's name and likeness is portrayed in the
newspaper, this "product" is also a form of "protected
expression." Products such as books, movies and plays are modes of
expression protected under the United States constitution. The First Amendment allows journalists to
write about others without their consent. Otherwise, subjects could prevent any
critical reporting of their activities. When one person's right of publicity
conflicts with another person's rights of free speech under the First Amendment,
the latter often but not always prevails. <o:p></o:p></div>
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However, when the likeness of Elvis Presley is used on an ashtray,
there is no expression deserving protection. The seller of this product is not
making a statement or expressing an opinion or view about Elvis. He is simply
trying to make money by exploiting the name and likeness of Elvis. Since there
are no competing First Amendment concerns, the right of publicity in this
instance might well preclude the unauthorized use of Elvis’s likeness. In
summary, the law draws a distinction between products that contain protected
expression and those that do not. <o:p></o:p></div>
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The right of publicity is derived from state law and these
laws vary significantly. In some states
the legislature has enacted statutes that specifically address the scope and
duration of the right. Other states rely on the common law, also known the law
of precedent that arises from case decisions made by judges. <o:p></o:p></div>
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Courts have struggled with the issue of whether the right of
publicity descends to a person's heirs. In other words, when a celebrity dies,
does his estate inherit his right of publicity? Can the estate continue to
control the use of the celebrity's name or likeness, or can anyone use it
without permission?<o:p></o:p></div>
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Some courts have held that the right of publicity is a
personal right that does not descend. These courts consider this right similar
to the right of privacy and the right to protect one's reputation (defamation).
When a person dies, heirs don't inherit these rights. Suppose, for instance,
that you were a direct descendent of Abraham Lincoln. An unscrupulous writer
publishes a biography falsely claiming that Abe Lincoln was a child molester.
You couldn't sue for defamation or invasion of privacy because you did not
inherit these rights from your ancestor. Perhaps this is why many scandalous
biographies are not published until the subject dies. <o:p></o:p></div>
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In California prior to 1984, courts held that the right of
publicity was personal and was not inherited by one’s heirs. In 1984, however, the California legislature
changed the law. Civil Code Section 3344.1 provides that the right of publicity
descends for products, merchandise and goods, but does not descend for books,
plays, television and movies. The statute was recently amended to extend
protection so that heirs can enforce this right for up to 70 years after the
death of a celebrity. In California, a
form available on the Secretary of State’s website is required to register a
claim as successor-in-interest for the right of publicity. Code Section 3344.1 requires any person
claiming to be successor-in-interest to the rights of a deceased personality
register their claim with the Secretary of State's Office. Other
states have their own registration requirements. <o:p></o:p></div>
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A similar statute, California Civil Code Section 3344
prohibits the unauthorized use of the name and likeness of living individuals.
Both statutes provide exceptions for uses in the news and public affairs arenas
in an attempt to balance First Amendment rights against rights of publicity and
privacy. <o:p></o:p></div>
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An interesting case is Hicks v. Casablanca Records, which
concerned a movie made by Casablanca Records called "Agatha." The
movie was about the well-known mystery writer Agatha Christie. The story was a
fictionalized account of the 11-day disappearance of Christie in 1926. The film
portrayed her as an emotionally unstable woman engaged in a sinister plot to
murder her husband's mistress. An heir to Christie's estate brought suit to
enjoin Casablanca from distributing the movie, alleging infringement of Agatha
Christie's right of publicity. <o:p></o:p></div>
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The Christie estate lost the suit. The court found that
Casablanca's First Amendment rights outweighed the estate's right to control
the name and likeness of Christie. Because of this case and other similar
rulings, we can conclude that a person’s right of publicity does not prevent
others from including a person’s name, features or biography in a book, motion
picture, news story. <o:p></o:p></div>
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However, the First Amendment rights of journalists and
filmmakers don’t always prevail. The United States Supreme Court weighed the
Right of Publicity against first amendment rights in the case of Zacchini v.
Scripps-Howard Broadcasting. Zacchini also known as the “human
cannonball,” was shot from cannon into a net 200 feet away at a county
fair. At one performance, a local news
reporter videotaped his entire act and broadcast it as part of the local news
without his consent. He objected and filed suit. The court held in his favor explaining that
the value of his act depended on the public’s desire to witness the event, so
televising it detracted from the demand of people willing to pay to see his
act.<o:p></o:p></div>
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The Court recognized Zacchini’s Right of Publicity and rejected
the news broadcaster’s First and Fourteenth Amendment defenses. In so doing,
the Court noted that the decision was not merely to ensure compensation for the
performer; rather, it was to provide “an economic incentive for him to make the
investment required to produce a performance of interest to the public.” So it
cannot be said that the First Amendment rights of journalists are always
paramount to subjects right of publicity.<o:p></o:p></div>
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UNFAIR COMPETITION <o:p></o:p></div>
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The law of unfair competition prevents a person, for
instance, from establishing a movie studio and calling it "Paramount
Pictures" if he/she is not affiliated with the well-known company. A
person would also be barred from displaying the Paramount logo or using any
other mark that might mislead or confuse consumers by leading them to believe
that films are genuine Paramount movies when they are not. <o:p></o:p></div>
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The names of persons and businesses may become associated in
the public mind with a supplier of products or services. The name can thus
acquire a secondary meaning, and the supplier can acquire trademark rights even
if he does not register the name as a trademark. In Dallas Cowboys
Cheerleaders, Inc. v. Pussycat Cinema, Ltd., the defendant exhibited a
pornographic movie, "Debbie Does Dallas," which portrayed a
"Texas Cowgirl" engaged in sex acts. The character wears a uniform
strikingly similar to that worn by the Dallas Cowboys Cheerleaders. Ads for the
movie showed the character in the uniform and included such captions as
"Starring Ex-Dallas Cowgirl Cheerleader Bambi Woods." <o:p></o:p></div>
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The Dallas Cowboy Cheerleaders brought suit alleging that
they had a trademark in the particular combination of colors and the design of
their uniforms. The court agreed and issued an injunction against further
distribution of the film. Filmmakers should take note that if they portray
people or products in a way that is likely to confuse the public as to the
origin of a product, they may be liable for unfair competition.<o:p></o:p></div>
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<!--EndFragment--></div>
Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-61512248242642974252013-05-06T15:09:00.001-07:002013-05-06T15:09:54.275-07:00TROUBLE FROM PEOPLE PORTRAYED IN YOUR WORK<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background: white; font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">As an entertainment
attorney, I am often called upon to assist writers who have gotten themselves
into trouble because they do not understand how their work may infringe the
rights of others. A writer who learns the fine points of the law through trial
and error is receiving an expensive education. Here is a brief explanation of
how to protect yourself.</span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"> <o:p></o:p></span></div>
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<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">I.</span></b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"> <b>FICTIONAL CHARACTERS<o:p></o:p></b></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">If your script or film contains
fictional characters -- characters from your imagination -- you generally do
not need to obtain any permissions or releases. However, if there is a chance
that the public could mistake your imaginary characters for real people, you
could be liable if you have thereby infringed their rights.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">You can protect yourself by making
sure your fictional characters cannot be mistaken for real people. Give
characters unusual names that no living individual would have. Check the phone
book to see if any people with your character's name reside at the location
portrayed in your story. If there is a person in that community with the same
name or a similar one, consider changing the locale or setting the story in a
fictional locale. Add a disclaimer at the beginning of the film stating that
any resemblance to persons living or dead is purely coincidental.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">If fictional characters are drawn
from another's literary work, you might be infringing that author's copyright
unless the work has gone into the public domain, or your use is considered a
fair use. You may borrow personality traits, so long as you do not infringe
another's copyright. The first author to create a hard-boiled private eye, for
example, cannot prevent other authors from creating their own hard-boiled
private eyes.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Characters that have a visual
component, such as comic book characters, are more likely to be protected under
copyright law. Moreover, if you borrow the name of someone else's character you
may be infringing trademark rights they have in the character, and engaging in
unfair competition.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">As explained later, in some
circumstances you may have the right to portray real-life individuals without
their permission, especially if those persons are public figures or public
officials.<o:p></o:p></span></div>
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<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">II. FICTIONAL CHARACTERS BASED ON
REAL INDIVIDUALS<o:p></o:p></span></b></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A writer's imagination necessarily
draws upon one's life experiences and people the writer has met. A writer can
freely borrow ideas, historical facts, personality traits of characters, and
themes from other copyrighted work without liability. These items are not
copyrightable.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">If a fictional character is loosely
based on a real-life individual, and the public cannot identify the real-life
individual from the context in which the fictional character is portrayed,
there is little risk of liability. On the other hand, suppose you wrote a novel
about the widow of a former American president assassinated in Dallas, and the
widow character later marries a Greek shipping tycoon. Although, you have
labeled the book a "novel," said that it is a work of fiction, and given
the characters fictitious names, readers may nevertheless believe you are
writing about Jackie Kennedy. If you defame her, or otherwise invade her
rights, she may have a good cause of action against you. You can be liable
for defaming an individual even if you do not name her.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">An interesting case is Leopold v.
Levin. The plaintiff, Nathan Leopold, pled guilty in 1924 to kidnapping and
murdering a young boy. Because of the sensational nature of the crime, the case
attracted international notoriety, which did not wane over time.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">In 1956, Levin, the defendant, wrote
a novel entitled Compulsion. The framework for the novel was the Leopold case,
although Leopold's name did not appear in it. The book was described as a
fictionalized account of the Leopold murder case. A motion picture based on the
book was released with fictitious characters who resembled the actual persons
from the case. The promotional materials referred to the crime but made it
clear that the story was a work of fiction suggested by real-life events.
Leopold sued for invasion of privacy. After the novel was published, but before
the movie was released, Leopold published his own autobiography.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The court was faced with the issue
of whether Leopold, who had fostered continued public attention after having
engaged in an activity placing him in the public eye, had a right of privacy in
a fictitious account of that activity, or in the use of his name in promoting
such an account. The court found against Leopold, stating that books, magazines,
and motion pictures are forms of public expression protected by the First
Amendment. The court noted that while the book and movie were
"suggested" by Leopold's crime, they were evidently fictional works.
The novel and film depicted portions of Leopold's life that he had caused to be
placed in public view. The court did not consider the fictionalized aspects
highly offensive, which is the standard for determining invasion of privacy.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The court noted that a documentary
account of the Leopold case would be constitutionally protected. Also, an
entirely fictional work inspired by the case would be protected if matters such
as locale were changed and the plaintiff was not identified.<o:p></o:p></span></div>
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<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">III. PORTRAYING IDENTIFIABLE PERSONS<o:p></o:p></span></b></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A person's right to privacy has to
be balanced against other people's rights under the First Amendment. If Kitty
Kelly wants to write an unauthorized biography about Frank Sinatra, she can do
so without his permission. Likewise, Mike Wallace and his "60
Minutes" camera crew can film others without their permission. However,
journalists' rights are not absolute. If Mike Wallace placed a hidden camera in
a department store dressing room, he would be liable for damages for invading
the privacy of customers.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Determining whether a filmmaker has
infringed upon the rights of a subject who has not consented to be portrayed
can be a complex matter. The status of the subject -- whether he is a public
figure or public official, and whether he is alive or deceased -- may be
important. Whether the activities portrayed are newsworthy may also be
decisive. And, the manner in which a person's likeness is used -- whether in a
film or on a coffee cup -- is relevant as well.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The most likely grounds upon which
to sue for an unauthorized portrayal are defamation, invasion of privacy, right
of publicity, and unfair competition. Let us consider each in turn.<o:p></o:p></span></div>
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<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">A. DEFAMATION<o:p></o:p></span></b></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Defamation is a communication that
harms the reputation of another so as to lower him in the opinion of the
community or to deter third persons from associating or dealing with him. For
example, those communications that expose another to hatred, ridicule, or
contempt, or reflect unfavorably upon one's personal morality or integrity are
defamatory. One who is defamed may suffer embarrassment and humiliation, as
well as economic damages, such as the loss of a job or the ability to earn a
living.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The law of defamation can be very
confusing because the common law rules that have developed over the
centuries are subject to constitutional limitations. To determine the current
law, one must read a state's defamation laws in light of various constitutional
principles. For example, recent United States Supreme Court decisions have
imposed significant limitations on the ability of public officials and public
figures to win defamation actions. If a state's law is inconsistent with a
constitutional principle, the law is invalid.<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">There are a number of defenses and
privileges in defamation law. Therefore, in some circumstances a person can
publish an otherwise defamatory remark with impunity. Why? Protecting a person’s
reputation is not the only value we cherish in a democratic society. When the
right to protect a reputation conflicts with a more important right, the
defamed person may be denied a recovery for the harm suffered.<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The most important privilege, from a
filmmaker's point of view, is truth. If your remarks hurt someone's reputation,
but your remarks are true, you are absolutely privileged. An absolute privilege
cannot be lost through bad faith or abuse. So, even if you maliciously defame
another person, you will be privileged if the statement is true. Truth is an
absolute privilege because our society values truth more than a person's
reputation.<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Keep in mind that while truth is an
absolute defense, the burden of proving the truth may sometimes fall on you. Thus,
if you make a defamatory statement, you should be prepared to prove that it is
true -- which may not be an easy task.<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Another privilege is the conditional
common law privilege of fair comment and criticism. This privilege applies to
communications about a newsworthy person or event. Conditional privileges may
be lost through bad faith or abuse. However, this privilege has been largely
superseded by a constitutional privilege applied in the context of statements about
public officials or public figures.<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Public figures, such as
celebrities, or public officials, such as senators, have a much higher burden
in order to prevail in a defamation action. They must prove that the defendant
acted with "actual malice." Actual malice is a term of art meaning
that the defendant intentionally defamed another or acted with reckless
disregard for the truth.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Plaintiffs often find it difficult
to prove that a defendant acted with actual malice. That is why few celebrities
sue the National Enquirer. To successfully defend itself, the magazine need
only show that it acted without actual malice. In other words, the newspaper
can come into court and concede that its report was false, defamatory, and the
result of sloppy and careless research. But, unless the celebrity can prove
that the National Enquirer acted with actual malice, the court must dismiss the
case. Mere negligence is not enough to create liability when the subject is a
public figure or a public official.<o:p></o:p></span></div>
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<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">B. INVASION OF PRIVACY<o:p></o:p></span></b></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The right of privacy has been
defined as the right to live one's life in seclusion, without being subjected
to unwarranted and undesired publicity. In other words, it is the right to be
left alone.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Similar to defamation, the right of
privacy is subject to constitutional restrictions. The news media, for example,
is not liable for newsworthy statements that portray another in a false light
unless the statements are made with actual malice. Unlike defamation, a cause
of action for invasion of privacy does not require an injury to one's
reputation.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Many defenses to defamation also
apply to invasion of privacy. Truth, however, is not a defense. Likewise,
revealing matters of public record cannot be the basis for an invasion of
privacy action. Express and implied consent are valid defenses. If you
voluntarily reveal private facts to others you cannot recover for invasion of
your privacy.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Privacy actions typically fall into
four factual patterns: <o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">1.<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><!--[endif]--><u><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Intrusion
into One's Private Affairs<o:p></o:p></span></u></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">This category includes such
activities as wiretapping and unreasonable surveillance. The intrusion must be
highly offensive. Whether an intrusion is highly offensive depends on the
circumstances. Most people would find it offensive to discover a voyeur peering
through their bedroom window. On the other hand, a salesman knocking on your
front door at dinner time may be obnoxious but his actions would not constitute
an invasion of privacy.<o:p></o:p></span></div>
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</span></span><!--[endif]--><u><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Public
Disclosure of Embarrassing Private Facts<o:p></o:p></span></u></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">One who gives publicity to a matter
concerning the private life of another is subject to liability for invasion of
privacy if the matter publicized is highly offensive to a reasonable person,
and if the matter is not of legitimate concern to the public, i.e., if the
information is not newsworthy.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">This type of invasion of privacy
occurs, for example, where someone digs up some dirt on another person and
publicizes it, but the information is not of legitimate interest to the public.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">3.<span style="font-family: 'Times New Roman'; font-size: 7pt;">
</span></span><!--[endif]--><u><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Appropriation<o:p></o:p></span></u></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">An action for appropriation of
another's name or likeness is similar to an action for invasion of one's right
of publicity. An invasion of privacy action seeks to compensate the plaintiff
for the emotional distress, embarrassment, and hurt feelings that may arise
from the use of his or her name or likeness. A right of publicity action, on
the other hand, seeks to compensate the plaintiff for the commercial value of
exploiting his or her name or likeness.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">As with the right of publicity, a
person cannot always control another’s use of his name or likeness. While you
can prevent someone from putting your face on a pancake mix box, you cannot
stop Time magazine from putting your face on its cover if you have been
involved in something newsworthy.<o:p></o:p></span></div>
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</span></span><!--[endif]--><u><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">False
Light<o:p></o:p></span></u></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Publicity that places a plaintiff in
a false light will be actionable if the portrayal is highly offensive. This
type of invasion of privacy is similar to defamation, but harm to a reputation
is not required. For example, false light invasion of privacy could entail a
political dirty trick such as placing the name of a prominent Republican on a
list of Democratic contributors. Although, this person's reputation may not be
harmed, he has been shown in a false light.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">An interesting false light case is
Spahn v. Julian Messner, Inc. Here, Warren Spahn, a well-known baseball
player, sued over the publication of an unauthorized biography, alleging that
his rights under New York's misappropriation (privacy) statute had been
invaded. In the purported biography, the author took great literary license,
dramatizing incidents, inventing conversations, manipulating chronologies,
attributing thoughts and feelings to Spahn, and fictionalizing events. The
invented material depicted the plaintiff's childhood, his relationship with his
father, the courtship of his wife and important events in their marriage, and
his military experience.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The defendant argued that the
literary techniques he used were customary for books aimed at young people. The
defendant never interviewed Spahn, any members of his family, or any baseball
player who knew him. The author's research was comprised of newspaper and
magazine clippings, the veracity of which he rarely confirmed.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">The court concluded that the
defendant invaded Spahn's privacy. The New York privacy statute protects a
public person from fictionalized publication if the work was published with
actual malice. Since the defendant writer invented large portions of the book,
he obviously knew his statements were untrue. While Spahn could not prevent
publication of an unflattering biography simply because he did not like its
contents, this fictitious report masquerading as fact was not protected.<o:p></o:p></span></div>
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<b><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Next blog: THE RIGHT OF PUBLICITY<o:p></o:p></span></b></div>
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<span style="color: red;"><strong><span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">Self Defense Seminar</span></strong>: <o:p></o:p></span></div>
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<span style="color: red;">Date: May 21, 2013, New York</span><o:p></o:p></div>
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This seminar explains how writers and filmmakers can prevent problems
from arising by properly securing underlying rights, and encouraging the other
party to live up to agreements by adding performance milestones, default
penalties, and arbitration clauses. This seminar is an all-day class with Mark
Litwak. Attorneys may earn CLE credit. Excerpts from Mark’s last seminar in New
York on financing films can be viewed at:<a href="http://www.ifp.org/resources/dealing-with-the-legal-woes-advice-from-entertainment-attorney-mark-litwak/" target="_blank"> Link</a></div>
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Volunteer Lawyers for the Arts presents Mark Litwak’s Self Defense Seminar: <a href="http://www.vlany.org/education/self_defense_writers_filmmakers_art_law.php" target="_blank">Seminar info</a></div>
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<a href="mailto:law2@marklitwak.com"><span style="color: windowtext; text-decoration: none; text-underline: none;">Mark Litwak</span></a><span class="apple-converted-space"> </span>is a veteran entertainment attorney
and Producer’s Rep based in Beverly Hills, California. He is the author of six
books including: Reel Power: The Struggle for Influence and Success in the New
Hollywood; Dealmaking in the Film and Television Industry; Contracts for the
Film and Television Industry; and Risky Business: Financing and Distributing
Independent Film. He is an Adjunct Professor at the USC School of Law and the
creator of<span class="apple-converted-space"> </span><a href="http://www.marklitwak.com/"><span style="color: windowtext; text-decoration: none; text-underline: none;">Entertainment Law Resources</span></a><span class="apple-converted-space"> </span>website. <a href="http://www.marklitwak.com/">www.marklitwak.com</a> <o:p></o:p></div>
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-29087013094004109742013-04-03T12:10:00.001-07:002013-04-03T12:11:05.824-07:00Self Defense Seminar in New York May 21, 2013<div dir="ltr" style="text-align: left;" trbidi="on">
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<strong>Tuesday May 21st from 9:30AM - 4:30PM</strong></div>
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<strong>Mark will be returning to New York City on May 21st to present his Seminar </strong><strong style="font-size: 16pt;">Self Defense for Writers and Filmmakers under the auspices of Volunteer Lawyers for the Arts</strong><br />
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<strong style="font-size: 16pt;"><a href="http://4.bp.blogspot.com/-VwF_FNtjqJA/UVx-ls66czI/AAAAAAACeA8/Q2NueOdATGs/s1600/VLA+logo.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="92" src="http://4.bp.blogspot.com/-VwF_FNtjqJA/UVx-ls66czI/AAAAAAACeA8/Q2NueOdATGs/s320/VLA+logo.jpg" width="320" /></a></strong></div>
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<span style="font-family: Times, 'Times New Roman', serif; font-size: medium;">Writers and filmmakers need to understand their legal rights and how to defend themselves from those who may seek to exploit them. Production companies and distributors often know all the tricks of the trade, while writers and filmmakers know little about how to protect themselves. </span></div>
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<span style="font-family: Times, 'Times New Roman', serif; font-size: medium;"> </span></div>
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<span style="font-family: Times, 'Times New Roman', serif; font-size: medium;">This seminar explains how writers and filmmakers can prevent problems from arising by properly securing underlying rights, and by encouraging the other party to live up to agreements by adding performance incentives, default penalties, and alternative dispute resolution clauses. In the event of a dispute, participants learn what remedies are available to enforce their rights. </span></div>
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<span style="font-family: Times, 'Times New Roman', serif; font-size: medium;">Related topics include:</span></div>
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<li style="margin: 0px; outline: none; padding: 0px;"><span style="font-family: Times, 'Times New Roman', serif; font-size: medium;">creative approvals</span></li>
<li style="margin: 0px; outline: none; padding: 0px;"><span style="font-family: Times, 'Times New Roman', serif; font-size: medium;">typical compensation and terms of studio contracts</span></li>
<li style="margin: 0px; outline: none; padding: 0px;"><span style="font-family: Times, 'Times New Roman', serif; font-size: medium;">merchandising deals</span></li>
<li style="margin: 0px; outline: none; padding: 0px;"><span style="font-family: Times, 'Times New Roman', serif; font-size: medium;">negotiating tactics and strategies </span></li>
</ul>
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<span style="font-family: Times, 'Times New Roman', serif; font-size: medium;">Extensive handouts (see below) will be made available. </span><br />
<span style="font-family: Times, 'Times New Roman', serif;"><br /></span><span style="font-family: Times, 'Times New Roman', serif; font-size: medium;"><span style="background-color: white; color: #0f5f80; font-weight: bold; line-height: 15px;">Where:</span><br style="background-color: white; line-height: 15px;" /><span style="background-color: white; line-height: 15px;">Proskauer Rose LLP</span><br style="background-color: white; line-height: 15px;" /><span style="background-color: white; line-height: 15px;">11 Times Square, New York, NY</span></span><br />
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<span style="font-size: medium;"><b>Space is Limited. Please register early if you want to attend.</b></span><br />
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<a href="http://www.vlany.org/education/self_defense_writers_filmmakers_art_law.php" style="-webkit-transition: color 0.3s; color: #009eb8; display: inline; font-family: 'Helvetica Neue Light', HelveticaNeue-Light, 'Helvetica Neue', Helvetica, Arial, sans-serif; outline: none; text-decoration: none; transition: color 0.3s;">To Register</a><br />
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-44503686791029638642013-03-04T05:58:00.000-08:002013-03-04T05:58:26.453-08:00Sherlock Holmes and the Case of the Public Domain<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">In a suit filed recently
in federal court in Chicago[1], a top Sherlock Holmes scholar alleged that many
licensin<a href="" name="_GoBack"></a>g fees paid to the Arthur Conan Doyle estate have
been unnecessary, since the main characters and elements of their story derive
from materials in the public domain. The suit was brought by Leslie S.
Klinger, the editor of the 3,000-page "Annotated Sherlock
Holmes" and other Sherlock Holmes-related books. It stems from his book
"In the Company of Sherlock Holmes," a collection of new Sherlock
Holmes stories by various authors, edited by Klinger and his co-editor Laurie
King to be published by Pegasus Books.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">The creator of Sherlock
Holmes was Arthur Conan Doyle. He published most of his Sherlock Holmes stories
from 1887 to 1927. One might think that Sherlock Holmes is now in the
public domain and any writer could freely borrow his character for inclusion in
their own story. However, some of Doyle's stories were published in
periodicals as late as 1927, they may be within the protection of U.S.
copyright laws. Works published before 1923 are most likely in the public
domain, at least under U.S. law. For those stories published after January 1,
1923, they could remain protected until 2023.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">According to the
lawsuit all the Sherlock Holmes stories entered the
public domain under the laws of the United Kingdom and Canada in
1980. However, with the passage of the U. S. Copyright Act of 1976
theauthor of a work that had passed into the public domain in the United
States, or his heirs, were entitled to restore the work to copyright in
the United States under certainconditions. In 1981, Dame Jean Conan Doyle, the
last surviving child of Sir Arthur Conan Doyle, applied for registration
of the copyright to "The Case-Book of Sherlock Holmes,"
a collection of stories. This workis comprised of 12 stories
that were first published in various periodicals between 1921 and 1927,
and thecollection was first published as a book in the United States in 1927.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">The complaint asserts
that the Doyle estate sent a letter to Pegasus Books threatening to
prevent publication of "In the Company of Sherlock Holmes" unless it
was paid a license fee. Kingler's prior publisher, Random House, had
reluctantly paid $5,000 fee for an earlier Klinger collection he edited titled
"A Study in Sherlock," even though Klinger believed he was not
legally required to do so. The suit asks the court to make a declaratory
judgment, establishing that the basic "Sherlock Holmes story elements"
are in the public domain under U.S copyright law. Klinger claims that the
stories in his new collection avoided drawing on copyrighted elements
introduced in any of the Holmes stories published after January 1, 1923.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">In a 2004 decision, a
U.S District court judge Naomi Reice Buchwald determined that of Doyle's 60
Sherlock Holmes stories, nine might still be under copyright.[2]Although the
character of Sherlock Holmes is in the public domain, various storylines,
dialogue and characters that first appeared in these nine stories could be
protected under U.S. copyright law. A copyright for a derivative work based on
a prior work does not create copyright protection retroactively for the
underlying work but can protect new material that has been added.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">Sherlock Holmes
continues to be an enormously popular character, even though he is 125 years
old. He was recently featured in two Warner Brother films, the BBC's
"Sherlock," and the television series "Elementary." The
most recent Warner Brothers film "Sherlock Holmes: A Game of
Shadows," starring Robert Downey Jr., had an international box office
gross of $543 million from distribution in more than 50 countries.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">The case raises the
issue of which elements of the Sherlock Holmes stories are in the public domain,
and which may remain under the protection of copyright law. Copyright can
sometimes, but not always, protect characters and plot. Recognition of
copyright protection for fictional characters goes back to Judge Learned Hand,
who suggested that characters might be protected, independent from the plot of
a story. He wrote "It follows that the less developed the characters, the
less they can be copyrighted; that is the penalty an author must bear for
making them too indistinct." So, while a writer cannot secure a monopoly
on hard-boiled private eyes, one could protect a finely drawn character like
Sam Spade.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">While plots can be
protected, stock scenes cannot. The doctrine of scènes à faire excludes from
copyright protection scenes that flow from common unprotectable ideas. These
would include "thematic concepts or scenes which necessarily follow
certain similar plot situations" and ordinary literary incidents and
settings which are customary for the genre. Thus, a writer cannot preclude
others from using such common devices as a car chase or cattle drive in their
stories.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">The situation becomes
even murkier when one considers that the Sherlock Holmes stories are subject to
a confusing web of differing copyright laws across the globe. There is no
such thing as an "international copyright" that will protect an
author's work everywhere. Protection against unauthorized use in a
particular country depends on the laws of that country. In other words,
Copyright law is applied territorially by every country within its borders.
Thus, the duration of copyright protection differs from country to country.
Each country enforces its own laws, irrespective of the nationality of the
author, or where the work was created or first published. The United States has
joined several international copyright conventions to protect American works
from infringement in foreign countries. These accords essentially provide for
reciprocity of treatment for authors. For example, France agrees to protect the
works of American authors in France. In return, the United States protects the
work of French authors in the United States.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">This means that the
United States will protect a French author in the United States in the same
manner and extent as the United States protects American authors. It does not
mean that French authors will have the same rights in the United States that
they have in France under French law. Thus, it is often said that copyright
laws are territorial in their application. French law applies in France;
American law applies in the United States. This application can produce
unexpected results, because American copyright law and French copyright law are
quite different. American law focuses on economic rights while French law
protects author's creative rights. The issue of whether a work is in the public
domain can vary from jurisdiction to jurisdiction, because each country applies
its own laws. This poses a potential minefield for publishers of works with
international appeal.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">U.S. law recognizes the
work-for-hire doctrine under which the "author" of a work can be the
employer of an artist, not the artist himself. Few countries recognize this
doctrine. On the other hand, some countries have doctrines that do not exist
under U.S. law. France expressly recognizes the moral rights ("droit
moral") of authors. U.S. copyright law only recognizes moral rights in the
realm of fine art. Moral rights prevent others from changing the author's work
(the right of integrity), or removing the author's name from the work (the
right of paternity), even if the author has sold the work and the copyright to
it.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">Under French law, the
rights of integrity and paternity are perpetual, inheritable, inalienable and
imprescriptible. Thus, the heirs of an artist can object to the use of their
ancestor's work, even if that work's copyright has expired.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">In Huston v. Turner
Entertainment,[3] the late American director John Huston was determined by
a French court to be the author of the American film "The Asphalt
Jungle." Under American law, Huston's employer was the author or
owner. When Turner Entertainment which had acquired the film, sought
to distribute a colorized version of it in France, over French television
Channel 5, Huston's heirs initiated an action in the French Courts under
the French moral rights law, seeking an injunction and damages
against Turner and Channel 5. <o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">The French Supreme Court
ruled that the transformation of the work from a black and white film to a
colorized version was a breach of Huston's moral rights, even though these
rights were not recognized in the United States. It did not matter that Huston
was a U.S. citizen directing a movie for a U.S. company (MGM), which was shot
on the MGM lot in Los Angeles. Moreover, the contract with Huston granted MGM
all rights, and provided that American law would govern any
dispute. France's highest court found for Huston's heirs on the grounds
that French moral rights laws may not be violated in France regardless of the
terms of a contract made elsewhere. The court held that it was against public
policy to permit foreign law or foreign contracts to change the French system of
moral rights within France. Ultimately, the French courts entered
judgment against Turner Entertainment for 400,000 francs and against
French Channel 5 for 200,000 francs, and prohibited distribution of the
colorized film in France. <o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">So, while Sherlock
Holmes is a brilliant detective, even he may find it difficult to sort out the
conflicting copyright laws of different nations.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">[1]Klinger v. Conan
Doyle Estate, Ltd., 1:13- cv-01226, U.S. District Court, Northern District of
Illinois (Chicago).<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;">[2] Pannonia Farms,
Inc., v USA Cable, 2004 U.S. Dist. LEXIS 23015; 72
U.S.P.Q.2D (BNA) 1090<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 14pt;"> </span><span style="font-family: 'Times New Roman', serif; font-size: 14pt;">[3] Huston v.
Turner Entertainment, French Court of Cassation, 1991, cited in article
"International Copyright Litigation in U.S. Courts: Jurisdiction, Damages
and Choice of Law" by Lionel S. Sobel; Emerging Issues in
Intellectual Property Practice, CEB Program Handbook, p. 83, April 1994,
California Continuing Education of the Bar.</span></div>
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-45762879523560365732013-02-14T15:56:00.000-08:002013-02-14T15:56:09.812-08:00Mark Litwak named to Southern California Super Lawyer list<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="margin: 12.6pt 0.1in 0.0001pt 0in;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.3pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">Mark
Litwak has been named to the Southern California Super<i> Lawyers </i>list as
one </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.1pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">of the top attorneys in Southern
California for 2013. No more than 5
percent of the </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.2pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">lawyers in the state are selected by <i>Super
Lawyers</i>.<o:p></o:p></span></div>
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<i><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.35pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">Super
Lawyers</span></i><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.35pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">, a Thomson Reuters business, is a
rating service of outstanding lawyers from </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.2pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">more
than 70 practice areas who have attained a high degree of peer recognition and </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.35pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">professional achievement. The annual selections are made
using a rigorous multi-</span><span style="font-family: "Cambria Math","serif"; font-size: 12.0pt; letter-spacing: -.35pt; mso-bidi-font-family: "Cambria Math"; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">‐</span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.35pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">phased </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.45pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">process that includes
a statewide survey of lawyers, an independent research evaluation of </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.2pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">candidates, and peer reviews by practice area.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 0.2in 0in 0.0001pt;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.1pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">The <i>Super Lawyers </i>lists
are published nationwide in <i>Super Lawyers </i>magazines and in leading </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.35pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">city and regional magazines across the country. <i>Super
Lawyers </i>magazines also feature editorial profiles of attorneys who embody
excellence in the practice of law. For more information about </span><i><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.25pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">Super Lawyers, </span></i><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.25pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">go
to superlawyers.com.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin: 12.6pt 0.1in 0.0001pt 0in;">
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.45pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">The
first <i>Super Lawyers </i>list was published in 1991 and by 2009 the rating
service had expanded </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.2pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;">nationwide. In February 2010 <i>Super
Lawyers </i>was acquired by Thomson Reuters the world’s leading source of intelligent
information for business and professionals. This is the fourth time that Mark
Litwak has been included </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">in the Southern California Super
Lawyer Edition. </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; letter-spacing: -.2pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-font-width: 105%;"><o:p></o:p></span></div>
</div>
Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-913724017487647872013-01-20T12:33:00.001-08:002013-01-20T12:33:24.375-08:00<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<span style="font-family: Times, Times New Roman, serif; font-size: x-large;"><b><br /></b></span>
<h2 style="text-align: left;">
<span style="color: red; font-family: Times, Times New Roman, serif; font-size: x-large;"><b>Seminar Clips Now Online </b></span><img src="http://i4.ytimg.com/vi/_eqTsQpgUr0/mqdefault.jpg" /></h2>
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span>
<span style="font-family: Times, Times New Roman, serif; font-size: large;">Clips from Mark's seminar last May for Volunteer Lawyers for the Arts in New York are now on-line for public viewing at YouTube. </span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><a href="http://www.youtube.com/channel/UCXCh35-jnGXQOwjorKdvB7w">Link to Videos</a></span><br />
<br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">The clips cover the following topics:</span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span>
<span style="font-family: Times, Times New Roman, serif; font-size: large;">1) Termination clauses, Performance Milestones, and Sales Agents</span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">2) Importance of E & O insurance </span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">3) Film Markets </span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">5) Why Festivals are Important</span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">6) The Risky Nature of Filmmaking </span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">7) Importance of Chain of Title</span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">8) Home video Deals </span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span>
<h2 style="text-align: left;">
<span style="color: red; font-family: Times, Times New Roman, serif; font-size: x-large;"><b>Sundance 2013</b></span></h2>
<br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">As Sundance 2013 launches, it is a good time to review how well last year's titles performed. Indiewire recently published a review by Peter Knegt that listed the 40 films in Sundance that were acquired for distribution last year. Of that slate, only three films grossed more than $6 million at the domestic box office. Those films were Beasts of the Southern Wild, Arbitrage, and The Words.</span><br />
<br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">Many of last year's most successful indie films did not premiere at Sundance. 14 indie films surpassed $6 million mark. Some of these titles included The Best Exotic Margiold Hotel (Fox Searchlight) - $46,385,112, Moonrise Kingdom (Focus Features) - $45,512,466, Silver Linings Playbook (Weinstein Company) - $28,682,072, The Master (Weinstein Company) - $15,956,662, and Friends With Kids (Roadside) $7,251,073. And, the right-wing attack documentary 2016 Obama's America (Rocky Mountain) grossed $33,449,086. </span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span>
<span style="font-family: Times, Times New Roman, serif; font-size: large;">Thus, for those filmmakers whose work was not accepted by Sundance, all is not lost. I just returned from the Palm Springs International Film Festivalwhere I saw many great films including Jackpot, 80 Million, Beware of Mr. Baker, A Royal Affair, War Witch, and Kon-Tiki. Palm Springs is one of the largest film festivals in North America, welcoming 135,000 attendees each year for its lineup of new and celebrated international features and documentaries. The festival is especially known for screening many of the Academy Award nominees for best foreign language film. This year the festival screened 8 of the 9 films on the shortlist of films competing for Best Foreign Language Film at the 85th Academy Awards. </span><br />
<br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">SXSW has also become a magnet for industry insiders. Last year 132 features screened, with 74 world premieres. At least three films shown there were acquired: Girls Against Boys(Anchor Bay),The Tall Man(Image), and Gimme the Loot (Sundance Selects). </span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span>
<span style="color: red; font-family: Times, Times New Roman, serif; font-size: large;"><br /></span>
<h2 style="text-align: left;">
<span style="color: red; font-family: Times, Times New Roman, serif; font-size: x-large;">Mark joins faculty at U.S.C Gould School of Law</span></h2>
<br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;">Mark has joined the adjunct faculty at the University of Southern California Gould School of Law where he is teaching a class titled Legal Issues in the Motion Picture Industry. The class is one of the key courses in the school's Certificate in Entertainment Law curriculum. Mark has previously taught entertainment law courses at Loyola Law School and U.C.L.A. The U.S.C. Gould School of Law is considered one of the top law schools in the nation. </span><br />
</div>
Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-38367774580754013812012-12-19T18:29:00.002-08:002012-12-19T18:29:42.118-08:00HOBBIT TITLES: AN UNEXPECTED JOURNEY IN CONFUSION<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">Warner Brothers, New Line, and its
affiliates (“Plaintiffs”) recently achieved a rare courtroom victory by
obtaining a court order restraining distribution of a film they claimed
unfairly competed with one of its titles. The target of their ire was The
Global Asylum's ("Asylum") film <i>The
Age of Hobbits.</i> Asylum was set to release its film on December 11, 2012,
three days before New Line rolled out its film “The Hobbit: An Unexpected
Journey.” New Line's film revolves
around the <span style="background-color: white;">Hobbit characters, which
first appeared in J.R.R. Tolkien's 1937 novel,<span class="apple-converted-space"> </span><i><span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">The Hobbit</span></i><span style="border: none windowtext 1.0pt; mso-bidi-font-style: italic; mso-border-alt: none windowtext 0in; padding: 0in;">,</span><span class="apple-converted-space"> </span>and were later in his <i><span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">The Lord of the Rings</span></i><span class="apple-converted-space"> book
</span>trilogy, and the basis for the hit movie trilogy <i>Lord of the Rings</i>, which earned $3 billion dollars at the box
office. </span>New Line’s film is the first in a series of three films, all shot
in New Zealand by Sir Peter Jackson, produced at a reported cost of $500
million dollars, and set to be released over the next few years. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">New Line’s film had its world premiere
in Wellington, New Zealand, on November 28, 2012 and has been the subject of
intense promotion and advertising. I was in Wellington right before the world premiere
and was surprised at the massive and ubiquitous nature of the promotion across the
city. Not only were Hobbit characters placed on buildings, but museum stores
and numerous other outlets carried movie merchandise. Tourism New Zealand spent
$10 million dollars promoting the trilogy. The promotion began when I boarded
my Air New Zealand flight to Wellington and was delighted to watch the most
entertaining in-flight safety video I have ever seen. It starred Tolkien elves,
dwarves, Hobbits, and a wizard. The video has become an online hit viewed by
millions <a href="http://www.youtube.com/watch?v=XCbPFHu3OOc">http://www.youtube.com/watch?v=XCbPFHu3OOc</a>.
The carrier has even rebranded itself the “Airline of Middle Earth,” and plastered
a plane with images from the film.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">Asylum's film, on the other hand, is a low budget indie film
reportedly made for $2 million dollars. Asylum
claimed that the word "Hobbits” as used in its film did not refer to the
fictional Tolkien creatures, but to a human sub-species whose skeletons were discovered
in Indonesia in 2003. In Indonesia, archaeologists discovered a human
sub-species with the Latin name Homo Floresiensis, which they nicknamed “<span style="letter-spacing: -.4pt; mso-font-width: 105%;">hobbits</span>” because of their
small stature. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">The legal dispute, in its simplest terms, comes down to
this. Asylum claimed it had the right, under the First Amendment, to make a
movie about ancient Indonesian people and refer to a name commonly used to
describe the short-statured ancients in its movie title. Plaintiffs, on the
other hand, asserted that Asylum infringed on their trademarks and tried to
ride on the coattails of its massive promotional campaign and trick moviegoers
to purchase the Asylum movie, thinking they are buying the Warner/New Line
film.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">On August 31, 2012, Plaintiffs sent Asylum a
cease-and-desist letter demanding that it refrain from using the “Hobbit” Marks.
The parties then discussed Asylum’s asserted fair use defense and possible
changes to the title, design, and promotional materials. Asylum changed the
design of its promotional materials, but refused to remove the word “Hobbit”
from the film title for the domestic release of the picture. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">On November 7, 2012, Plaintiffs
filed a complaint against Asylum for trademark infringement, false designation
of origin, trademark dilution, false advertising, and unfair competition. Then,
approximately three weeks before the scheduled release of the Asylum picture,
Plaintiffs filed an application seeking a temporary restraining order stopping
the release of the Asylum film. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">As most movie aficionados know, there is
a long history of independent filmmakers trying to cash in on viewer interest in
topics made popular by the major studios. Roger Corman produced <i>Black Scorpion</i>, which imitated the <i>Batman</i> movies, <i>Forbidden World</i>, a knockoff of <i>Alien</i>,
and <i>Piranha,</i> which borrows liberally from
<i>JAWS</i>. Asylum has produced a number of
low- budget films that resemble major studio releases. <span style="background-position: initial initial; background-repeat: initial initial;">The company made </span>a low-budget version of H.G.
Wells' <i>The War of the Worlds</i>,
which was released the same year as Steven Spielberg's<span style="background-position: initial initial; background-repeat: initial initial;"> film based on the same 1898 public
domain book. Blockbuster reportedly ordered 100,000 copies of the Asylum film,
far more than it had for any of Asylum’s previous titles.</span> Seeing
how profitable such films can be, Asylum produced several low-budget knockoffs,
sometimes called mockbusters, including <i>Transmorphers</i>,
<i>Almighty Thor</i>, <i>Abraham Lincoln vs. Zombies</i>, <i>Snakes
on a Train</i>, and <i>Paranormal Entity</i>.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">The major studios were not amused, but it was
questionable whether they could legally stop Asylum. 20th Century Fox threatened
legal action over the release of <i>The Day the Earth Stopped</i>, a film
similar to <i>The Day the Earth Stood Still</i>.<sup> </sup>Last May, Universal Studios filed suit
against Asylum over their film <i>American Battleship</i>, claiming
infringement of their movie <i>Battleship</i>.
Asylum then changed the title to <i>American
Warships</i>.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> For
the most part, Asylum has been successful in releasing its pictures and defending
them from legal assault. The company claims that it has released more than 150
films and has only been sued twice for trademark infringement. One case was
settled, and Asylum prevailed in the other. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">Asylum's legal success involved the film
<i>Haunting of Winchester House</i>. Asylum
was<i> </i>sued by the owners of the
Winchester Mystery House, a popular tourist attraction in San Jose that consists
of a 160-room Victorian-style mansion as well as a museum, gift shop, and café.
The attraction is billed as the world's most haunted house. Sarah Winchester,
according to legend, created this mansion to fend off ghosts.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">The owners objected to Asylum's plan to
produce and market its movie, which allegedly was based on a "terrifying
true story." When Asylum asked for permission to film at the Winchester
Mystery House, the owners informed Asylum that they had signed a contract with
another producer for exclusive rights to the Winchester story.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">The Asylum movie begins with a shot of a
Victorian-style structure, but not the actual Winchester Mystery House. The
movie includes the ghost characters of Sarah Winchester, her adolescent
daughter, and her brother, who was deaf and could not speak. These characters,
as well as the ghosts of those killed by Winchester guns, haunt Sarah
Winchester’s home. However, the real Sarah Winchester did not have an
adolescent daughter or a brother who was deaf and unable to speak. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">The trial court dismissed the case
against Asylum on summary judgment. On appeal, the appellate court agreed,
stating that in trademark infringement cases involving First Amendment
concerns, the finding of likelihood of confusion must be particularly
compelling to outweigh the First Amendment interests of filmmakers. The owner
of a trademark does not have the right to quash an unauthorized use of its mark
by another who is communicating ideas or expressing points of view.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">However, with its Hobbit movie, Asylum
apparently crossed the line. So the question arises, where exactly is that
line? How closely can a filmmaker imitate another work or title without having a
judge halt its distribution? <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">It is rare for a court to restrain
distribution of a film especially when copies have already been shipped. Films,
like newspapers and books, are protected expression under the First Amendment. A
party seeking a preliminary injunction must show that it is likely to succeed
on the merits and will suffer irreparable harm if the relief is not granted. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">A basic principle of copyright law is that
ideas, themes, facts, subject matter, and historical incidents cannot be
copyrighted. Anyone can write a book about George Washington, and they can even
borrow facts from prior books without infringing those authors’ copyrights. Moreover,
film titles generally cannot be registered as trademarks. Only a distinctive
title to a series of books, periodicals, newspapers, or television programs
like <i>Bonanza </i>could be registered. The
reason is that trademarks are used to identify the origin of goods or services.
Single books or films are one-offs. Their titles describe that particular work,
not a series of works. Courts can, however, protect titles from confusingly
similar uses, under the law of unfair competition, if the title has acquired a
secondary meaning. A secondary meaning is when the title is sufficiently well
known, that consumers associate it with a particular author’s work.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">While courts are very protective of
filmmaker's First Amendment rights, the law is also concerned about protecting
consumers from being misled about the origin of products, which is what the
laws of unfair competition and trademark address. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">There
have been a number of cases in which courts have wrestled with a conflict
between the freedom of expression of a filmmaker and the owners of trademarks
and other rights. A commonly cited case is <i>Rogers
v. Grimaldi</i><u>,</u> which Asylum relied upon in its defense. In that case, Federico Fellini conceived, co‑wrote,
and directed a film entitled "Federico Fellini's `Ginger and Fred'."
The movie was a fictional work about two retired dancers. The dancers made a
living in Italian cabarets imitating Fred Astaire and Ginger Rogers, thus
earning the nickname "Ginger and Fred." The story was a satire about
the world of television. According to Fellini, the characters did not resemble
or portray Fred Astaire and Ginger Rogers. However, Ginger Rogers brought suit,
claiming that Fellini violated her rights of privacy and publicity. Her
complaint alleged that the defendants violated her rights by creating the false
impression that the film was about her or that she sponsored, endorsed, or was
involved in the film, and that it violated her right of publicity, and defamed
her by depicting her in a false light.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> The district court decided that
Fellini’s movie was a work protected under the First Amendment, and that a
trademarked term could be used in the title of an artistic work if the use of
the term has some artistic relevance to the work and does not explicitly
mislead consumers as to the source and content of the work. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> The Court of Appeals affirmed the
lower court, explaining that movies, plays, books, and songs are all works of
artistic expression and deserve protection, even though they are also sold in
the commercial marketplace and thus can be the subject of consumer deception. Consequently,
when the title of a movie or a book has acquired secondary meaning—that is, when
the title is sufficiently well-known, that consumers associate it with a
particular author’s work—the holder of the rights to that title can prevent the
use of the same or confusingly similar titles by other authors.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> The court concluded that filmmakers
can use a celebrity’s name in the title of an artistic work where the title
does not explicitly denote authorship, sponsorship, or endorsement by the
celebrity or explicitly mislead as to its content. The court also
held that Oregon law on the right of publicity
does not bar the use of a celebrity’s name in a movie title, unless the title
was “wholly unrelated” to the movie or was “simply a disguised commercial
advertisement for the sale of goods or services.”<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> Other cases have given less weight
to the First Amendment rights of filmmakers. In <i>American Dairy Queen Corp. v. New Line Productions, Inc.,</i> the defendant
produced and was preparing to release a film entitled <i>Dairy Queens</i>, which was described as a mockumentary satirizing
Minnesota beauty contests. The plaintiff was the Dairy Queen ice-cream chain, which
claimed trademark infringement and dilution of its trademark. The district
court found that the likelihood-of-confusion factors weighed in favor of the
plaintiff. Then, it considered whether the defendant’s First Amendment
interests were sufficient to outweigh the plaintiff’s trademark interests in
its Dairy Queen trademark. Ultimately, the court found that because other
alternative titles like <i>Dairy Princesses</i>
or <i>Milk Maids</i> were available, “the
balance between the public’s interest in free expression and its interest in
avoiding consumer confusion and trademark dilution tilts in favors [sic] of
avoiding confusion and dilution.” Dairy Queen Corp. won because the court distinguished
<i>Rogers
v. Grimaldi</i> on the grounds that the <i>Rogers
c</i>ase involved a title that directly referred to the content of the film –
performers known as Ginger and Fred. On the other hand, defendant’s film was
about beauty pageants in Minnesota, without any
connection to plaintiff's ice cream stores. The Dairy Queen decision has
been widely criticized. Moreover, there
are many cases that stand for the principle that filmmakers can refer to
trademarks in their film, provided they do not do so in such a manner as to
mislead moviegoers that the trademark owner is somehow affiliated or endorsing
the picture. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> In <i>Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd</i><u>.</u><i>,</i> the defendant exhibited a pornographic
movie, "Debbie Does Dallas," which portrayed a "Texas
Cowgirl" engaged in sex acts. The character wears a uniform strikingly
similar to that worn by the Dallas Cowboys Cheerleaders. Ads for the movie
showed the character in the uniform, and included such captions as
"Starring Ex-Dallas Cowgirl Cheerleader Bambi Woods." In fact, Bambi
Woods had never been a Dallas Cowboys Cheerleader. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> The Dallas Cowboy Cheerleaders
brought suit, alleging that they had a trademark in the particular combination
of colors and the design of their uniforms. The uniform in which they appear
and perform consists of a blue bolero blouse, a white vest decorated with three
blue five-pointed stars on each side of the front of the vest and white fringe
at the bottom of the vest, tight white shorts with a belt decorated with blue
stars, and white boots. The trademark was not registered at the time, although
Plaintiff contended that it was protected as a common law trademark. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> The defendant contended that the
film was a parody or satire on female cheerleaders and was protected expression
under the First Amendment. Moreover, the defendant claimed that no one could rationally
believe that the film originated or was associated with the actual Dallas
Cowboy Cheerleaders. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> The court disagreed and issued an
injunction against further distribution of the film. The court found that the
association with the Dallas Cowboy Cheerleaders, both in the film and in the
advertising, had the single purpose of exploiting the Dallas Cowboy Cheerleaders'
popularity in order to attract an audience to view sex acts in the movie.<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> Then there is the <i>Agatha Christie</i> case. Casablanca Records
produced a film titled “Agatha” about the famous mystery writer Agatha
Christie. The story is a fictionalized account of an 11-day disappearance of
Christie in 1926. Christie is portrayed as an emotionally unstable woman who
engaged in a sinister plot to murder her husband’s mistress. The heir to
Christie’s estate brought suit to enjoin Casablanca from distributing the movie,
alleging unfair competition and infringement of the right of publicity. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">During her life, Agatha Christie agreed to have her name used in
connection with various motion pictures and plays based on her books. Her heir alleged
that Casablanca’s use of the name "Agatha" and "Agatha
Christie" would cause confusion in the minds of the public in general, and
Agatha Christie readers in particular, by creating the impression that the
movie and novel were authorized or even written by Ms. Christie. The court,
however, summarily dismissed this claim, without much explanation other than
finding that the heir "can prove no set of facts in support of [this]
claim which would entitle [them] to relief.” <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">These cases were decided by different judges, under different
state laws, and federal and state laws have evolved over time. Still, it is
difficult to distinguish how the use of the word “Agatha,” is not likely to
confuse moviegoers about the origin of the film about her, but the use of the
word “Hobbit” is likely to confuse moviegoers about the source of Asylum’s
movie. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> The judge in the Asylum case seemed
to be greatly influenced by Plaintiffs’ data showing that Asylum's title was
likely to mislead moviegoers about its movie. Plaintiffs presented evidence
from a weekly tracking study conducted by Nielsen National Research Group
(“Nielsen”) in which 30 to 40 percent of survey respondents indicated confusion
about the source of “Age of Hobbits.” The survey included 1200 respondents
divided into two groups. The Test Group was shown an image of the “Age of
Hobbits” poster while the Control Group was shown the same poster with an
alternative title. Thirty percent of those in the Test Group who had an opinion
about the source of “Age of Hobbits” (about 200 respondents) said they believed
the movie was made or distributed by Plaintiffs. On the other hand, only 6 to
14 percent of the respondents in the Control Group, who were shown the movie
poster “Age of Java Men,” associated the film with Plaintiffs. <o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"> The court also mentioned that
Asylum's release of its film three days before the release of the Plaintiff's
film demonstrated intent to capitalize on the publicity surrounding Plaintiffs’
film, and its similar artwork and prominent use of the trademark showed intent
to deceive. <o:p></o:p></span></div>
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-11470576071739682532012-11-12T08:17:00.001-08:002012-11-12T08:17:38.746-08:00Domestic Distribution Part III, Home Video Formulas<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">There
are many formulas for home video deals, but most fall within three patterns.
The first deal allows the distributor to retain a percentage of Gross Receipts
as a distribution fee, and to recoup certain designated marketing expenses from
film revenues, with the remaining balance, if any, paid to the filmmaker. I
will call this formula a “standard distribution deal,” although there is
nothing standard about it except for the fact that these deals calculate the
distributor’s fee as a percentage of Gross Receipts. Another type of deal,
sometimes referred to as a “50-50 net deal,” allows the distributor to first
recoup its expenses from Gross Receipts off the top, and then share the remaining
amount 50/50 with the filmmaker. A third type of deal is known as a “royalty
deal,” where the filmmaker gets a percentage of the wholesale price of every
DVD sold. The percentage is negotiable, but often is in the range of 20-25%. Here,
all expenses incurred are irrelevant in calculating the filmmaker's share
because they are borne by the distributor. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">Which type of deal is best for a
filmmaker? That depends on how much revenue is generated, the amount of
expenses and whether they are capped, and the size of distribution fees. Let us
consider three different scenarios.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">First, suppose $1,000,000 is generated
in Gross Receipts from sales and rentals of DVDs. Gross Receipts for the home
video media are generally defined as the
wholesale revenues received, less any returns. If the suggested retail price of
a DVD is twenty dollars, the wholesale price would be about half or ten
dollars. However, prices are negotiable and Wal-Mart is known to drive a hard
bargain and pay substantially less for DVD’s. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">Under a standard distribution deal with
a 25% distribution fee and recoupment of $100,000 in expenses, a filmmaker
would receive $650,000. Under a 50/50 net deal, with the same Gross Receipts and
cap on recoupable expenses, the filmmaker would receive $450,000. Under a
royalty deal with a 20% royalty, the filmmaker receives $200,000. Clearly the
standard distribution deal appears to be the better choice.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">But now suppose the film generated $175,000
in Gross Receipts. With the same distribution fee and expenses, the filmmaker
receives $31,250 under the standard distribution deal, $37,500 under a 50/50
net deal, and $35,000 under a royalty deal. In this case, the 50/50 net deal delivers
the most revenue to the filmmaker.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">Now, consider a third scenario with only
$100,000 in Gross Receipts and the same distribution fee and expenses. Here,
the filmmaker receives zero under either a standard distribution deal or the
50/50 net deal. However, under a royalty deal, the filmmaker receives $20,000.
The fact that distribution fees and expenses now outweigh Gross Receipts is
irrelevant in a royalty deal, because the filmmaker gets 20% of the wholesale
price, no matter the extent of fees and expenses incurred. Moreover, under a
royalty deal, there is little room for a distributor to engage in creative
accounting. Once you determine how many units have been sold, and determine their
price, a simple calculation reveals what the producer is due. Many creative accounting disputes concern the
deduction of expenses which is irrelevant in a royalty deal, since expenses are
not counted in calculating the producer’s share of revenue.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">Consequently, the best choice for the
filmmaker depends on a number of factors especially how much revenue is
generated; which is unknown when the deal is negotiated. Since none of these
types of deals is always best, it is important for the filmmaker to pencil out
the numbers before deciding which formula they want. Most deals are more complicated to assess
because they cover multiple media, and the distributor’s fee varies by media (<i>i.e.</i>, 35% for theatrical, 25% for
broadcast television). Moreover, domestic distributors usually insist on cross-collateralizing
expenses among media. Thus, if there is a loss on the theatrical release but a
net gain on television, then the revenue and expenses are pooled. This enables
the distributor to recoup its theatrical loss from television revenue. Particular
care must be taken when the home video arrangement is a royalty deal that does
not allow deduction of expenses. These royalties should not be offset against expenses
incurred in other media.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">DVD’s are sold on consignment, meaning
the buyers can return any product for a 100% refund. Sometimes large numbers of
DVD’s are returned. Therefore, most distributors insist on holding back some
revenues as a reserve to make sure they do not pay the filmmaker a share of
revenue based on sales that are returned. DVD sales are dominated by mass merchants like
Wal-Mart, Best Buy, and Target. However, only a few companies have a direct
relationship with Wal-Mart, therefore the other distributors have to go through
an intermediary such as Anderson Merchandisers. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">One should also keep in mind that while
home video sales have been declining VOD sales have grown. Some home video
companies manufacture a limited number of DVD’s, or none at all, and focus on
distributing the film digitally through NetFlix, Amazon, and other outlets.
Without the cost of manufacturing, these deals can be quite profitable.
However, one has to be careful in licensing rights to avoid conflicts and
maximize revenues. The filmmaker may only want to grant VOD rights on a
non-exclusive basis. Moreover, filmmakers can often negotiate with a home video
company to retain the right to sell their film directly to the public from
their own website. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">Let
me offer one final piece of advice. Filmmakers should never sign a short form
deal memo to be followed by a long form contract. Once you sign a short form,
you may have a binding contract with the distributor. When the long form
arrives, if you do not like some of the provisions, you may have a big problem.
If the distributor refuses to make the changes you want, you have an agreement
but not on the terms you want. Your
options are not good. You cannot easily disavow the deal memo, yet you may not
want to proceed without certain terms in the long form. A short form deal memo
is short because many terms are left out. By agreeing to the short form, you
are agreeing to a deal without knowing all its terms. Therefore, you should insist
on going directly to a long form. If you are unable to work out all the terms
to your satisfaction, you can walk away with all your rights unencumbered. Many
distributors try to get filmmakers to commit to a short form deal memo because
it is easier to negotiate. Nonetheless, if and when the long form arrives, the filmmaker
cannot just walk away. The short form often does not include such provisions as
a detailed audit and accounting clause. If there is a dispute between the
filmmaker and a distributor, a judge will not insert terms that he/she thinks
are fair. The contract is only those terms agreed upon by the parties.<o:p></o:p></span></div>
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<b><i><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">About Mark Litwak: </span></i></b><i><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">Mark Litwak is a veteran entertainment attorney and
Producer’s Rep based in Beverly Hills, California. He is the author of six
books including: Reel Power: The Struggle for Influence and Success in the New
Hollywood, Dealmaking in the Film and Television Industry, Contracts for the
Film and Television Industry, and Risky Business: Financing and Distributing
Independent Film. He is the author of the CD-ROM program Movie Magic Contracts,
and the creator of the Entertainment Law Resources website at </span></i><a href="http://www.marklitwak.com/" target="_blank"><i><span style="color: blue; font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">www.marklitwak.com</span></i></a><i><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">.
He can be reached at </span></i><a href="mailto:law2@marklitwak.com"><i><span style="color: blue; font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";">law2@marklitwak.com</span></i></a><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"> <o:p></o:p></span></div>
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<i><span style="background: white; color: #333333; font-family: "Times","serif"; font-size: 12.0pt;">Mark will be
speaking about distributing independent film at the SPADA (<span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0in; padding: 0in;">Screen Production and Development Association) annual </span>conference
November 22, 2012 in Wellington, New Zealand.</span></i><i><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></i></div>
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-49670261762169130792012-11-02T14:23:00.000-07:002012-11-02T14:23:47.678-07:00Mark to speak at SPADA Conference New Zealand<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">Mark will be speaking about distributing independent film at the SPADA (<span style="background-color: white; border: 0px; font: inherit; line-height: 19.5px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Screen Production and Development Association) annual </span><span style="background-color: white; line-height: 19.5px;"> 2 day </span>conference beginning on November 22, 2012 in Wellington, New Zealand.</span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">Mark will also be teaching a master class for a select group of producers before the formal conference begins.</span></div>
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<span style="background-color: white; color: #003333;"><span style="font-family: Times, Times New Roman, serif; font-size: large;">SPADA members include producers, directors, production companies and allied craft professionals working in film, television, TVC, video, post-production, animation and interactive media; lawyers and accountants, completion guarantors, and industry suppliers.</span></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">SPADA is supported by the New Zealand Film Commission, SONY, KODAK and others.</span></div>
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<div class="separator" style="clear: both; text-align: center;">
<a href="http://www.spadaconference.org.nz/sites/all/themes/SPADA/img/spada-front-tile-box.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://www.spadaconference.org.nz/sites/all/themes/SPADA/img/spada-front-tile-box.png" /></a></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span style="background-color: white; border: 0px; font: inherit; line-height: 19.5px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">Screen Production and Development Association is located at </span><span style="background-color: white; border: 0px; font: inherit; line-height: 19.5px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">119 Taranaki Street, PO BOX 9567, Wellington, New Zealand.</span></span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span style="background-color: white; border: 0px; font: inherit; line-height: 19.5px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><br /></span></span><span style="font-family: Times, Times New Roman, serif; font-size: large;"><span style="background-color: white; border: 0px; font: inherit; line-height: 19.5px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><a href="http://www.spadaconference.org.nz/">SPADA Conference</a></span></span></div>
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-34852840196520845442012-10-16T18:01:00.001-07:002012-10-16T18:01:32.653-07:00DOMESTIC DISTRIBUTION PART II <div dir="ltr" style="text-align: left;" trbidi="on">
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<strong><span style="font-size: 18pt;"> </span></strong><span style="font-size: 14pt;">The goal for many filmmakers is nothing less than to see their
film shown in a theater. Theatrical distributors typically advance
all marketing and distribution costs and, for highly desirable films, may
provide the producer with an advance payment or minimum guarantee
("MG"). These payments are recoupable but not refundable. That means
the distributor can reimburse itself its advances from revenues before paying
the filmmaker his share of revenue, but if the film bombs and there is not
enough revenue for the distributor to recoup its advance and expenses, the
filmmaker does not have to refund payments received. If the advance is
sufficient to repay one's investors, then the filmmaker has effectively
transferred all financial risk to the distributor. This is a desirable but
increasingly rare occurrence. Nowadays, many distributors will only offer a
small advance or no advance when seeking to acquire a title for distribution.
The distributor will argue that it is advancing marketing and distribution
costs and that is enough, thank</span><span style="font-size: 18pt;">
you. </span></div>
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<span style="font-size: 14.0pt;">If a
domestic distributor is willing to take the plunge and release a film
theatrically, it will almost always insist on securing ancillary rights for
home video and television media. A theatrical release, even for a hit film,
often generates less revenue than its costs because of the substantial expense
for prints and advertising (P & A): a 35 mm print costs $1200 to $1500.
Thus, a major studio releasing a film on 4,000 screens will spend $6 million
dollars. Shipping heavy film canisters has cost major studios up to $450
million a year. On top of that, the price of a single full page advertisement
in the New York Times can add another hundred thousand dollars. <o:p></o:p></span></div>
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<span style="font-size: 14.0pt;">However,
print outlays are plummeting as theaters convert to digital projection. 77% of
screens in the USA now have systems that can exhibit a digital copy, which
costs about $150. The savings are so enormous that the studios have been
subsidizing the conversion to digital projectors by paying exhibitors "virtual
print fees." While many theaters have taken advantage of this
subsidy, the studios have announced that they will soon phase out this support.
Smaller theaters face a terrible dilemma. If 35 mm prints are no longer
available, and they cannot afford a digital system, which can cost $150,000,
they will go out of business. In a few years, it may be difficult to view a
movie on celluloid. Eastman Kodak has filed for bankruptcy, and hundreds of art
house cinemas are predicted to go out of business. This can only make it more
difficult for independent filmmakers to secure a theatrical release. Screen
Digest predicts that almost all screens will be digital by 2015.<o:p></o:p></span></div>
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<span style="font-size: 14.0pt;">Aside
from wide releases, even a limited release to a hundred theaters can cost a
million dollars or more. If a film is released digitally, the print costs are
dramatically reduced, but the advertising outlays remain the same.
Consequently, a distributor that bears the financial risk of a theatrical
release will insist on securing the rights to home video and television media
to offset any theatrical losses. These so-called ancillary media are usually
more profitable than the theatrical release. A film that becomes known to the
public as a result of its theatrical run does not require much more publicity for
its home video release. And, television exhibition is the most profitable of
all.<o:p></o:p></span></div>
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<span style="font-size: 14.0pt;">When
a distributor licenses a film to a cable channel it does not incur any
advertising expenses because the channel promotes its own programming. The
seller simply negotiates the deal and delivers a copy of the film, which is
often returned after the cable television window expires. <o:p></o:p></span></div>
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<span style="font-size: 14.0pt;">The
sequence of release windows is also changing. Traditionally, films were first
exhibited in theaters, followed months later by home video (DVD's), followed by
a release to television beginning with Pay TV, VOD, and eventually free
television. The order of these windows was intended to maximize revenue.
However, a release that generates maximum revenue for a distributor does not
necessarily do the same for the exhibitor. Distributors want to capitalize on
public awareness arising from the theatrical release by quickly issuing the
film into the home video market. A short delay also inhibits piracy because
illegal sales are more likely as long as there is no legitimate way to buy a
DVD. <o:p></o:p></span></div>
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<span style="font-size: 14.0pt;">Some
distributors have gone so far as to experiment with a simultaneous release in
theaters and in home video. However, theater owners strongly object to such
releases or any shortening of the gap between windows, arguing that moviegoers
are less likely to buy box office tickets if they know the film will soon be
available on DVD. The gap from the end of the theatrical release to the start
of the home video release has been falling and now is in the range of 90 to 120
days. <o:p></o:p></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">In
2011, Universal Pictures attempted to release its movie "Tower Heist"
on Comcast's Video-on-Demand three weeks after its theatrical debut. The Regal
and AMC theater chains objected and the third largest theater chain, Cinemark,
refused to book the picture at all if it was available on VOD so soon after its
debut. This caused Universal to back down and cancel the VOD release. <o:p></o:p></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">As
mentioned earlier, exhibitors and distributors have competing interests. The
exhibitor and distributor enter into a lengthy and complex agreement, which sets
out how they share revenue. The agreement may require the exhibitor to give
certain advances or guarantees to the distributor to secure a film.
Additionally, the exhibitor may agree to play the film for a minimum number of
weeks. In the past, a distributor releasing a major motion picture would split
revenues on a sliding scale, with a 90/10 ratio for the first few weeks after
the theater owner deducted its overhead costs. The distributor received 90% of
the revenue and the exhibitor 10%. In subsequent weeks, the split would become
more favorable for the exhibitor, shifting to 70/30, 60/40, or 50/50. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">This
sliding scale formula gave exhibitors an incentive to retain the picture for a
long run. As the weeks pass, the exhibitor's share increases. Of course, for
major studio films, revenues tend to drop sharply after the initial few weeks.
Giving the exhibitor a larger share of revenue in later weeks makes sense
because the distributor wants to encourage the theatre owner to exhibit the
film as long as possible. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">However,
major studios have now adopted a new formula for sharing revenue with
exhibitors. The revenues are split according to the magnitude of the overall
national box office. The distributor receives 48% to 63% of box office
receipts, with more receipts earning the distributor a larger percentage.
On average, a major studio receives 53% of the box office gross. For art
house fare, distributors average around 45%. The exhibitor no longer has the
same incentive to hold a picture, and pictures tend to be released wider and
pay off faster. For major studio films, 80% of the box office revenue is often
received in the first two weeks of a picture's release. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">One
aspect of exhibition has not changed. The exhibitor retains 100% of all sales
at the concession stand. This is a major profit center for theaters; it can be
said that theater owners are really in the fast food business. The candy and
popcorn they sell have huge profit margins. However, nobody goes to the theater
for the food. So, theater owners have an incentive to fill the house with a lot
of moviegoers, even if they only earn a relative minor portion of the ticket
price. This is why they prefer major studio films designed for mass consumption
rather than art house fare that appeals to a niche audience. <o:p></o:p></span></div>
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<span style="font-size: 14.0pt;">Another
ongoing struggle is whether movies should be released on DVD before being
offered for digital download. The major studios find digital downloads quite
profitable because they avoid all manufacturing and shipping costs. 20th
Century Fox released Ridley Scott's
sci-fi thriller "Prometheus" for HD download on Sept. 18,
2012, three weeks before its release on DVD. The film was made available
through Amazon, iTunes, Vudu, Xbox, and CinemaNow. Sony and the Weinstein Company
have also experimented with early digital releases. <o:p></o:p></span></div>
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<span style="font-size: 14.0pt;">The
economics of independent films have become increasingly tricky. Due to a flood
of independent films, licensing fees have declined, and many specialty
distributors have disappeared. Filmmakers can no longer expect to auction their
film off to the highest bidder at Sundance or Toronto. This occasionally occurs
for a breakout film, but it is hardly the norm, even for films shown at top
festivals. Hence, instead of an all-rights deal with one domestic distributor,
many filmmakers end up opting for "split rights" deals. Rather than
one deal with a domestic distributor that controls all media in North America,
the filmmaker enters into a series of deals with different distributors, each
of which is granted limited rights. This can benefit the filmmaker, because
with several distributors, there is no cross-collateralization of expenses
against revenue. So, if the home video release loses money, those losses would
not be recouped by the home video distributor from TV sales controlled by a
different company. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">Although
a theatrical release is risky, it is important for building awareness and
prestige that filmmakers sometimes book their films directly into theaters. A
rent-a-distributor or "service" deal is an arrangement in which the
producer bears the marketing costs of releasing a film theatrically.
Traditionally, distributors cover these costs, whether the title is one they
produced or acquired from an independent producer. With a service deal, the
producer is essentially renting the distribution apparatus and bearing all
distribution costs. The distributor is willing to receive a reduced
distribution fee -- perhaps half of the traditional 35% -- in return for not
advancing any expenses. The producer assumes all financial risk. One of my
clients recently self-released a documentary on 80 screens at a cost of
$600,000. While it did not earn back its distribution costs from the theatrical
release alone, the film became a best-selling documentary on Amazon and
received substantial license fees from Netflix and other outlets. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">For
a distributor, such a deal makes sense if there is an open slot in its release
schedule. Many distribution and marketing staff are full time permanent
employees, and if the distributor does not have a title to release one month,
the staff must nevertheless be paid. Why would a producer bear the financial
risk of releasing a film theatrically? Often, it is because there is no other
alternative as no distributor is willing to bear the costs to release the film
in the traditional manner. It bears noting that relatively few independent
films nowadays secure a theatrical release. Indeed, many indies are unable to
secure distribution in any media. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">Another
reason a filmmaker may desire a theatrical release is because it will generate
more attention than if the picture is released directly to home video and
television. Many publications will not review a film unless it opens
theatrically in their region. Therefore, a theatrical release, even if
unprofitable by itself, can boost television and home video revenues. There
have been some spectacular self-release successes including Mel Gibson's
"The Passion of the Christ." This picture cost $30 million to
produce, $15 million to market, and generated more than $600 million. In its
first weekend, the film reportedly earned $83 million in the United States. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">Another
method used to get films into theaters is known as a "four wall"
release. This is an arrangement between the producer and theater owner that
bypasses the distributor. Here, the filmmaker rents the theater from the
exhibitor and takes the financial risk that is normally borne by the
distributor and exhibitor. The filmmaker, in turn, retains all the box office
receipts. If a lot of tickets are sold, the filmmaker can do well. However, if
ticket sales are meager, the filmmaker can suffer disastrous losses, since the
filmmaker is paying for the theater, as well as bearing all print and
advertising costs. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">Self-distribution
not only requires money, but enormous time and effort. Most successful
campaigns require the filmmaker to be available for media interviews, develop a
rich website, conduct research to find and reach out to their audience, and
accompany the film to openings. Some filmmakers earn additional income through
speaking fees, websites, and DVD screenings. <o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;">The
theatrical release, while often difficult to secure and expensive, can
significantly help a filmmaker advance their career. The exposure gained from
one film can induce investors or a studio to finance their next project.<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
</div>
<div align="center" class="MsoNormal" style="text-align: center;">
<b><span style="font-size: 18pt;">Emmy Win</span></b><o:p></o:p></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<span face="Times New Roman, Times, serif">CHILDRENS </span>HOSPITAL</div>
<div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<o:p></o:p></div>
<div class="MsoNormal" style="text-align: center;">
<span style="font-size: 14pt;">Congratulations to our client Jon Stern
and his Abominable Pictures for their Emmy Award for Outstanding Special Class
Live Action Entertainment. The show is exhibited on Adult Swim which is
part of the Cartoon Network in association with Warner Bros. Television. The
shows stars Rob Corddry, Erinn Hayes, Ken Marino, Megan Mullally, Malin
Akerman, Lake Bell, Rob Huebel and others.</span></div>
<div class="MsoNormal" style="text-align: center;">
<o:p></o:p></div>
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<span style="font-size: 14.0pt;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;"><br /></span></div>
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<span style="font-size: 14.0pt;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: 14.0pt;"><br /></span></div>
</div>
Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-39759805440627446112012-09-10T16:47:00.002-07:002012-09-23T13:22:13.329-07:00UPDATE ON SOLICITING INVESTORS <div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;">The Jumpstart Our Business Startups Act (the “JOBS
Act”) was enacted on April 5, 2012. It allows
small businesses to enter into equity-based crowdfunding for raising up to one million
dollars, without the usual burdensome requirements currently in place. These
rules should be in place by early 2013. <o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;">As important as the crowdfunding provisions, the JOBS
Act also amended Rule 506 of Regulation D, thus permitting general solicitation
or general advertising, provided that all purchasers are accredited investors. Currently,
it is unlawful for a filmmaker to send out email blasts to strangers, or
advertise on the internet to attract investors. To comply with the existing law
you should only approach persons you have a pre-existing relationship with. This
rule will change with the implementation of the JOBS Act.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;">People may be accredited investors based on their
net worth or annual income, as follows: <o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Times, Times New Roman, serif;">1)
a natural person whose individual net worth, or joint net worth with that person’s
spouse, exceeds $1 million, excluding the value of the person’s primary
residence (the “net worth test”); or<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Times, Times New Roman, serif;">2)
a natural person who had an individual income in excess of $200,000 in each of
the two most recent years, or joint income with that person’s spouse in excess
of $300,000 in each of those years, and has a reasonable expectation of reaching
the same income level in the current year (the “income test”). <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0in;">
<br /></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;">The shorthand description of accredited investors is
simply "wealthy people." General solicitation could be described as advertising
or any method for approaching people you do not currently know.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;">The Securities and
Exchange Commission (SEC) was given 90 days to implement this rule change and
missed the deadline. However, the SEC has proposed draft rules that, if adopted,
will make it easier to raise capital. Essentially, the proposed rules state
that if you want to advertise or approach strangers for capital you will have
to: 1) take reasonable steps to verify that all of the purchasers are
accredited investors; 2) reasonably believe that all of the purchasers are
accredited investors; and 3) check a box on the Form D confirming that you are
acting under the rules which allow general solicitation.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;">The SEC did not specify exactly what steps must be
taken to verify that a person is an accredited investor, but states that it
depends on the circumstances. Most filmmakers do not have access to detailed
financial records of potential
investors, and a potential investor may not want to disclose their tax returns
or other documents to prove that they are accredited. The SEC gives as an
example: "An issuer that solicits
new investors through a website accessible to the general public or through a
widely disseminated email or social media solicitation would likely be
obligated to take greater measures to verify accredited investor status than an
issuer that solicits new investors from a database of pre-screened accredited
investors created and maintained by a reasonably reliable third party, such as
a registered broker-dealer." <o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;"><br /></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;">In other words, if you are indiscriminately sending
out solicitations through social media, merely requiring a potential investor
to check a box that they are accredited, that is not likely to be deemed sufficient. Since the
standard is vague, and no specific steps to determine an investor's status are suggested,
it would be wise to verify an investor’s status by having them complete a
detailed questionnaire that will provide information that can be used to
justify a belief that they have the assets or income they claim. If, for instance, a person claiming to be
accredited, does not have any investment
or bank accounts and resides in low-income housing, then either they are not as
wealthy as they allege, or perhaps they are a drug dealer whose savings are
stashed in a mattress. <o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;"><br /></span></span></div>
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;">Filmmakers relying on the new Reg D rules should
maintain careful records documenting what they have done to verify that each
investor is accredited. And remember, these rules have not yet been adopted. The
proposed rules can be read at: <a href="http://www.sec.gov/rules/proposed/2012/33-9354.pdf">Link</a></span></span><br />
<span style="font-family: Times, Times New Roman, serif;"><br /></span>
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;">You
can submit your comments on the proposed rules at: <a href="http://www.sec.gov/cgi-bin/ruling-comments?ruling=s7xxxx&rule_path=/comments/s7-07-12&file_num=S7-07-12&action=Show_Form&title=Eliminating%20the%20Prohibition%20Against%20General%20Solicitation%20and%20General%20Advertising%20in%20Rule%20506%20and%20Rule%20144a%20Offerings">Link</a></span></span><br />
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span>
<br />
<h2 style="text-align: left;">
<span style="border: 1pt none windowtext; padding: 0in;"><span style="color: #cc0000; font-family: Times, Times New Roman, serif; font-size: x-large;">Contracts for the Film and Television Industry: 3rd Edition</span></span></h2>
<div>
<span style="color: #666666; line-height: 115%;"><span style="font-family: Times, Times New Roman, serif; font-size: large;">The long awaited third edition of my Contracts book, now including 80
contracts, has just been published. For more information, click <a href="http://www.marklitwak.com/store/?eventId=491080ampEventViewMode=EventDetails">here</a></span></span></div>
<div>
<span style="color: #666666; line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;"><br /></span></span></div>
<div>
<span style="color: #666666; line-height: 115%;"><span style="font-family: Times, Times New Roman, serif;"><br /></span></span></div>
<div>
<div class="MsoNormal" style="background: white; line-height: 16.5pt; margin-bottom: .0001pt; margin-bottom: 0in; vertical-align: baseline;">
<span style="font-family: Times, Times New Roman, serif;"><span style="color: #cc0000;"><b><span style="border: 1pt none windowtext; padding: 0in;"><span style="font-size: x-large;">California Lawyers for the Arts Self Defense Seminar</span></span></b><span style="font-size: x-large;">:</span></span><span style="color: #666666; font-size: 10.5pt;"><o:p></o:p></span></span></div>
<div class="MsoNormal" style="background: white; line-height: 16.5pt; margin-bottom: 8.25pt; vertical-align: baseline;">
<span style="color: #666666;"><span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span></span></div>
<div class="MsoNormal" style="background: white; line-height: 16.5pt; margin-bottom: 8.25pt; vertical-align: baseline;">
<span style="color: #666666;"><span style="font-family: Times, Times New Roman, serif; font-size: large;">Date: October 20, 2012<o:p></o:p></span></span></div>
<div class="MsoNormal" style="background: white; line-height: 16.5pt; margin-bottom: 8.25pt; vertical-align: baseline;">
<span style="color: #666666;"><span style="font-family: Times, Times New Roman, serif; font-size: large;">Location: West Los
Angeles College, 9000 Overland Ave., Culver City, CA 90230 (Free parking is
available in the campus parking structure.)<o:p></o:p></span></span></div>
<div class="MsoNormal" style="background: white; line-height: 16.5pt; margin-bottom: 8.25pt; vertical-align: baseline;">
<span style="color: #666666;"><span style="font-family: Times, Times New Roman, serif;"><span style="font-size: large;">This seminar explains
how writers and filmmakers can prevent problems from arising by properly
securing underlying rights, and by encouraging the other party to live up to
agreements by adding performance milestones, default penalties and arbitration
clauses.</span><span style="font-size: 10.5pt;"><o:p></o:p></span></span></span></div>
<div class="MsoNormal" style="background: white; line-height: 16.5pt; margin-bottom: 8.25pt; vertical-align: baseline;">
<span style="color: #666666;"><span style="font-family: Times, Times New Roman, serif; font-size: large;"><a href="http://www.calawyersforthearts.org/calendar?eventId=541354&EventViewMode=EventDetails">Seminar Info</a></span></span></div>
<div class="MsoNormal" style="background: white; line-height: 16.5pt; margin-bottom: 8.25pt; vertical-align: baseline;">
<span style="color: #666666; font-family: Arial, sans-serif;"><span style="font-size: large;"><br /></span></span></div>
</div>
<span style="line-height: 115%;"><span style="font-family: Times, Times New Roman, serif; font-size: large;"><br /></span></span>
<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US;"><br /></span></div>
Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-42037890368902953552012-08-22T10:19:00.000-07:002012-08-24T05:59:43.213-07:00DOMESTIC DISTRIBUTION PART I <div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">In my last article I discussed foreign sales agents and their role in the
distribution of independent films. Now let's turn to domestic deals.
"Domestic" is usually defined as North America, which is comprised of
the USA and Canada, as well as their possessions, territories,
commonwealths, protectorates and trusteeships. For the United States,
these include the U.S. Virgin Islands, Saipan American Samoa, Guam,
Wake Island and Puerto Rico. However, many domestic deals also encompass
the Bahamas, Bermuda, Saba Island, St. Eustatius Island, St. Kitts Island
and St. Maarten Island. These are not affiliated with either the USA or
Canada. Bermuda, a British colony in the middle of the Atlantic Ocean, has
never been part of Canada or the USA. St. Kitts Island's sovereignty is
shared by France and the Netherlands.Why are these entities considered part of
the Domestic territory? Simply because certain television channels have
satellite footprints that cover these areas, and they demand these rights
be included in any deal.</span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Consequently, producers need to be careful in
defining the scope of territories granted to distributors. It is customary for
independent producers to enter into separate foreign and domestic deals. If,
for example, the filmmaker assigns Bermuda to an international distributor,
that could prevent their domestic distributor from making a lucrative deal with
HBO. Indeed, it may deter a domestic distributor from acquiring the title.
Thus, to maximize revenues a producer has to make sure they don't sacrifice a
beneficial deal because they thoughtlessly assigned away rights to a small
territory.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">The term "distributor" is so broad that it
encompasses many different types of companies. The major studios such as
Paramount and Sony typically distribute pictures directly to theaters, license
them to television channels like Showtime, and manufacture their own packaged
media (i.e. DVDs) for sale to mass merchants and video rental outlets. Many
majors studios may also distribute their pictures in selected foreign
territories and contract with local distributors elsewhere.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Smaller independent distributors exploit movies in a
variety of different ways. Some book films into theaters and then assign
television and home video rights to third parties for licensing in those media.
Others are basically home video labels that manufacture and market DVD's. Some
of these companies license directly to television while others use
intermediaries. However, sometimes home video labels decide to release some of
their films in theaters to build awareness for the picture. They may pay a
third party to book the title into theaters. A filmmaker seeing such theatrical
releases may perceive the company as a theatrical company when they are not. So
it can be difficult to tell what kind of distributor they are dealing with.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">A theatrical release, even if perfunctory, may help
the distributor persuade filmmakers to make a deal even if it is unprofitable
by itself. If a smaller distributor attempts to theatrically release an indie
film, they face stiff competition from the majors. Because the major
distributors have a steady flow of desirable movies, they have the clout to
demand the best theaters and dates, often relegating independents to whatever
dates and venues are left.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Complicating matters further, some home video
companies deal directly with mass merchants like Wal-Mart, while the others
have to go through intermediaries like Anderson Merchandisers, that ship and
pack product from numerous companies for delivery to mass merchants.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">All this is to say that distributors operate
differently and filmmakers need to do their homework before making commitments
so they understand exactly how each distributor proposes to release their film
and how the revenue stream will be divvied up. If multiple companies in the
chain of distribution deduct significant fees and expenses, the revenue stream
that goes to the filmmaker/investors can become a trickle. So when a
distributor says they distribute to theatrical, home video and television
media, you should ask: "O.K. Exactly how you do that? What intermediary
companies do you use, and what kind of fees and expenses do they deduct?"<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">One type of home video deal is known as a sub-label
deal. Here two companies split the responsibilities for acquiring, marketing
and distributing titles. Typically one company, such as Lionsgate, handles the
physical distribution of titles and collection of revenue from its buyers. The
other company, the sub-label, is responsible for acquiring titles and creating
the key art and marketing materials. The two share revenue.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">There is nothing inherently wrong with a sub-label
deal, provided the filmmaker understands how distribution fees are collected
and expenses are recouped, and the amounts are reasonable. However, I have seen
many of these deals where the filmmaker thinks they are sharing in the
wholesale price remitted by buyers like Blockbuster or Wal-Mart. The filmmaker
is unaware that he/she is really receiving just a share of what is remitted to
the sub-label from the parent company.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">In these deals, "Gross Receipts" has been
defined and calculated on the revenue received by the sub-label after the
parent company has deducted its fees and expenses. The cumulative effect may be
that little or no revenue flows down to the filmmaker. The filmmaker thinks
he/she is receiving 25% of the wholesale price of each DVD sold but actually is
receiving 25% of the funds remitted from the parent company to the sub-label. A
well-drawn contract will carefully define "Gross Receipts" as the
wholesale price which is the amount remitted from the home video buyers, and
not the amount remitted to the sub-label. Filmmakers need to ask specific
questions when selecting a distributor in order to avoid unpleasant surprises.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Almost all distributors nowadays try to acquire
so-called ancillary and new media rights so they can license movies to such
companies as iTunes, Netflix, Hulu and Amazon. Many of these new media buyers
don't like to acquire individual titles and prefer to deal with aggregators who
can license them bunches of films at a time.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;"> <o:p></o:p></span></span></div>
<h2 style="text-align: left;">
<b><span style="line-height: 115%;"><span style="color: red; font-family: inherit; font-size: x-large;">Book Recommendation:</span></span></b></h2>
<div class="MsoNormal">
<span style="font-family: inherit;"><span style="font-size: 12pt; line-height: 115%;"> </span><span style="font-size: large;"><span style="line-height: 115%;">The Reel Truth: Everything you didn't
know you need to know about making an independent film.</span></span><span style="font-size: large; line-height: 115%;"> By
Reed Martin </span></span></div>
<div style="text-align: left;">
<span style="font-family: inherit;"><span style="font-size: large;"><span style="line-height: 115%;"> </span></span><span style="font-size: 12pt; font-weight: normal; line-height: 115%;">Filmmakers are creative artists, and the less time
they have to spend on the logistics of getting their film to the market, the
happier many of them are. But the logistics of the business cannot be ignored,
and a recent book by Reed Martin offers filmmakers of all persuasions an
impeccable, thorough, intelligent guide to navigating one's way through the
film industry. The book is "The Reel Truth: Everything you didn't know you
need to know about making an independent film. " </span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">This is a book that will save filmmakers years of
research and missteps, so they can proceed full steam ahead to create their
cinematic masterpieces. This is a definitive, essential guide for all
filmmakers.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;"><br /></span></span></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;"><a href="http://amzn.to/RfOqNl">to purchase Reel Truth</a></span></span><br />
<span style="font-size: 12pt; line-height: 115%;"><br /></span>
<span style="font-size: 12pt; line-height: 115%;"><br /></span></div>
<h2 style="text-align: left;">
<span style="line-height: 115%;"><span style="color: red; font-family: inherit; font-size: x-large;">CONTRACTS IN THE FILM AND TELEVISION INDUSTRY, 3RD EDITION </span></span></h2>
<h2 style="text-align: left;">
<span style="line-height: 115%;"><span style="color: red; font-family: inherit; font-size: x-large;">JUST PUBLISHED</span></span></h2>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;"><br /></span></span></div>
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<img height="200" src="http://2.bp.blogspot.com/-hrc_Fvbg6SQ/UDUSHtlZ5QI/AAAAAAACDDg/ycU8Z8eE5R0/s200/Contracts_3rd_FRONT_COVER_RGB.jpg" width="154" />
</div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">The long awaited third edition of my Contracts book
has just been published. Newly expanded and updated the book now includes 80 contracts.<o:p></o:p></span></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">An invaluable collection of sample
entertainment contracts along with discussions of the terms and ideas contained
therein. Armed with this book, filmmakers can save thousands of dollars in
legal fees.<o:p></o:p></span></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: inherit;"><b><span style="font-size: 12pt; line-height: 115%;">You can also order a separate CD-R disk
with copies of all the 80 contracts in word format. This is on sale now at a
reduced price of $45.00.</span></b><span style="font-size: 12pt; line-height: 115%;"><o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="line-height: 115%;"><span style="font-family: inherit;"><br /><br />
<a href="http://www.marklitwak.com/store/"><span style="font-size: large;">Order Now</span></a><br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><span style="font-size: small;"><o:p></o:p></span></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Table of Contents<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Introduction<br />
Basic Elements of Contract Law<br />
Common Provisions of Entertainment Contracts<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Depiction and Copyright Releases<br />
Depiction Release, Grant with Reversion<br />
Depiction Release, Option/Purchase Format<br />
Depiction Release, Documentary Short Form<br />
Guestbook Release<br />
Crowd Release<br />
Talk Show Appearance Agreement<br />
Film Clip License<br />
Still Photo Release<br />
Artwork Release<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Literary Submission and Sale<br />
Submission Release<br />
Non-Disclosure Agreement<br />
Option and Literary Purchase Agreement (Long Form)<br />
Option and Literary Purchase Agreement (Short Form)<br />
Quitclaim Release<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Artist Employment<br />
Conversion Agreement<br />
Actor Offer Letter<br />
Actor Employment Agreement (Loan-out Format to Employ SAG Actor)<br />
Actor Employment Agreement )Low-Budget, Non-Union Day Player)<br />
Nudity Rider to Player Agreement<br />
Rider to Day Player Agreement<br />
Extra Agreement<br />
Extra Release<br />
Series Regular Actor Contract (AFTRA)<br />
Minor Release<br />
Parental Consent<br />
Stunt Performer's Agreement<br />
Television Host Agreement<br />
Television Performer Employment Agreement<br />
Writer Employment Agreement (Low-Budget, Non-union)<br />
Writer Employment Agreement (Theatrical WGA Writer)<br />
Television Writer's Contract (WGA, Loan-out)<br />
Director Agreement (Theatrical, Loan-Out)<br />
Director Employment Agreement (Non-Union)<br />
Director's Television Series Employment Agreement (to Employ a DGA Director)<br />
Consultant Agreement<br />
Certificate of Engagement<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Collaboration<br />
Writer Collaboration Agreement<br />
Joint Venture Agreement<br />
Agreement to Dissolve<br />
Co-Production Agreement<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Music<br />
Composer Agreement (Low-Budget Feature)<br />
TV Music Rights License<br />
Synchronization/Performing/Master Use and Mechanical License<br />
Synchronization License TV Series<br />
Master Use License, Television<br />
Soundtrack Recording Agreement (Loan-Out Format)<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Financing<br />
Finder Agreement<br />
Promissory Note<br />
Promissory Note with Guarantee<br />
Guarantee<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Production<br />
Production Services Agreement<br />
Cable TV Production Agreement<br />
Casting Director Employment Agreement (Independent Contractor)<br />
Crew Deal Memo (Salaried On-Call)<br />
Producer Employment Agreement<br />
Television Series Producer Agreement<br />
Makeup and Special Effects Agreement<br />
Location Agreement<br />
Studio Rental Agreement<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Distribution and Exhibition<br />
International Sales Agency Agreement (Filmmaker Friendly)<br />
International Sales Agency Agreement (Distributor Friendly)<br />
Certificate of Authorship<br />
Certificate of Origin<br />
Short Form Assignment<br />
Definition of Gross Receipts After Break-even<br />
Net Profit Definition<br />
Television Distribution Agreement<br />
International TV Distribution Agreement<br />
Security Agreement<br />
Short Form Security Agreement<br />
SAG Buyer's Assumption Agreement Theatrical<br />
Home Video Licensing Agreement<br />
Internet Acquisition Distribution Agreement<br />
Website Content Provider Agreement<br />
Video on Demand Agreement<br />
Exhibition Agreement<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Merchandising<br />
Merchandising Agreement<br />
Product Release<br />
Product Placement Agreement<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Retainer<br />
Attorney-Client Retainer Agreement<br />
SAG Agency Motion Picture/Television Agency Contract<br />
Representative Agreement<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Glossary of Terms<o:p></o:p></span></span></div>
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<span style="font-size: 12pt; line-height: 115%;"><span style="font-family: inherit;">Appendix</span><span style="font-family: Times New Roman, serif;"><o:p></o:p></span></span></div>
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-8172271116049420772012-05-18T13:22:00.001-07:002012-05-18T13:22:17.574-07:00DISTRIBUTION 101 – Foreign Sales Agents<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">With the start of the
Festival De Cannes and accompanying Marche Du Film, one is reminded that film
is both an art form and a business. The festival will exhibit approximately 22 feature
films in competition, another 20 in Un Certain Regard, 6 Out of Competition and
10 in Special Screenings. Then there are the parallel sections or sidebars that
are not officially part of the festival, but exhibit at the same time. Director’s Fortnight, which was created by the
French Director’s Guild, will exhibit 19 features. <span style="background-color: white; background-position: initial initial; background-repeat: initial initial;">International Critics' Week (la
Semaine de la Critique) run by the French Union of Film Critics, will show another
10 features. Add these up and you have 87 feature films in the festival and its
sidebars. Only a relative handful of these films are from filmmakers based in the
USA. On the other hand, the </span>market
(Marche Du Film) will screen 1465 feature films, and many of these are from the
USA. Few of the market films are also in the festival. Many are more commercial
fare that festivals often ignore. However, they generate substantial revenue. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">With that in mind,
filmmakers fortunate enough to receive distribution offers for their films are
often confronted with complex deals to distribute their films. These can
bewilder those unfamiliar with the customs and practices of the industry. Let’s begin with a discussion of
international film sales. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">International sales
agents are distributors, although they usually do not own a single theater,
home video label or television outlet. They are essentially distributors that
license films to territory distributors ("buyers"). Territory
distributors acquire rights to exhibit a film within their country although
sometimes they may license rights for several different countries. They often
find out about films from sales agents whom they meet at various markets held
throughout the year. Sales agents and buyers typically attend the three major
film markets, which are at Cannes, Berlin and Santa Monica (AFM) as well as TV
markets such as Mip and MipCom. The May 2012 edition of the Cannes Market will
have more than 1100 sales agents and 10,000 participants from almost one
hundred different countries.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">The sales agent not
only licenses the films they represent, but also services their buyers by
providing them with various materials and elements, including film and video masters,
key art, photos and trailers. An honest and competent sales agent can be
extremely helpful to a filmmaker. Most filmmakers have no clue how to go about
licensing their film, for instance, to a Turkish buyer, and what terms would be
acceptable. Moreover, they don’t even know who the buyers are in most
territories. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">According to the latest
2011 Box Office statistics, two-thirds of all film revenue now comes from
abroad. International sales (those outside of North America) grew 35% from 2007
to 2011. Revenue in North America, by comparison, increased a mere 6%. So while
foreign sales have been expanding quickly, domestic sales have grown modestly. <span style="background-color: white; background-position: initial initial; background-repeat: initial initial;">Over the past four years, the number of
screens in China has doubled to more than 6,200, a number that's expected to
double again by 2015.<span class="apple-converted-space"> Chinese b</span>ox-office
receipts hit a record $1.5 billion last year, according to their State
Administration of Radio, Film and Television.</span> With China and other
rapidly developing countries building thousands of new theaters, this trend is
expected to continue. Indeed, for many
independent filmmakers, even today, 90% or more of their revenue is derived from
foreign sales. That is because the North American market is by far the toughest
market to crack for a low budget indie film without stars. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">It can be difficult to
select a sales agent. Reputable sales agents should be willing to accept terms in
their contract with filmmakers that protect their interests. Many such
provisions do not cost the sales agent anything, as long as the sales agent
lives up to the terms of its contract. A requirement for interest on late
payments, for example, costs the sales agent nothing as long as payments are made
on time. Such a clause is important because it will encourage a sales agent to
live up to its commitments, and provide the filmmaker with a viable remedy in
case the sales agent defaults. While a competent sales agent provides valuable
services, one should always remember the importance of what the filmmaker
brings to the table. Without a good film, the sales agent has nothing to sell. Most
sales agents produce few if any movies themselves.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">Here is a list of some
of the most critical ways for filmmakers to protect their interests in contracting
with sales agents. The following list should not be considered exhaustive.
There are other provisions a filmmaker may want to include such as clauses
dealing with advances, guarantees and reservation of rights.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">NO CHANGES: The film
should not be edited, nor the title changed, without the filmmaker's approval.
Editing for censorship purposes, television broadcast and changes made for a
foreign language release, such as adding subtitles and translating the title
and dialogue, is permissible.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">MINIMUM ADVERTISING
SPECIFIED: The contract should specify in writing the minimum amount the sales
agent will spend on advertising and promotion of the film. These expenses are
often incurred at various markets. They could include advertising in the trade
papers, a billboard on the Croissette or payment for a screening room for the
film. The sales agent should commit to payment for the creation of a poster,
one-sheet and trailer if these items do not exist. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">EXPENSES LIMITED: There
should be a floor and a ceiling on expenses. Market expenses (the cost to
attend film and TV markets) should be limited to the first year of release and
capped per market. Promotional expenses should be limited to direct
out-of-pocket costs spent to promote the film, and should specifically exclude
the sales agent's general overhead and staff expenses.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">TERM: The term should
be a reasonable length, perhaps five or even 10 years, but not in perpetuity.
The filmmaker should be able to regain rights to the film if the sales agent
gives up on it. Thus, it is best to have a short initial term of two or three years
and a series of automatic rollovers if the sales agent returns a certain amount
of revenue to the filmmaker. If the sales agent does not meet or exceed these
performance milestones, all rights should revert to the filmmaker. If the sales
agent is doing a good job and paying the filmmaker his share of revenue, there
is little reason to switch to another sales agent. Indeed, for movies that have
been out in the marketplace for a few years, it is very difficult to find a
sales agent willing to take on an older film.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">INDEMNITY: Filmmaker
should be indemnified (receive reimbursement) for any losses incurred by
filmmaker as a result of the sales agent's breach of the terms of the
agreement, violation of third party rights, and for any unauthorized changes or
additions made to the film.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">POSSESSION OF NEGATIVE:
The sales agent should receive a lab access letter rather than possession of
the original negative and other master elements. The sales agent should not be
permitted to remove masters from the laboratory.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">ERRORS AND OMISSIONS
(E&O) POLICY: While it is generally the filmmaker's responsibility to
purchase an E & O insurance policy, sales agents sometimes may be willing
to advance the cost of this insurance and recoup it from film revenues. In such
an event, the filmmaker should be added as an additional named insured on the
policy, which is a minor cost.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">TERMINATION CLAUSE: If
the sales agent defaults on its contractual obligations, the filmmaker should
have the right to terminate the contract, and regain rights to license the film
in unsold territories as well as obtain money damages for the default. It is
only fair for the filmmaker to give the sales agent reasonable prior notice of
default before exercising her right to terminate. <o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">RIGHT TO INSPECT BOOKS
AND RECORDS: The sales agent should maintain complete and detailed books and
records with regard to all sales and rental of the film. Filmmakers should receive
quarterly (or monthly) producer statements accompanied by any payments due the filmmaker.
Filmmakers should have the right to examine the books and records of sales
agent during reasonable business hours, on 10 days’ notice.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">LATE
PAYMENTS/LIEN: All monies due and payable to the filmmaker should be held in
trust by sales agent for the filmmaker. The filmmaker should be deemed to have
a lien on filmmaker's share of revenue. The sales agent should pay the filmmaker
interest on any late payments. <o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt;">LIMITATION
ON ACTION: The filmmaker should have at least three years from receipt of any
financial statement, or discovery of any accounting irregularity, whichever is
later, to contest accounting errors and file a Demand for Arbitration.<o:p></o:p></span></div>
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<br /></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">ASSIGNMENT: It is best
to prohibit assignment unless filmmaker consents. If assignment is permitted, the
sales agent should not be relieved of its obligations under the original
contract.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">FILMMAKER DEFAULT: The
sales agent should give the filmmaker 14 days written notice of any alleged
default by filmmaker, and an additional 10 days to cure such default, before
taking any action to enforce its rights.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">WARRANTIES: The filmmaker's
warranties, in regard to infringement of third party rights, should be to the
best of the filmmaker's knowledge and belief, not absolute.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">SCHEDULE OF MINIMUMS: Foreign
sales agents should agree to attach, to their contract, a schedule of minimum
acceptable license fees per territory. The sales agent is not permitted to
license the film in any territory for less than the minimum without the prior
approval of the filmmaker.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;"><br /></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">ARBITRATION CLAUSE:
Every contract should contain an IFTA arbitration clause ensuring that all
contractual disputes are subject to binding arbitration with the prevailing
party entitled to reimbursement of legal fees and costs. The arbitration award
should be final, binding and non-appealable. The IFTA personal guarantee Rider
can be used to bar a company's chief executive from attending future American
Film Markets if the company refuses to pay an arbitration award.<o:p></o:p></span></div>
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<span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; line-height: 115%;">For a more detailed discussion of distribution deal
terms read my article at: <a href="http://www.marklitwak.com/articles/film/indie_filmmaker.html">Article</a> </span><o:p></o:p></div>
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Mark Litwak will next be offering his Risky Business seminar
in San Francisco on June 16<sup>, </sup>2012 through California Lawyers for the
Arts.<a href="http://www.calawyersforthearts.org/calendar?eventId=491080&EventViewMode=EventDetails">Seminar</a> <o:p></o:p></div>
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</div>Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-69505189578731389882012-04-19T10:49:00.002-07:002012-04-19T17:16:49.201-07:00CROWDFUNDING FOR FILMMAKERS, RAISE A MILLION DOLLARS OVER THE INTERNET<div dir="ltr" style="text-align: left;" trbidi="on"><br />
<div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">Although Republicans and Democrats rarely agree on anything these days, Congress has passed and President Obama signed on April 5, 2012 the JOBS (Jumpstart Our Business Startups) Act, a collection of laws that dramatically relaxes regulations on raising capital for startup companies. The law was backed by Republicans, as well as tech companies and their venture capital backers. While encouraging independent filmmaking was not on the mind of Congress when it passed this law, it promises to dramatically expand the ability of filmmakers to raise financing for their projects. <o:p></o:p></span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br />
</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">In Silicon Valley, entrepreneurs often raise large amounts of capital for risky start-ups. However, the number of Initial Public Offerings is much less than it was before the dot com bubble burst. In 1996, there were 791 Initial Public Offerings (IPO) while from 2001 to 2008 the average was a mere 157 a year. Of course, this reduced activity may be due to investors assuming a more prudent investment strategy after losing their shirts in the dot com crash, or it could be a reaction to new regulations. Among other changes enacted, Wall Street firms are prohibited from promoting stocks with their own questionable research, an obvious conflict of interest. <o:p></o:p></span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br />
</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">The new Act relaxes some restrictions for smaller emerging growth companies. It seeks to encourage entrepreneurs because most new jobs are created by small businesses, not large ones. Consequently, this new law could be the impetus for an economic boom – at least that is the hope of its backers. No doubt, some of the “reforms” in the Act are of questionable merit and could open the door to new abuses. However, the current laws governing the raising small amounts of capital are unduly onerous for entrepreneurs, and have been for many decades. Furthermore, these laws have clearly not kept pace with technological change and the methods we use nowadays to communicate with one another. If anyone understands the potential of the crowd, it should be President Obama. In the last presidential election, he raised nearly three-quarters of a billion dollars from Internet solicitations, mostly small donations. <o:p></o:p></span><br />
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</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">Most promising for indie filmmakers, the JOBS Act contains provisions that for the first time will allow internet crowdfunding for the production of films. Crowdfunding is a method of raising capital by obtaining small amounts of money from a large number of investors. Although existing companies like Kickstarter.com and IndieGoGo currently enable filmmakers to raise funding through donations (i.e., gifts), this new law, when it becomes effective, will allow filmmakers to raise up to one million dollars in equity investments by soliciting the general public without the prior restraints. <o:p></o:p></span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br />
</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">The prime restriction that hampered filmmakers from raising funds using the internet was the prohibition on public solicitation for what are called private placements. Public solicitation is any form of advertising or approaching strangers such as by putting leaflets on their car windows. Up until now, the law has required a “pre-existing relationship” between the filmmaker and the potential investor. It was not always clear how much of a relationship was required. There are filmmakers today who have thousands of "friends" on Facebook. Some of these connections may be fairly tenuous and the filmmaker may have never met some friends in person. Do these contacts count as a pre-existing relationship if the extent of the bond is merely accepting an invitation to connect? Fortunately, these kinds of issues don’t seem to matter much anymore with the passage of the JOBS Act.<o:p></o:p></span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br />
</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">For many businesses, a million dollars is not a lot of money, but for filmmakers it can be more than sufficient to produce a feature film. Indeed, with the use of digital cameras and a laptop with Final Cut Pro, many films are made for less. Moreover, about 40 states now offer production incentives, enabling producers to stretch their funding. And by spreading the risk among a large pool of small investors through crowdfunding, no one gets burned badly if the movie flops. <o:p></o:p></span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br />
</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">The major problem with film investments has always been their extreme risk and the expense involved in complying with the laws that regulate investments. Filmmakers were free to go after an unlimited number of high rollers they had relationships with, plus up to 35 middle class investors. But most aspiring indie filmmakers don’t hang around the craps table in Vegas and don't know many wealthy individuals. So they often relied on friends and family, or their own resources, including borrowing money against one's house, or at least in one celebrated instance, selling their blood. Other filmmakers used various subterfuges to reach potential investors and hoped the SEC would not notice. Most of the time the authorities paid them no mind as they had bigger fish to fry. I once spoke to a federal prosecutor on behalf of a client who had been defrauded of several hundred thousand dollars in a fraudulent film investment. The prosecutor confessed that unless at least a million dollars was at stake, the case was just too small for him to pursue. There are just too many bigger crooks out there. <o:p></o:p></span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br />
</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">Crowdfunding may hold another advantage for filmmakers unrelated to raising money. One of the major problems facing independent filmmakers is how to market and distribute their completed movies. Today it is a buyer's market and distributors have thousands of films to choose from when deciding what to acquire. Of course, self-distribution is always an option, and anyone can put their film up on YouTube or other portals. But without effective promotion the film may just sit there undiscovered. However, if a film is financed by a crowd, one starts with a community backing the project, and each member has an incentive to spread the word about the film. As the major studios have seen, a film that receives bad word--of-mouth on opening weekend falls faster and harder than ever before, while at the same time, an unknown title can quickly catch fire and become an overnight sensation. Moreover, funds could be used for advertising and distribution provided that use is disclosed to investors. <o:p></o:p></span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br />
</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">The potential for crowdfunding looks promising. There are many examples of enterprising filmmakers who have already funded films with crowd sourced donations. In these instances, the donors have no expectation of sharing in any financial return, but have the satisfaction of supporting a project they believe in. They could also be given t-shirts, a DVD of the completed movie, a screen credit or an invitation to the wrap party or premiere screenings. In other words, they receive benefits not considered an equity interest and therefore not subject to state and federal security laws. However, filmmakers need to cautious if they decide to fund a film through crowdfunding. They need to make sure they do not overpromise what investors may receive or they could be liable for fraud. One of the major safeguards in the legislation for investors is that offers to investors need to be made through a Broker-Dealer or a funding portal that is registered with the SEC under rules to be developed. These intermediaries will be responsible for trying to keep the fraudsters out of the system and offer some comfort to investors that they are not investing with a Nigerian con artist who last week was soliciting you for help in transferring millions of dollars as part of some internet scam. <o:p></o:p></span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br />
</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">The SEC has 270 days to implement additional regulations, and it is not clear at this time how restrictive or liberal these rules may be. The SEC <span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; color: #333333;">is inviting the public to send in comments on each of the seven titles of the law including the crowdfunding provision, which is Title III. </span> This is an opportunity for filmmakers to express their concerns about the rules that will be adopted to enforce provisions of the JOBS act. Filmmakers can submit comments via either email or on the SEC website. <o:p></o:p></span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br />
</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">To submit comments go to: <o:p></o:p></span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><br />
</span></div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"> <a href="http://www.sec.gov/spotlight/jobsactcomments.shtml">SEC comments</a><o:p></o:p></span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">To read comments submitted go to: <a href="http://www.sec.gov/comments/jobs-title-iii/jobs-title-iii.shtml">Read link</a><o:p></o:p></span></div><div class="MsoNormal"><br />
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</span></span></div></div>Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-60553325374909146052012-04-10T15:01:00.001-07:002012-05-08T09:56:59.026-07:00NEW LAW WILL HELP INDIE FILMMAKERS RAISE FINANCING<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">President Obama signed last week the JOBS (Jumpstart Our Business Startups) Act, a collection of laws that dramatically relaxes regulations on raising capital for startup companies. The Act has provisions that for the first time will allow internet crowdfunding of small businesses, such as producing indie films. Crowdfunding is a method of raising capital by obtaining small amounts of money from a large number of investors. Although existing companies like kickstarter.com enable filmmakers to raise funding through donations (i.e. gifts), this new law, when it becomes effective, will allow filmmakers to raise up to one million dollars in equity investments by soliciting the general public without complying with the onerous security regulations currently in place. </span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">Up until now, it has been difficult for filmmakers to raise financing either through a public offering or a private offering. A public offering is made to the public at large and requires SEC approval. A company selling stock on the New York Stock Exchange is an example of a public offering. Registration for a public offering is both time-consuming and expensive, costing hundreds of thousands of dollars, and not a realistic alternative for most low-budget filmmakers.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">A private offering, on the other hand, is generally restricted to people the promoter already knows, or as the law states, with whom the promoter has a “pre-existing relationship.” Advertising is generally prohibited. While a private offering is not nearly as expensive as public offering, the fees for the creation of a Private Placement Memorandum (PPM) can easily exceed $25,000, which is not an insignificant expense for a small entrepreneur. <o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">The new law had bi-partisan support. It passed Congress with a 73-26 Senate vote and a 380-41 House vote. It allows non-accredited investors to participate in funding rounds. Non-accredited investors are essentially everyone who is not rich. In the past there have been significant limitations on the number of non-accredited investors a filmmaker could accept in an offering, typically no more than 35. <o:p></o:p></span><br />
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">The SEC has 270 days to implement additional regulations, and it is not clear at this time how restrictive or liberal these rules may be. So it will be early 2013 when filmmakers will be able to actually start raising funds. Investors with a net worth under $100,000 are limited to investing the greater of<span class="apple-converted-space"> </span><span class="xn-money">$2,000</span><span class="apple-converted-space"> </span>or 5% of their annual income or net worth, whichever is greater. Wealthier investors can invest 10 percent of their annual income or net worth, not to exceed a maximum aggregate amount sold of $100,000<span class="xn-money">. </span>Offers must be made through a Broker-Dealer or a "funding portal" that is registered with the SEC, pursuant to rules and regulations to be developed. Such intermediaries will need to provide detailed disclosures to investors and make sure potential investors confirm that they are willing to risk losing their entire investment.<o:p></o:p></span></div>
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">The company seeking funding will need to disclose its financial condition including: a) <span class="prnewsspan">If the target offering amount is $100,000 or less, then the most recent year's income tax returns (if any); as well as financial statements of the issuer certified by the principal executive officer of the issuer as being true and complete in all material aspects; b) If the target offering amount is over $100,000, but not more than $500,000, the issuer must provide financial statements reviewed by an independent public accountant; and, c) If the target offering amount is over $500,000, the issuer must provide audited financial statements. So crowdfunding is not going to be as simple as soliciting investors from your blog or facebook, and the costs may not be any less than what it currently costs to prepare a PPM. However, being able to use the internet to attract many small investors could make it much easier to raise funds. Investors risking $2,000 may be more willing to tolerate on the risks of filmmaking than those being asked to invest larger sums. <o:p></o:p></span></span></div>
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<span class="prnewsspan"><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">Besides the ability to raise funds through crowdfunding, the Act made a major change to Reg D 506 offerings, which are offerings limited to accredited investors (i.e. wealthy people) or sophisticated investors. For the first time the restrictions on public solicitations have been removed which means that the offering company could solicit investors including approaching them over the Internet. The SEC has 90 days to develop rules to implement this change.</span></span><span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;"><o:p></o:p></span><br />
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<span style="font-family: 'Times New Roman', serif; font-size: 12pt; line-height: 115%;">Critics of the new law claim that these changes will open the floodgates for scammers to raise funds from unwary investors. With that in mind, investors may want to read the article I wrote for the Vanderbilt Law Journal about protecting film investors at: <a href="http://www.marklitwak.com/downloads/HollywoodShuffle.pdf">link</a><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">The new act is reprinted below: </span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">-H.R.3606--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">H.R.3606<o:p></o:p></span></div>
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<b><i><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">One Hundred Twelfth Congress</span></i></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<b><i><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">of the</span></i></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<b><i><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">United States of America</span></i></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<i><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">AT THE SECOND SESSION</span></i><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Begun and held at the City of Washington on Tuesday,<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">the third day of January, two thousand and twelve<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">An Act<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">To increase American job creation and economic growth by improving access to the public capital markets for emerging growth companies.<o:p></o:p></span></div>
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<i><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,</span></i><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 13.5pt;">SECTION 1. SHORT TITLE.<o:p></o:p></span></b></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">This Act may be cited as the `Jumpstart Our Business Startups Act'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 2. TABLE OF CONTENTS.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">The table of contents of this Act is as follows:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 1. Short title.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 2. Table of contents.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 13.5pt;">TITLE I--REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES<o:p></o:p></span></b></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 101. Definitions.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 102. Disclosure obligations.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 103. Internal controls audit.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 104. Auditing standards.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 105. Availability of information about emerging growth companies.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 106. Other matters.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 107. Opt-in right for emerging growth companies.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 108. Review of Regulation S-K.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 13.5pt;">TITLE II--ACCESS TO CAPITAL FOR JOB CREATORS<o:p></o:p></span></b></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 201. Modification of exemption.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 13.5pt;">TITLE III--CROWDFUNDING<o:p></o:p></span></b></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 301. Short title.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 302. Crowdfunding exemption.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 303. Exclusion of crowdfunding investors from shareholder cap.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 304. Funding portal regulation.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 305. Relationship with State law.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 13.5pt;">TITLE IV--SMALL COMPANY CAPITAL FORMATION<o:p></o:p></span></b></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 401. Authority to exempt certain securities.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 402. Study on the impact of State Blue Sky laws on Regulation A offerings.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 13.5pt;">TITLE V--PRIVATE COMPANY FLEXIBILITY AND GROWTH<o:p></o:p></span></b></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 501. Threshold for registration.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 502. Employees.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 503. Commission rulemaking.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 504. Commission study of enforcement authority under Rule 12g5-1.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 13.5pt;">TITLE VI--CAPITAL EXPANSION<o:p></o:p></span></b></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 601. Shareholder threshold for registration.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 602. Rulemaking.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 13.5pt;">TITLE VII--OUTREACH ON CHANGES TO THE LAW<o:p></o:p></span></b></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Sec. 701. Outreach by the Commission.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">TITLE I--REOPENING AMERICAN CAPITAL MARKETS TO EMERGING GROWTH COMPANIES<o:p></o:p></span></b></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 101. DEFINITIONS.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) Securities Act of 1933- Section 2(a) of the Securities Act of 1933 (15 U.S.C. 77b(a)) is amended by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(19) The term `emerging growth company' means an issuer that had total annual gross revenues of less than $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) during its most recently completed fiscal year. An issuer that is an emerging growth company as of the first day of that fiscal year shall continue to be deemed an emerging growth company until the earliest of--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under this title;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(D) the date on which such issuer is deemed to be a `large accelerated filer', as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Securities Exchange Act of 1934- Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) by redesignating paragraph (77), as added by section 941(a) of the Investor Protection and Securities Reform Act of 2010 (Public Law 111-203, 124 Stat. 1890), as paragraph (79); and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(80) EMERGING GROWTH COMPANY- The term `emerging growth company' means an issuer that had total annual gross revenues of less than $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) during its most recently completed fiscal year. An issuer that is an emerging growth company as of the first day of that fiscal year shall continue to be deemed an emerging growth company until the earliest of--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) the last day of the fiscal year of the issuer during which it had total annual gross revenues of $1,000,000,000 (as such amount is indexed for inflation every 5 years by the Commission to reflect the change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics, setting the threshold to the nearest 1,000,000) or more;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the issuer pursuant to an effective registration statement under the Securities Act of 1933;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) the date on which such issuer has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(D) the date on which such issuer is deemed to be a `large accelerated filer', as defined in section 240.12b-2 of title 17, Code of Federal Regulations, or any successor thereto.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(c) Other Definitions- As used in this title, the following definitions shall apply:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) COMMISSION- The term `Commission' means the Securities and Exchange Commission.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) INITIAL PUBLIC OFFERING DATE- The term `initial public offering date' means the date of the first sale of common equity securities of an issuer pursuant to an effective registration statement under the Securities Act of 1933.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(d) Effective Date- Notwithstanding section 2(a)(19) of the Securities Act of 1933 and section 3(a)(80) of the Securities Exchange Act of 1934, an issuer shall not be an emerging growth company for purposes of such Acts if the first sale of common equity securities of such issuer pursuant to an effective registration statement under the Securities Act of 1933 occurred on or before December 8, 2011.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 102. DISCLOSURE OBLIGATIONS.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) Executive Compensation-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) EXEMPTION- Section 14A(e) of the Securities Exchange Act of 1934 (15 U.S.C. 78n-1(e)) is amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(A) by striking `The Commission may' and inserting the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) IN GENERAL- The Commission may';<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(B) by striking `an issuer' and inserting `any other issuer'; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(C) by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) TREATMENT OF EMERGING GROWTH COMPANIES-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) IN GENERAL- An emerging growth company shall be exempt from the requirements of subsections (a) and (b).<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) COMPLIANCE AFTER TERMINATION OF EMERGING GROWTH COMPANY TREATMENT- An issuer that was an emerging growth company but is no longer an emerging growth company shall include the first separate resolution described under subsection (a)(1) not later than the end of--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(i) in the case of an issuer that was an emerging growth company for less than 2 years after the date of first sale of common equity securities of the issuer pursuant to an effective registration statement under the Securities Act of 1933, the 3-year period beginning on such date; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(ii) in the case of any other issuer, the 1-year period beginning on the date the issuer is no longer an emerging growth company.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) PROXIES- Section 14(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(i)) is amended by inserting `, for any issuer other than an emerging growth company,' after `including'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(3) COMPENSATION DISCLOSURES- Section 953(b)(1) of the Investor Protection and Securities Reform Act of 2010 (Public Law 111-203; 124 Stat. 1904) is amended by inserting `, other than an emerging growth company, as that term is defined in section 3(a) of the Securities Exchange Act of 1934,' after `require each issuer'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Financial Disclosures and Accounting Pronouncements-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) SECURITIES ACT OF 1933- Section 7(a) of the Securities Act of 1933 (15 U.S.C. 77g(a)) is amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(A) by striking `(a) The registration' and inserting the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(a) Information Required in Registration Statement-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) IN GENERAL- The registration'; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(B) by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) TREATMENT OF EMERGING GROWTH COMPANIES- An emerging growth company--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) need not present more than 2 years of audited financial statements in order for the registration statement of such emerging growth company with respect to an initial public offering of its common equity securities to be effective, and in any other registration statement to be filed with the Commission, an emerging growth company need not present selected financial data in accordance with section 229.301 of title 17, Code of Federal Regulations, for any period prior to the earliest audited period presented in connection with its initial public offering; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) may not be required to comply with any new or revised financial accounting standard until such date that a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) is required to comply with such new or revised accounting standard, if such standard applies to companies that are not issuers.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) SECURITIES EXCHANGE ACT OF 1934- Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) is amended by adding at the end the following: `In any registration statement, periodic report, or other reports to be filed with the Commission, an emerging growth company need not present selected financial data in accordance with section 229.301 of title 17, Code of Federal Regulations, for any period prior to the earliest audited period presented in connection with its first registration statement that became effective under this Act or the Securities Act of 1933 and, with respect to any such statement or reports, an emerging growth company may not be required to comply with any new or revised financial accounting standard until such date that a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a))) is required to comply with such new or revised accounting standard, if such standard applies to companies that are not issuers.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(c) Other Disclosures- An emerging growth company may comply with section 229.303(a) of title 17, Code of Federal Regulations, or any successor thereto, by providing information required by such section with respect to the financial statements of the emerging growth company for each period presented pursuant to section 7(a) of the Securities Act of 1933 (15 U.S.C. 77g(a)). An emerging growth company may comply with section 229.402 of title 17, Code of Federal Regulations, or any successor thereto, by disclosing the same information as any issuer with a market value of outstanding voting and nonvoting common equity held by non-affiliates of less than $75,000,000.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 103. INTERNAL CONTROLS AUDIT.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262(b)) is amended by inserting `, other than an issuer that is an emerging growth company (as defined in section 3 of the Securities Exchange Act of 1934),' before `shall attest to'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 104. AUDITING STANDARDS.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Section 103(a)(3) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7213(a)(3)) is amended by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) TRANSITION PERIOD FOR EMERGING GROWTH COMPANIES- Any rules of the Board requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer (auditor discussion and analysis) shall not apply to an audit of an emerging growth company, as defined in section 3 of the Securities Exchange Act of 1934. Any additional rules adopted by the Board after the date of enactment of this subparagraph shall not apply to an audit of any emerging growth company, unless the Commission determines that the application of such additional requirements is necessary or appropriate in the public interest, after considering the protection of investors and whether the action will promote efficiency, competition, and capital formation.'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 105. AVAILABILITY OF INFORMATION ABOUT EMERGING GROWTH COMPANIES.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) Provision of Research- Section 2(a)(3) of the Securities Act of 1933 (15 U.S.C. 77b(a)(3)) is amended by adding at the end the following: `The publication or distribution by a broker or dealer of a research report about an emerging growth company that is the subject of a proposed public offering of the common equity securities of such emerging growth company pursuant to a registration statement that the issuer proposes to file, or has filed, or that is effective shall be deemed for purposes of paragraph (10) of this subsection and section 5(c) not to constitute an offer for sale or offer to sell a security, even if the broker or dealer is participating or will participate in the registered offering of the securities of the issuer. As used in this paragraph, the term `research report' means a written, electronic, or oral communication that includes information, opinions, or recommendations with respect to securities of an issuer or an analysis of a security or an issuer, whether or not it provides information reasonably sufficient upon which to base an investment decision.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Securities Analyst Communications- Section 15D of the Securities Exchange Act of 1934 (15 U.S.C. 78o-6) is amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) by redesignating subsection (c) as subsection (d); and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) by inserting after subsection (b) the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(c) Limitation- Notwithstanding subsection (a) or any other provision of law, neither the Commission nor any national securities association registered under section 15A may adopt or maintain any rule or regulation in connection with an initial public offering of the common equity of an emerging growth company--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) restricting, based on functional role, which associated persons of a broker, dealer, or member of a national securities association, may arrange for communications between a securities analyst and a potential investor; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) restricting a securities analyst from participating in any communications with the management of an emerging growth company that is also attended by any other associated person of a broker, dealer, or member of a national securities association whose functional role is other than as a securities analyst.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(c) Expanding Permissible Communications- Section 5 of the Securities Act of 1933 (15 U.S.C. 77e) is amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) by redesignating subsection (d) as subsection (e); and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) by inserting after subsection (c) the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(d) Limitation- Notwithstanding any other provision of this section, an emerging growth company or any person authorized to act on behalf of an emerging growth company may engage in oral or written communications with potential investors that are qualified institutional buyers or institutions that are accredited investors, as such terms are respectively defined in section 230.144A and section 230.501(a) of title 17, Code of Federal Regulations, or any successor thereto, to determine whether such investors might have an interest in a contemplated securities offering, either prior to or following the date of filing of a registration statement with respect to such securities with the Commission, subject to the requirement of subsection (b)(2).'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(d) Post Offering Communications- Neither the Commission nor any national securities association registered under section 15A of the Securities Exchange Act of 1934 may adopt or maintain any rule or regulation prohibiting any broker, dealer, or member of a national securities association from publishing or distributing any research report or making a public appearance, with respect to the securities of an emerging growth company, either--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) within any prescribed period of time following the initial public offering date of the emerging growth company; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) within any prescribed period of time prior to the expiration date of any agreement between the broker, dealer, or member of a national securities association and the emerging growth company or its shareholders that restricts or prohibits the sale of securities held by the emerging growth company or its shareholders after the initial public offering date.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 106. OTHER MATTERS.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) Draft Registration Statements- Section 6 of the Securities Act of 1933 (15 U.S.C. 77f) is amended by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(e) Emerging Growth Companies-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) IN GENERAL- Any emerging growth company, prior to its initial public offering date, may confidentially submit to the Commission a draft registration statement, for confidential nonpublic review by the staff of the Commission prior to public filing, provided that the initial confidential submission and all amendments thereto shall be publicly filed with the Commission not later than 21 days before the date on which the issuer conducts a road show, as such term is defined in section 230.433(h)(4) of title 17, Code of Federal Regulations, or any successor thereto.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) CONFIDENTIALITY- Notwithstanding any other provision of this title, the Commission shall not be compelled to disclose any information provided to or obtained by the Commission pursuant to this subsection. For purposes of section 552 of title 5, United States Code, this subsection shall be considered a statute described in subsection (b)(3)(B) of such section 552. Information described in or obtained pursuant to this subsection shall be deemed to constitute confidential information for purposes of section 24(b)(2) of the Securities Exchange Act of 1934.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Tick Size- Section 11A(c) of the Securities Exchange Act of 1934 (15 U.S.C. 78k-1(c)) is amended by adding at the end the following new paragraph:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(6) TICK SIZE-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) STUDY AND REPORT- The Commission shall conduct a study examining the transition to trading and quoting securities in one penny increments, also known as decimalization. The study shall examine the impact that decimalization has had on the number of initial public offerings since its implementation relative to the period before its implementation. The study shall also examine the impact that this change has had on liquidity for small and middle capitalization company securities and whether there is sufficient economic incentive to support trading operations in these securities in penny increments. Not later than 90 days after the date of enactment of this paragraph, the Commission shall submit to Congress a report on the findings of the study.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) DESIGNATION- If the Commission determines that the securities of emerging growth companies should be quoted and traded using a minimum increment of greater than $0.01, the Commission may, by rule not later than 180 days after the date of enactment of this paragraph, designate a minimum increment for the securities of emerging growth companies that is greater than $0.01 but less than $0.10 for use in all quoting and trading of securities in any exchange or other execution venue.'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 107. OPT-IN RIGHT FOR EMERGING GROWTH COMPANIES.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) In General- With respect to an exemption provided to emerging growth companies under this title, or an amendment made by this title, an emerging growth company may choose to forgo such exemption and instead comply with the requirements that apply to an issuer that is not an emerging growth company.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Special Rule- Notwithstanding subsection (a), with respect to the extension of time to comply with new or revised financial accounting standards provided under section 7(a)(2)(B) of the Securities Act of 1933 and section 13(a) of the Securities Exchange Act of 1934, as added by section 102(b), if an emerging growth company chooses to comply with such standards to the same extent that a non-emerging growth company is required to comply with such standards, the emerging growth company--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) must make such choice at the time the company is first required to file a registration statement, periodic report, or other report with the Commission under section 13 of the Securities Exchange Act of 1934 and notify the Securities and Exchange Commission of such choice;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) may not select some standards to comply with in such manner and not others, but must comply with all such standards to the same extent that a non-emerging growth company is required to comply with such standards; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(3) must continue to comply with such standards to the same extent that a non-emerging growth company is required to comply with such standards for as long as the company remains an emerging growth company.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 108. REVIEW OF REGULATION S-K.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) Review- The Securities and Exchange Commission shall conduct a review of its Regulation S-K (17 CFR 229.10 et seq.) to--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) comprehensively analyze the current registration requirements of such regulation; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) determine how such requirements can be updated to modernize and simplify the registration process and reduce the costs and other burdens associated with these requirements for issuers who are emerging growth companies.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Report- Not later than 180 days after the date of enactment of this title, the Commission shall transmit to Congress a report of the review conducted under subsection (a). The report shall include the specific recommendations of the Commission on how to streamline the registration process in order to make it more efficient and less burdensome for the Commission and for prospective issuers who are emerging growth companies.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">TITLE II--ACCESS TO CAPITAL FOR JOB CREATORS<o:p></o:p></span></b></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 201. MODIFICATION OF EXEMPTION.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) Modification of Rules-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) Not later than 90 days after the date of the enactment of this Act, the Securities and Exchange Commission shall revise its rules issued in section 230.506 of title 17, Code of Federal Regulations, to provide that the prohibition against general solicitation or general advertising contained in section 230.502(c) of such title shall not apply to offers and sales of securities made pursuant to section 230.506, provided that all purchasers of the securities are accredited investors. Such rules shall require the issuer to take reasonable steps to verify that purchasers of the securities are accredited investors, using such methods as determined by the Commission. Section 230.506 of title 17, Code of Federal Regulations, as revised pursuant to this section, shall continue to be treated as a regulation issued under section 4(2) of the Securities Act of 1933 (15 U.S.C. 77d(2)).<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) Not later than 90 days after the date of enactment of this Act, the Securities and Exchange Commission shall revise subsection (d)(1) of section 230.144A of title 17, Code of Federal Regulations, to provide that securities sold under such revised exemption may be offered to persons other than qualified institutional buyers, including by means of general solicitation or general advertising, provided that securities are sold only to persons that the seller and any person acting on behalf of the seller reasonably believe is a qualified institutional buyer.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Consistency in Interpretation- Section 4 of the Securities Act of 1933 (15 U.S.C. 77d) is amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) by striking `The provisions of section 5' and inserting `(a) The provisions of section 5'; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(b) Offers and sales exempt under section 230.506 of title 17, Code of Federal Regulations (as revised pursuant to section 201 of the Jumpstart Our Business Startups Act) shall not be deemed public offerings under the Federal securities laws as a result of general advertising or general solicitation.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(c) Explanation of Exemption- Section 4 of the Securities Act of 1933 (15 U.S.C. 77d) is amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) by striking `The provisions of section 5' and inserting `(a) The provisions of section 5'; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(b)(1) With respect to securities offered and sold in compliance with Rule 506 of Regulation D under this Act, no person who meets the conditions set forth in paragraph (2) shall be subject to registration as a broker or dealer pursuant to section 15(a)(1) of this title, solely because--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) that person maintains a platform or mechanism that permits the offer, sale, purchase, or negotiation of or with respect to securities, or permits general solicitations, general advertisements, or similar or related activities by issuers of such securities, whether online, in person, or through any other means;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) that person or any person associated with that person co-invests in such securities; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) that person or any person associated with that person provides ancillary services with respect to such securities.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) The exemption provided in paragraph (1) shall apply to any person described in such paragraph if--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) such person and each person associated with that person receives no compensation in connection with the purchase or sale of such security;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) such person and each person associated with that person does not have possession of customer funds or securities in connection with the purchase or sale of such security; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) such person is not subject to a statutory disqualification as defined in section 3(a)(39) of this title and does not have any person associated with that person subject to such a statutory disqualification.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(3) For the purposes of this subsection, the term `ancillary services' means--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) the provision of due diligence services, in connection with the offer, sale, purchase, or negotiation of such security, so long as such services do not include, for separate compensation, investment advice or recommendations to issuers or investors; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) the provision of standardized documents to the issuers and investors, so long as such person or entity does not negotiate the terms of the issuance for and on behalf of third parties and issuers are not required to use the standardized documents as a condition of using the service.'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">TITLE III--CROWDFUNDING<o:p></o:p></span></b></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 301. SHORT TITLE.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">This title may be cited as the `Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012' or the `CROWDFUND Act'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 302. CROWDFUNDING EXEMPTION.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) Securities Act of 1933- Section 4 of the Securities Act of 1933 (15 U.S.C. 77d) is amended by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(6) transactions involving the offer or sale of securities by an issuer (including all entities controlled by or under common control with the issuer), provided that--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) the aggregate amount sold to all investors by the issuer, including any amount sold in reliance on the exemption provided under this paragraph during the 12-month period preceding the date of such transaction, is not more than $1,000,000;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) the aggregate amount sold to any investor by an issuer, including any amount sold in reliance on the exemption provided under this paragraph during the 12-month period preceding the date of such transaction, does not exceed--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(i) the greater of $2,000 or 5 percent of the annual income or net worth of such investor, as applicable, if either the annual income or the net worth of the investor is less than $100,000; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(ii) 10 percent of the annual income or net worth of such investor, as applicable, not to exceed a maximum aggregate amount sold of $100,000, if either the annual income or net worth of the investor is equal to or more than $100,000;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) the transaction is conducted through a broker or funding portal that complies with the requirements of section 4A(a); and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(D) the issuer complies with the requirements of section 4A(b).'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Requirements To Qualify for Crowdfunding Exemption- The Securities Act of 1933 (15 U.S.C. 77a et seq.) is amended by inserting after section 4 the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`SEC. 4A. REQUIREMENTS WITH RESPECT TO CERTAIN SMALL TRANSACTIONS.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(a) Requirements on Intermediaries- A person acting as an intermediary in a transaction involving the offer or sale of securities for the account of others pursuant to section 4(6) shall--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) register with the Commission as--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) a broker; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) a funding portal (as defined in section 3(a)(80) of the Securities Exchange Act of 1934);<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) register with any applicable self-regulatory organization (as defined in section 3(a)(26) of the Securities Exchange Act of 1934);<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(3) provide such disclosures, including disclosures related to risks and other investor education materials, as the Commission shall, by rule, determine appropriate;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(4) ensure that each investor--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) reviews investor-education information, in accordance with standards established by the Commission, by rule;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) positively affirms that the investor understands that the investor is risking the loss of the entire investment, and that the investor could bear such a loss; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) answers questions demonstrating--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(i) an understanding of the level of risk generally applicable to investments in startups, emerging businesses, and small issuers;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(ii) an understanding of the risk of illiquidity; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(iii) an understanding of such other matters as the Commission determines appropriate, by rule;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(5) take such measures to reduce the risk of fraud with respect to such transactions, as established by the Commission, by rule, including obtaining a background and securities enforcement regulatory history check on each officer, director, and person holding more than 20 percent of the outstanding equity of every issuer whose securities are offered by such person;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(6) not later than 21 days prior to the first day on which securities are sold to any investor (or such other period as the Commission may establish), make available to the Commission and to potential investors any information provided by the issuer pursuant to subsection (b);<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(7) ensure that all offering proceeds are only provided to the issuer when the aggregate capital raised from all investors is equal to or greater than a target offering amount, and allow all investors to cancel their commitments to invest, as the Commission shall, by rule, determine appropriate;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(8) make such efforts as the Commission determines appropriate, by rule, to ensure that no investor in a 12-month period has purchased securities offered pursuant to section 4(6) that, in the aggregate, from all issuers, exceed the investment limits set forth in section 4(6)(B);<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(9) take such steps to protect the privacy of information collected from investors as the Commission shall, by rule, determine appropriate;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(10) not compensate promoters, finders, or lead generators for providing the broker or funding portal with the personal identifying information of any potential investor;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(11) prohibit its directors, officers, or partners (or any person occupying a similar status or performing a similar function) from having any financial interest in an issuer using its services; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(12) meet such other requirements as the Commission may, by rule, prescribe, for the protection of investors and in the public interest.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(b) Requirements for Issuers- For purposes of section 4(6), an issuer who offers or sells securities shall--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) file with the Commission and provide to investors and the relevant broker or funding portal, and make available to potential investors--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) the name, legal status, physical address, and website address of the issuer;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) the names of the directors and officers (and any persons occupying a similar status or performing a similar function), and each person holding more than 20 percent of the shares of the issuer;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) a description of the business of the issuer and the anticipated business plan of the issuer;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(D) a description of the financial condition of the issuer, including, for offerings that, together with all other offerings of the issuer under section 4(6) within the preceding 12-month period, have, in the aggregate, target offering amounts of--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(i) $100,000 or less--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(I) the income tax returns filed by the issuer for the most recently completed year (if any); and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(II) financial statements of the issuer, which shall be certified by the principal executive officer of the issuer to be true and complete in all material respects;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(ii) more than $100,000, but not more than $500,000, financial statements reviewed by a public accountant who is independent of the issuer, using professional standards and procedures for such review or standards and procedures established by the Commission, by rule, for such purpose; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(iii) more than $500,000 (or such other amount as the Commission may establish, by rule), audited financial statements;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(E) a description of the stated purpose and intended use of the proceeds of the offering sought by the issuer with respect to the target offering amount;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(F) the target offering amount, the deadline to reach the target offering amount, and regular updates regarding the progress of the issuer in meeting the target offering amount;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(G) the price to the public of the securities or the method for determining the price, provided that, prior to sale, each investor shall be provided in writing the final price and all required disclosures, with a reasonable opportunity to rescind the commitment to purchase the securities;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(H) a description of the ownership and capital structure of the issuer, including--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(i) terms of the securities of the issuer being offered and each other class of security of the issuer, including how such terms may be modified, and a summary of the differences between such securities, including how the rights of the securities being offered may be materially limited, diluted, or qualified by the rights of any other class of security of the issuer;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(ii) a description of how the exercise of the rights held by the principal shareholders of the issuer could negatively impact the purchasers of the securities being offered;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(iii) the name and ownership level of each existing shareholder who owns more than 20 percent of any class of the securities of the issuer;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(iv) how the securities being offered are being valued, and examples of methods for how such securities may be valued by the issuer in the future, including during subsequent corporate actions; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(v) the risks to purchasers of the securities relating to minority ownership in the issuer, the risks associated with corporate actions, including additional issuances of shares, a sale of the issuer or of assets of the issuer, or transactions with related parties; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(I) such other information as the Commission may, by rule, prescribe, for the protection of investors and in the public interest;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) not advertise the terms of the offering, except for notices which direct investors to the funding portal or broker;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(3) not compensate or commit to compensate, directly or indirectly, any person to promote its offerings through communication channels provided by a broker or funding portal, without taking such steps as the Commission shall, by rule, require to ensure that such person clearly discloses the receipt, past or prospective, of such compensation, upon each instance of such promotional communication;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(4) not less than annually, file with the Commission and provide to investors reports of the results of operations and financial statements of the issuer, as the Commission shall, by rule, determine appropriate, subject to such exceptions and termination dates as the Commission may establish, by rule; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(5) comply with such other requirements as the Commission may, by rule, prescribe, for the protection of investors and in the public interest.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(c) Liability for Material Misstatements and Omissions-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) ACTIONS AUTHORIZED-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) IN GENERAL- Subject to paragraph (2), a person who purchases a security in a transaction exempted by the provisions of section 4(6) may bring an action against an issuer described in paragraph (2), either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if such person no longer owns the security.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) LIABILITY- An action brought under this paragraph shall be subject to the provisions of section 12(b) and section 13, as if the liability were created under section 12(a)(2).<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) APPLICABILITY- An issuer shall be liable in an action under paragraph (1), if the issuer--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by any means of any written or oral communication, in the offering or sale of a security in a transaction exempted by the provisions of section 4(6), makes an untrue statement of a material fact or omits to state a material fact required to be stated or necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading, provided that the purchaser did not know of such untruth or omission; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) does not sustain the burden of proof that such issuer did not know, and in the exercise of reasonable care could not have known, of such untruth or omission.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(3) DEFINITION- As used in this subsection, the term `issuer' includes any person who is a director or partner of the issuer, and the principal executive officer or officers, principal financial officer, and controller or principal accounting officer of the issuer (and any person occupying a similar status or performing a similar function) that offers or sells a security in a transaction exempted by the provisions of section 4(6), and any person who offers or sells the security in such offering.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(d) Information Available to States- The Commission shall make, or shall cause to be made by the relevant broker or funding portal, the information described in subsection (b) and such other information as the Commission, by rule, determines appropriate, available to the securities commission (or any agency or office performing like functions) of each State and territory of the United States and the District of Columbia.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(e) Restrictions on Sales- Securities issued pursuant to a transaction described in section 4(6)--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) may not be transferred by the purchaser of such securities during the 1-year period beginning on the date of purchase, unless such securities are transferred--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) to the issuer of the securities;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) to an accredited investor;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) as part of an offering registered with the Commission; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(D) to a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance, in the discretion of the Commission; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) shall be subject to such other limitations as the Commission shall, by rule, establish.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(f) Applicability- Section 4(6) shall not apply to transactions involving the offer or sale of securities by any issuer that--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) is not organized under and subject to the laws of a State or territory of the United States or the District of Columbia;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) is subject to the requirement to file reports pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(3) is an investment company, as defined in section 3 of the Investment Company Act of 1940, or is excluded from the definition of investment company by section 3(b) or section 3(c) of that Act; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(4) the Commission, by rule or regulation, determines appropriate.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(g) Rule of Construction- Nothing in this section or section 4(6) shall be construed as preventing an issuer from raising capital through methods not described under section 4(6).<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(h) Certain Calculations-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) DOLLAR AMOUNTS- Dollar amounts in section 4(6) and subsection (b) of this section shall be adjusted by the Commission not less frequently than once every 5 years, by notice published in the Federal Register to reflect any change in the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) INCOME AND NET WORTH- The income and net worth of a natural person under section 4(6)(B) shall be calculated in accordance with any rules of the Commission under this title regarding the calculation of the income and net worth, respectively, of an accredited investor.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(c) Rulemaking- Not later than 270 days after the date of enactment of this Act, the Securities and Exchange Commission (in this title referred to as the `Commission') shall issue such rules as the Commission determines may be necessary or appropriate for the protection of investors to carry out sections 4(6) and section 4A of the Securities Act of 1933, as added by this title. In carrying out this section, the Commission shall consult with any securities commission (or any agency or office performing like functions) of the States, any territory of the United States, and the District of Columbia, which seeks to consult with the Commission, and with any applicable national securities association.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(d) Disqualification-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) IN GENERAL- Not later than 270 days after the date of enactment of this Act, the Commission shall, by rule, establish disqualification provisions under which--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(A) an issuer shall not be eligible to offer securities pursuant to section 4(6) of the Securities Act of 1933, as added by this title; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(B) a broker or funding portal shall not be eligible to effect or participate in transactions pursuant to that section 4(6).<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) INCLUSIONS- Disqualification provisions required by this subsection shall--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(A) be substantially similar to the provisions of section 230.262 of title 17, Code of Federal Regulations (or any successor thereto); and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(B) disqualify any offering or sale of securities by a person that--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(i) is subject to a final order of a State securities commission (or an agency or officer of a State performing like functions), a State authority that supervises or examines banks, savings associations, or credit unions, a State insurance commission (or an agency or officer of a State performing like functions), an appropriate Federal banking agency, or the National Credit Union Administration, that--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(I) bars the person from--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(aa) association with an entity regulated by such commission, authority, agency, or officer;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(bb) engaging in the business of securities, insurance, or banking; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(cc) engaging in savings association or credit union activities; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(II) constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct within the 10-year period ending on the date of the filing of the offer or sale; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(ii) has been convicted of any felony or misdemeanor in connection with the purchase or sale of any security or involving the making of any false filing with the Commission.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 303. EXCLUSION OF CROWDFUNDING INVESTORS FROM SHAREHOLDER CAP.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) Exemption- Section 12(g) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)) is amended by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(6) EXCLUSION FOR PERSONS HOLDING CERTAIN SECURITIES- The Commission shall, by rule, exempt, conditionally or unconditionally, securities acquired pursuant to an offering made under section 4(6) of the Securities Act of 1933 from the provisions of this subsection.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Rulemaking- The Commission shall issue a rule to carry out section 12(g)(6) of the Securities Exchange Act of 1934 (15 U.S.C. 78c), as added by this section, not later than 270 days after the date of enactment of this Act.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 304. FUNDING PORTAL REGULATION.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) Exemption-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) IN GENERAL- Section 3 of the Securities Exchange Act of 1934 (15 U.S.C. 78c) is amended by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(h) Limited Exemption for Funding Portals-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) IN GENERAL- The Commission shall, by rule, exempt, conditionally or unconditionally, a registered funding portal from the requirement to register as a broker or dealer under section 15(a)(1), provided that such funding portal--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) remains subject to the examination, enforcement, and other rulemaking authority of the Commission;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) is a member of a national securities association registered under section 15A; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) is subject to such other requirements under this title as the Commission determines appropriate under such rule.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) NATIONAL SECURITIES ASSOCIATION MEMBERSHIP- For purposes of sections 15(b)(8) and 15A, the term `broker or dealer' includes a funding portal and the term `registered broker or dealer' includes a registered funding portal, except to the extent that the Commission, by rule, determines otherwise, provided that a national securities association shall only examine for and enforce against a registered funding portal rules of such national securities association written specifically for registered funding portals.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) RULEMAKING- The Commission shall issue a rule to carry out section 3(h) of the Securities Exchange Act of 1934 (15 U.S.C. 78c), as added by this subsection, not later than 270 days after the date of enactment of this Act.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Definition- Section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)) is amended by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(80) FUNDING PORTAL- The term `funding portal' means any person acting as an intermediary in a transaction involving the offer or sale of securities for the account of others, solely pursuant to section 4(6) of the Securities Act of 1933 (15 U.S.C. 77d(6)), that does not--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) offer investment advice or recommendations;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) solicit purchases, sales, or offers to buy the securities offered or displayed on its website or portal;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its website or portal;<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(D) hold, manage, possess, or otherwise handle investor funds or securities; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(E) engage in such other activities as the Commission, by rule, determines appropriate.'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 305. RELATIONSHIP WITH STATE LAW.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) In General- Section 18(b)(4) of the Securities Act of 1933 (15 U.S.C. 77r(b)(4)) is amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) by redesignating subparagraphs (C) and (D) as subparagraphs (D) and (E), respectively; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) by inserting after subparagraph (B) the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) section 4(6);'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Clarification of the Preservation of State Enforcement Authority-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) IN GENERAL- The amendments made by subsection (a) relate solely to State registration, documentation, and offering requirements, as described under section 18(a) of Securities Act of 1933 (15 U.S.C. 77r(a)), and shall have no impact or limitation on other State authority to take enforcement action with regard to an issuer, funding portal, or any other person or entity using the exemption from registration provided by section 4(6) of that Act.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) CLARIFICATION OF STATE JURISDICTION OVER UNLAWFUL CONDUCT OF FUNDING PORTALS AND ISSUERS- Section 18(c)(1) of the Securities Act of 1933 (15 U.S.C. 77r(c)(1)) is amended by striking `with respect to fraud or deceit, or unlawful conduct by a broker or dealer, in connection with securities or securities transactions.' and inserting the following: `, in connection with securities or securities transactions<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) with respect to--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(i) fraud or deceit; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(ii) unlawful conduct by a broker or dealer; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) in connection to a transaction described under section 4(6), with respect to--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(i) fraud or deceit; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(ii) unlawful conduct by a broker, dealer, funding portal, or issuer.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(c) Notice Filings Permitted- Section 18(c)(2) of the Securities Act of 1933 (15 U.S.C. 77r(c)(2)) is amended by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(F) FEES NOT PERMITTED ON CROWDFUNDED SECURITIES- Notwithstanding subparagraphs (A), (B), and (C), no filing or fee may be required with respect to any security that is a covered security pursuant to subsection (b)(4)(B), or will be such a covered security upon completion of the transaction, except for the securities commission (or any agency or office performing like functions) of the State of the principal place of business of the issuer, or any State in which purchasers of 50 percent or greater of the aggregate amount of the issue are residents, provided that for purposes of this subparagraph, the term `State' includes the District of Columbia and the territories of the United States.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(d) Funding Portals-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) STATE EXEMPTIONS AND OVERSIGHT- Section 15(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(i)) is amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(A) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(B) by inserting after paragraph (1) the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) FUNDING PORTALS-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) LIMITATION ON STATE LAWS- Except as provided in subparagraph (B), no State or political subdivision thereof may enforce any law, rule, regulation, or other administrative action against a registered funding portal with respect to its business as such.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) EXAMINATION AND ENFORCEMENT AUTHORITY- Subparagraph (A) does not apply with respect to the examination and enforcement of any law, rule, regulation, or administrative action of a State or political subdivision thereof in which the principal place of business of a registered funding portal is located, provided that such law, rule, regulation, or administrative action is not in addition to or different from the requirements for registered funding portals established by the Commission.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) DEFINITION- For purposes of this paragraph, the term `State' includes the District of Columbia and the territories of the United States.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) STATE FRAUD AUTHORITY- Section 18(c)(1) of the Securities Act of 1933 (15 U.S.C. 77r(c)(1)) is amended by striking `or dealer' and inserting `, dealer, or funding portal'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">TITLE IV--SMALL COMPANY CAPITAL FORMATION<o:p></o:p></span></b></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 401. AUTHORITY TO EXEMPT CERTAIN SECURITIES.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) In General- Section 3(b) of the Securities Act of 1933 (15 U.S.C. 77c(b)) is amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) by striking `(b) The Commission' and inserting the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(b) Additional Exemptions-<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(1) SMALL ISSUES EXEMPTIVE AUTHORITY- The Commission'; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) by adding at the end the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(2) ADDITIONAL ISSUES- The Commission shall by rule or regulation add a class of securities to the securities exempted pursuant to this section in accordance with the following terms and conditions:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) The aggregate offering amount of all securities offered and sold within the prior 12-month period in reliance on the exemption added in accordance with this paragraph shall not exceed $50,000,000.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) The securities may be offered and sold publicly.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(C) The securities shall not be restricted securities within the meaning of the Federal securities laws and the regulations promulgated thereunder.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(D) The civil liability provision in section 12(a)(2) shall apply to any person offering or selling such securities.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(E) The issuer may solicit interest in the offering prior to filing any offering statement, on such terms and conditions as the Commission may prescribe in the public interest or for the protection of investors.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(F) The Commission shall require the issuer to file audited financial statements with the Commission annually.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(G) Such other terms, conditions, or requirements as the Commission may determine necessary in the public interest and for the protection of investors, which may include--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(i) a requirement that the issuer prepare and electronically file with the Commission and distribute to prospective investors an offering statement, and any related documents, in such form and with such content as prescribed by the Commission, including audited financial statements, a description of the issuer's business operations, its financial condition, its corporate governance principles, its use of investor funds, and other appropriate matters; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(ii) disqualification provisions under which the exemption shall not be available to the issuer or its predecessors, affiliates, officers, directors, underwriters, or other related persons, which shall be substantially similar to the disqualification provisions contained in the regulations adopted in accordance with section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 77d note).<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(3) LIMITATION- Only the following types of securities may be exempted under a rule or regulation adopted pursuant to paragraph (2): equity securities, debt securities, and debt securities convertible or exchangeable to equity interests, including any guarantees of such securities.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(4) PERIODIC DISCLOSURES- Upon such terms and conditions as the Commission determines necessary in the public interest and for the protection of investors, the Commission by rule or regulation may require an issuer of a class of securities exempted under paragraph (2) to make available to investors and file with the Commission periodic disclosures regarding the issuer, its business operations, its financial condition, its corporate governance principles, its use of investor funds, and other appropriate matters, and also may provide for the suspension and termination of such a requirement with respect to that issuer.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(5) ADJUSTMENT- Not later than 2 years after the date of enactment of the Small Company Capital Formation Act of 2011 and every 2 years thereafter, the Commission shall review the offering amount limitation described in paragraph (2)(A) and shall increase such amount as the Commission determines appropriate. If the Commission determines not to increase such amount, it shall report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate on its reasons for not increasing the amount.'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Treatment as Covered Securities for Purposes of NSMIA- Section 18(b)(4) of the Securities Act of 1933 (as amended by section 303) (15 U.S.C. 77r(b)(4)) is further amended by inserting after subparagraph (C) (as added by such section) the following:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(D) a rule or regulation adopted pursuant to section 3(b)(2) and such security is--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(i) offered or sold on a national securities exchange; or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(ii) offered or sold to a qualified purchaser, as defined by the Commission pursuant to paragraph (3) with respect to that purchase or sale;'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(c) Conforming Amendment- Section 4(5) of the Securities Act of 1933 is amended by striking `section 3(b)' and inserting `section 3(b)(1)'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 402. STUDY ON THE IMPACT OF STATE BLUE SKY LAWS ON REGULATION A OFFERINGS.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">The Comptroller General shall conduct a study on the impact of State laws regulating securities offerings, or `Blue Sky laws', on offerings made under Regulation A (17 CFR 230.251 et seq.). The Comptroller General shall transmit a report on the findings of the study to the Committee on Financial Services of the House of Representatives, and the Committee on Banking, Housing, and Urban Affairs of the Senate not later than 3 months after the date of enactment of this Act.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">TITLE V--PRIVATE COMPANY FLEXIBILITY AND GROWTH<o:p></o:p></span></b></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 501. THRESHOLD FOR REGISTRATION.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Section 12(g)(1)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(1)(A)) is amended to read as follows:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(A) within 120 days after the last day of its first fiscal year ended on which the issuer has total assets exceeding $10,000,000 and a class of equity security (other than an exempted security) held of record by either--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(i) 2,000 persons, or<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(ii) 500 persons who are not accredited investors (as such term is defined by the Commission), and'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 502. EMPLOYEES.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Section 12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(5)), as amended by section 302, is amended in subparagraph (A) by adding at the end the following: `For purposes of determining whether an issuer is required to register a security with the Commission pursuant to paragraph (1), the definition of `held of record' shall not include securities held by persons who received the securities pursuant to an employee compensation plan in transactions exempted from the registration requirements of section 5 of the Securities Act of 1933.'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 503. COMMISSION RULEMAKING.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">The Securities and Exchange Commission shall revise the definition of `held of record' pursuant to section 12(g)(5) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)(5)) to implement the amendment made by section 502. The Commission shall also adopt safe harbor provisions that issuers can follow when determining whether holders of their securities received the securities pursuant to an employee compensation plan in transactions that were exempt from the registration requirements of section 5 of the Securities Act of 1933.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 504. COMMISSION STUDY OF ENFORCEMENT AUTHORITY UNDER RULE 12G5-1.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">The Securities and Exchange Commission shall examine its authority to enforce Rule 12g5-1 to determine if new enforcement tools are needed to enforce the anti-evasion provision contained in subsection (b)(3) of the rule, and shall, not later than 120 days after the date of enactment of this Act transmit its recommendations to Congress.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">TITLE VI--CAPITAL EXPANSION<o:p></o:p></span></b></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 601. SHAREHOLDER THRESHOLD FOR REGISTRATION.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(a) Amendments to Section 12 of the Securities Exchange Act of 1934- Section 12(g) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(g)) is further amended--<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(1) in paragraph (1), by amending subparagraph (B) to read as follows:<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">`(B) in the case of an issuer that is a bank or a bank holding company, as such term is defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841), not later than 120 days after the last day of its first fiscal year ended after the effective date of this subsection, on which the issuer has total assets exceeding $10,000,000 and a class of equity security (other than an exempted security) held of record by 2,000 or more persons,'; and<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(2) in paragraph (4), by striking `three hundred' and inserting `300 persons, or, in the case of a bank or a bank holding company, as such term is defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841), 1,200 persons'.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">(b) Amendments to Section 15 of the Securities Exchange Act of 1934- Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)) is amended, in the third sentence, by striking `three hundred' and inserting `300 persons, or, in the case of bank or a bank holding company, as such term is defined in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841), 1,200 persons'.<o:p></o:p></span></div>
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<b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">SEC. 602. RULEMAKING.</span></b><span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;"><o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">The Securities and Exchange Commission shall provide online information and conduct outreach to inform small and medium sized businesses, women owned businesses, veteran owned businesses, and minority owned businesses of the changes made by this Act.<o:p></o:p></span></div>
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<span style="color: #333333; font-family: Verdana, sans-serif; font-size: 12pt;">Speaker of the House of Representatives.<o:p></o:p></span></div>
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</div>Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-65563398326110481552012-02-27T13:40:00.003-08:002012-02-27T13:44:06.560-08:00<div dir="ltr" style="text-align: left;" trbidi="on"><span style="color: red; font-size: x-large;">New Law Increases Penalties for Classifying Employees as Independent Contractors</span><br />
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<div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: large;">A</span><span style="font-size: 14pt;">s of January 1, 2012, a new California law creates significant penalties for employers who "willfully" misclassify their workers as independent contractors. In the movie industry, the government usually considers most crew members, as well as above-the-line personnel, to be employees, not independent contractors.</span></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 14pt;">Producers, however, often attempt to hire others as independent contractors because it is administratively simpler, and they may want to avoid hiring a payroll company, withholding taxes, paying the minimum wage or overtime, and complying with other wage and hour law regulations. Moreover, a producer may want to avoid covering staff under workers' compensation insurance, unemployment insurance, disability insurance, or social security.</span><span style="color: #857458;"><o:p></o:p></span></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 14pt;">The federal government has for some time now been cracking down on employers who treat regular employees as independent contractors, thereby avoiding taxes and side-stepping various employment laws.</span><span style="color: #857458;"><o:p></o:p></span></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 14pt;">The new bill, SB 459 was recently signed into law by Governor Brown. It does not change the criteria for determining whether a worker qualifies as an independent contractor, but it greatly enhances the penalty for employers who misclassify personnel.</span><span style="color: #857458;"><o:p></o:p></span></div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 14pt;">Penalties range from $5,000 to $15,000 per violation for isolated violations. Where there is a pattern or practice of violations, the penalty can increase to $10,000 to $25,000 per violation. </span><span style="color: #857458;"><o:p></o:p></span></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 14pt;">However, it is often difficult to determine how personnel should be classified. The IRS takes the position that most people working on a film production should be classified as employees, not independent contractors. They obviously want taxes withheld. If the person is being employed through a loan out company, then the loan out company will withhold taxes and this should not pose a problem for the producer. Moreover, if the person is being hired, not just for their time but also equipment that is being supplied, it is more likely to pass muster as an independent contractor. Simply calling the person an independent contractor or using a independent contractor form of agreement, does not by itself give much protection. </span><span style="color: #857458;"><o:p></o:p></span></div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 14pt;"> </span><span style="color: #857458;"><o:p></o:p></span></div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 14pt;">In determining whether an individual providing service to another is an independent contractor or an employee, the "control" test, is often used initially to make this evaluation. To put it simply, an employee is an individual who the employer has the right to exercise control over the manner and means by which the individual performs his or her services. </span><span style="color: #857458;"><o:p></o:p></span></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 14pt;">However, there is no single determinative factor. Rather, it is necessary to closely examine the facts of each service relationship and to then apply a multi-factor or "economic realities" test. (Labor Code § 3357; S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (1989) 48 C al. 3d 341 at pp. 349, 354.) The Borello court identified the following additional factors that must be considered:</span><span style="color: #857458;"><o:p></o:p></span></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 14pt;">1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal; 2. Whether or not the work is a part of the regular business of the principal; 3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work; 4. The alleged employee's investment in the equipment or materials required by his task; 5. The skill required in the particular occupation; 6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; 7. The alleged employee's opportunity for profit or loss depending on his managerial skill; 8. The length of time for which the services are to be performed; 9. The degree of permanence of the working relationship; 10. The method of payment, whether by time or by the job; 11. Whether or not the parties believe they are creating an employer-employee relationship.</span><span style="color: #857458;"><o:p></o:p></span></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 14pt;"> The party seeking to avoid liability as an employer has the burden of proving that persons whose services he or she has retained are independent contractors rather than employees. In other words, there is a presumption of employment. </span><span style="color: #857458;"><o:p></o:p></span></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div class="MsoNormal"><span style="font-size: 14pt;"><b><span style="color: black;"><a href="http://r20.rs6.net/tn.jsp?et=1109388104995&s=0&e=001c2udYKK5ZV_25nEX2FFQr_QPpxoDjafuWJVFffYaU08kmhVpP_C24_vJn9eNc9tetUW7gk_XPBGfGNiw9lkga8R5SapWbjXrBsvH7HV-jBoxni1vUHs9RNNtt977cXEQSYoxjS68Wy4ufF0j2FiS1dePckKwgthPkIYedbGXQmgGO-GG_UzMLNsQuLQ58SrOtpvfk5fOvrlgcCr77V6KPZgEbuQ8VX1s" linktype="1" shape="rect" target="_blank" track="on">To review the bill and analysis</a></span></b></span><span style="color: #857458;"><o:p></o:p></span></div><div class="MsoNormal"><span style="font-size: 14pt;"><b><br />
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</b></span></div><div class="MsoNormal"></div><div style="margin-bottom: .0001pt; margin: 0in;"><strong><span style="font-size: 22pt;"><span style="color: red;">California Lawyers for the Arts presents: "Risky Business: Financing and Distributing Independent Films. </span></span></strong><o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div style="margin-bottom: .0001pt; margin: 0in;"><strong><span style="font-size: 22pt;">Saturday, March 31, 2012</span></strong><o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 16pt;">Mark Litwak will present this comprehensive seminar-for new attorneys, attorneys transitioning to entertainment law, and filmmakers-explores how independent films are financed and distributed. Topics include financing via pre-sales, debt and equity investors, negotiating tactics, typical contract terms, cross-collateralization, and creative accounting. </span><o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span style="font-size: 16pt;">Particular attention will be paid to how producers and filmmakers can protect themselves by: investigating distributors; watering down warranties; adding contract provisions covering performance, termination, and alternative dispute resolution; getting errors and omissions (E&O) insurance; and using lab access letters and schedules of minimums. </span> <br />
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</span></div><div class="MsoNormal"><span style="font-size: 16pt;">Other topics will include: criteria for selecting a distributor; new media distribution; which contract terms are negotiable; compliance with state and federal laws regarding investors; retaining an attorney, producer reps and publicists; and confirming awards and enforcing judgments. </span> <br />
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</span></div><div class="MsoNormal"><span style="font-size: 16pt;">Extensive handouts will be made available exclusively online for download, including a distribution contract, articles, and a self-defense checklist. Finally, the lunch hour will provide a great opportunity for networking.</span><o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
</div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 16pt;">Saturday, March 31, 2012 10:00 AM - 5:00 PM</span><o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 16pt;"> </span><o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 16pt;"> Location: West Los Angeles College, Fine Arts Auditorium, 9000 Overland Ave., Culver City, CA 90230 (Free parking is available in the campus parking structure.) </span><o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><span style="font-size: 16pt;"> </span><o:p></o:p></div><div class="MsoNormal"><span style="font-size: 16pt;"> <a href="http://r20.rs6.net/tn.jsp?et=1109388104995&s=0&e=001c2udYKK5ZV_25nEX2FFQr_QPpxoDjafuWJVFffYaU08kmhVpP_C24_vJn9eNc9tetUW7gk_XPBGfGNiw9lkga462IQln4WbwB-3xNtWVWgWDC4rNyP9fMrKgYKlDxT_njnAfOJhp0IoEYjobQ4hj-vbXoA4LMWxcTTGbMTHiIEObOhMSyEd67NLyqklTZo65ArVEPF9BbCM=" linktype="1" shape="rect" target="_blank" track="on"><b><span style="color: #857458;">For more information and to Enroll</span></b></a></span><o:p></o:p></div><div style="margin-bottom: .0001pt; margin: 0in;"><br />
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</div></div>Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-8720730546796967332012-01-26T15:46:00.000-08:002012-01-30T12:33:34.676-08:00Mark Litwak Named Super Lawyer<div dir="ltr" style="text-align: left;" trbidi="on"><span style="font-family: inherit;">I am pleased to announce that I have been named a Southern California Super Lawyer for 2012. Each year, only 5 percent of the lawyers in the state receive this honor.</span><br />
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</span></div><div class="MsoNormal" style="margin-bottom: 0.0001pt;"><span style="background-attachment: initial; background-clip: initial; background-color: white; background-image: initial; background-origin: initial; color: #505050; font-family: inherit;">Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. The selection process is multi-phased and includes independent research, peer nominations and peer evaluations.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0.0001pt;"><span style="font-family: inherit;"><br />
</span></div><div class="MsoNormal" style="margin-bottom: 0.0001pt;"><span style="font-family: inherit;">The selections for this esteemed list are made by the research team at Super Lawyers, which is a service of the Thomson Reuters, Legal division based in Eagan, Minn. Thomson Reuters is the world's leading source of intelligent information for businesses and professionals. Super Lawyers can be found online at superlawyers.com where lawyers can be searched by practice area and location.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0.0001pt;"><span style="font-family: inherit;"><br />
</span></div><div class="MsoNormal" style="margin-bottom: 0.0001pt;"><span style="font-family: inherit;">This is the third time I have received this honor.<o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 0.0001pt;"><span style="font-family: inherit;"><br />
</span></div><div style="background: white; margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="color: #505050; font-family: inherit;">Super Lawyers magazine features the list and profiles of selected attorneys and is distributed to attorneys in the state or region and the ABA-accredited law school libraries. It is also published as a special section in leading city and regional magazines across the country.<o:p></o:p></span></div><div style="background: white; margin-bottom: 6.0pt; margin-left: 0in; margin-right: 0in; margin-top: 0in;"><span style="color: #505050;"><span style="font-family: inherit;">Super Lawyers magazine is published in all 50 states and Washington, D.C., reaching more than 13 million readers.</span><o:p></o:p></span><br />
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<span style="color: #505050;"><span style="font-family: inherit;"><a href="http://www.superlawyers.com/california-southern/lawyer/Mark-Litwak/63c33cbc-3ad5-4de1-b2dc-950722226196.html">Super Lawyer listing</a></span></span><br />
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<span style="color: #505050;"><a href="http://www.marklitwak.com/downloads/super_lawyer_profile_final.pdf">2006 Super Lawyer Profile</a></span><br />
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<div class="MsoNormal"><b><span style="font-size: 22pt;">UPDATED WEBSITE </span></b><o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span style="font-size: 18pt;">We have added new sections to our Entertainment Law Resources website (<a href="http://r20.rs6.net/tn.jsp?llr=8f8tz4bab&et=1109155012256&s=0&e=0018HBRecYwYGMOg4afy4tUPh1Sll1fz7eIR3kavDSQaaSeZ8tRsAGUM_BE2uicjxT9MyxSGlkkVJtvrm26fG-ov5R4xySNkGCsp2LJLmiJdJlTaL86zXZmdw==" shape="rect" target="_blank">www.marklitwak.com</a>) including a list of legal blogs, talent and literary agents, information on approval of minor contracts, links to the California Talent Agency Act and the database for agent licensing, and much more. </span><o:p></o:p></div><div class="MsoNormal"><br />
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</div><div class="MsoNormal"><span style="font-size: 14pt;">Go to: <a href="http://r20.rs6.net/tn.jsp?llr=8f8tz4bab&et=1109155012256&s=0&e=0018HBRecYwYGMOg4afy4tUPh1Sll1fz7eIR3kavDSQaaSeZ8tRsAGUM_BE2uicjxT9MyxSGlkkVJtvrm26fG-ov5R4xySNkGCsp2LJLmiJdJnQyGLv0Wzbj94sVwvVvvzY--ollHiO8K4=" linktype="1" shape="rect" target="_blank" track="on"><b>Entertainment Law Resources</b></a></span><o:p></o:p></div><br />
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</div></div>Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-1902138902020031482011-12-02T13:05:00.000-08:002011-12-02T13:05:27.512-08:00<div dir="ltr" style="text-align: left;" trbidi="on"><br />
<div class="MsoNormal"><b><span class="Apple-style-span" style="font-size: large;">The Right of Publicity</span></b></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">The Right of Publicity is the right that individuals have to control the use of their name and likeness in a commercial setting. For example, you cannot put a picture of someone on your brand of pickles without their permission. The right of publicity is typically exploited by celebrities who earn large fees for endorsing products. However, even ordinary folks possess this right in most states. Since there is no federal statute concerning this right, the extent of the right can vary from state to state. </div><div class="MsoNormal"><o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">The Right of Publicity is similar to the appropriation form of invasion of privacy. The principal difference is that the right of publicity seeks to ensure that a person is compensated for the commercial value of his name or likeness, while the right of privacy seeks to remedy any hurt feelings or embarrassment that a person may suffer from such publicity. <o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">Celebrities may have difficulty proving invasion of privacy, because they do not seek solitude and privacy. How can a celebrity claim that the unauthorized use of his likeness on a product embarrassed and humiliated him at the same time that he appears in numerous commercials? By thrusting themselves into the public eye, celebrities waive much of their right of privacy. On the other hand, celebrities have an especially valuable property right in their name and likeness, for which they are often paid handsomely to endorse commercial products. <o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">Under either a publicity or privacy theory, subjects can recover for some unconsented uses of their names and likenesses. A problem arises, however, when one person’s publicity/privacy rights come in conflict with another person’s free speech rights under the First Amendment. Suppose a newspaper publisher wants to put a picture of Cher on the front page of its paper. Is her permission required? <o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">While Cher’s name and likeness is being used on a “product,” the newspaper, this product is also “protected expression.” Products such as books, movies and plays are forms of expression protected by the First Amendment. The First Amendment allows journalists to write about others without their consent. Otherwise, subjects could prevent any critical reporting of their activities. When one person’s right of publicity conflicts with another person’s rights under the First Amendment, the rights under the First Amendment are often, but not always, paramount. <o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">So in the case of the use of the name or likeness of Elvis Presley on a coffee cup or T-shirt, there is no expression deserving protection. The seller of these products is not making a statement or expressing an opinion. The seller is simply trying to make a buck by exploiting the name and likeness of Elvis. Since there are no First Amendment rights needing protection in this instance, the right of publicity may stop the unauthorized use of a subject’s name or likeness. Thus the law draws a distinction between products that contain protected expression and those that do not. Generally speaking, it is permitted to use, without consent, a person’s name or likeness in a play, book, magazine, newspaper, musical composition, audiovisual work, radio or television program, work of art, work of political or newsworthy value, or an advertisement or commercial announcement for any of these works. <o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">Courts have struggled with the issue of whether the right of publicity descends to a person’s heirs. In other words, when a celebrity dies, does his estate inherit his right of publicity? Can the estate continue to control the use of the celebrity’s name or likeness, or can anyone use it without permission?<o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">Some courts have held that the right of publicity is a personal right that does not descend. These courts consider the right similar to the right of privacy and the right to protect one’s reputation (defamation). When a person dies, heirs don’t inherit these rights. Suppose you were a descendent of Abraham Lincoln. An unscrupulous writer publishes a defamatory biography claiming Abe was a child molester. You couldn’t sue for defamation or invasion of privacy. Perhaps this is why many scandalous biographies are not published until the subject dies. <o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">In California, courts initially held that the right of publicity was personal and did not descend to one's heirs. In 1984, however, the California legislature enacted the Celebrity Rights Act which changed the law. This statute, presently found at Civil Code section 3344.1, provides that the right of publicity descends and lasts for 70 years after the death of the person. A similar statute, known as the Astaire Celebrity Protection Act (California Civil Code section 3344), prohibits the unauthorized use of the name, voice, signature, photograph or likeness on or in products, merchandise or goods for those who are living. Both statutes attempt to balance First Amendment rights against rights of publicity and privacy. <o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">The California Secretary of State is responsible for registration of claims by successors-in-interest of deceased personalities. Section 3344.1 permits any person claiming to be successor-in-interest to the rights of a deceased personality register their claim. The registry of successor-in-interest claims contains the celebrity name, date of death, the name and address of the claimant and the interest claimed. The filing can be done online at: <a href="http://www.sos.ca.gov/business/sf/sf_siisearch.htm">http://www.sos.ca.gov/business/sf/sf_siisearch.htm</a><o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">In other states, the right to publicity may descend. The rights of the heirs, however, may be outweighed by other people’s First Amendment rights. Because the Right of Publicity is a state-based right, as opposed to Federal right, its application can vary depending on which state's law applies. In many jurisdictions even if there is not a specific Right of Publicity statute, this right may be recognized by the courts. <o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"> Indiana appears to have the broadest Right of Publicity statute in the country, providing recognition of the right for 100 years after death, and protecting not only the usual "name, image and likeness," but also signature, photograph, gestures, distinctive appearances, and mannerisms. However, many of the cases concerning this right arise under New York or California law. <o:p></o:p></div><div class="MsoNormal"><br />
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</div><div class="MsoNormal"><span class="Apple-style-span" style="color: red; font-size: large;">COPYRIGHT FORMS ADDED TO WEBSITE</span><o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">More than 75 copyright forms and documents have been added to my website for free download as either a word or PDF document. <o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">These forms include forms and brochures that explain how to register your copyright whether it is a musical work, book, play or film. There are also detailed explanations of the fair use doctrine, and the entire text of U.S. Copyright law. <o:p></o:p></div><div class="MsoNormal"><br />
</div><div class="MsoNormal">Go to: <a href="http://www.marklitwak.com/resources/copyright.php">Entertainment Law Resources</a><o:p></o:p></div><div class="MsoNormal"> <o:p></o:p></div><div class="MsoNormal"><br />
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</div></div>Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-7185033977759360032011-10-31T07:27:00.000-07:002011-10-31T07:28:54.619-07:00<div dir="ltr" style="text-align: left;" trbidi="on"><span class="Apple-style-span" style="color: red; font-size: x-large;">Tintin a Hit</span><br />
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<div class="MsoNormal">Congratulations to our client Moulinsart SA on the success of the movie version of its classic comic book series Tintin. We are pleased to have represented our client in negotiating an agreement with Dreamworks to produce this film. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal"></div><div class="MsoNormal">Steven Spielberg’s The Adventures of Tintin: The Secret of the Unicorn, was the number one offshore hit with a gross of $55.8 million from 5,620 screens in 19 markets. The movie is in 3 D and comes from Oscar winning director Steven Spielberg and Oscar winning producer Peter Jackson.</div><div class="MsoNormal"><br />
</div><div class="MsoNormal">The Adventures of Tintin is a series of classic comic books created by the Belgian writer Georges Rémi (1907–1983), who wrote under the name of Herge. Tintin is a young Belgian reporter who is aided in his adventures by his faithful fox terrier dog Snowy. The series is one of the most successful European comics of the 20th century, with translations published in more than 80 languages. More than 350 million copies of the books have been sold to date. Tintin’s popularity has grown ever since its first appearance in 1929. </div><div class="MsoNormal"><br />
</div><div class="MsoNormal">The 3D animated feature stars an international cast that includes Jamie Bell (Billy Elliot, Defiance), Andy Serkis (Lord of the Rings, King Kong), Daniel Craig (James Bond, Cowboys and Aliens), and comedy duo Nick Frost and Simon Pegg (Shaun of the Dead, Hot Fuzz). Sony is co-distributing abroad with Paramount. According to the Hollywood Reporter the film was No. 1 in 17 of Tintin’s opening markets with France leading the way ($21.5 million collected over five days from 935 spots), which Sony described as “the biggest opening ever for an original, non-sequel film from Hollywood.”</div><div class="MsoNormal"><br />
</div><div class="MsoNormal">Additional information and trailer at:<a href="http://us.tintin.com/welcome/">Tintin</a></div><div class="MsoNormal"><br />
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<div class="MsoNormal"><span class="Apple-style-span" style="color: red; font-size: x-large;">CONDUCTING AN AUDIT</span><b style="font-size: 12pt;"><o:p></o:p></b></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span style="font-size: 12pt;">Many filmmakers sign complex distribution agreements that they do not fully understand. Several years ago I was approached by a filmmaker who seemed certain that his distributor was cheating him. His film had been licensed to HBO for a large fee, and significant revenue was generated from foreign sales. Nevertheless, very little revenue was paid to the filmmaker. He asked me to investigate, and to arrange for an audit. <o:p></o:p></span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span style="font-size: 12pt;">I reviewed the distribution contract and the distributor’s producer reports. The agreement allowed the distributor to deduct virtually any expense, with no caps or limitations. The distributor was therefore able to deduct several hundred thousand dollars in expenses. The contract permitted the distributor to take 35% of gross receipts as a distribution fee. The balance remaining was split 50/50 with the filmmaker. This formula allowed the distributor to retain almost all the revenue without resorting to cheating or creative accounting. It was a terrible deal for the filmmaker. I asked him why he had agreed to these terms. He replied that the distributor told him the terms offered were “standard.” <o:p></o:p></span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span style="font-size: 12pt;">Of course, these terms are not standard, and a savvy filmmaker would never accept them. A distributor is usually allowed to recoup specified market and promotional expenses only, and the total amount of recoupable expenses may be capped. The distribution fee charged was excessive, and for the distributor to also share in the balance remaining on a film it did not provide any financing for is just outrageous. I told the filmmaker not to bother with an audit since it was unlikely it would make any difference. This was not creative accounting; it was an instance of a gullible filmmaker being taken advantage of by a more experienced distributor. <o:p></o:p></span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span style="font-size: 12pt;">While creative accounting complaints are common, many films are not profitable by any measure, so the profit participant will not bother to audit the books. For those films that do generate significant revenue, audits often recover more than their cost, which may be $20,000 to $30,000 or more.<o:p></o:p></span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span style="font-size: 12pt;">An audit may reveal two types of errors. The first type are clerical mistakes. A studio accountant might make a mathematical error when adding numbers. For some mysterious reason, these errors usually favor the studio. When such errors are discovered, distributors usually make corrections without much protest. <o:p></o:p></span></div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span style="font-size: 12pt;">The other type of error arises from contract interpretation. The philosophy prevalent at many studios is, “When in doubt, interpret it in our favor and we will fight it out later if someone objects.” Despite the great care taken by lawyers to draft straightforward contracts, new areas of ambiguity constantly arise. As a result, contracts have become increasingly detailed and long. Every time a lawyer thinks that his client has been taken advantage of, he tries to clarify matters in the next deal by being even more explicit. This is why signing a short-form contract may not be wise. A deal memo addresses the major issues without spelling out the details. The resulting ambiguity often does not favor the filmmaker because in a dispute the distributor can better afford the legal expense of contesting the point.<o:p></o:p></span></div><div class="MsoNormal"><span style="font-size: 12pt;"><br />
</span></div><div class="MsoNormal"></div><div class="MsoNormal"><span style="font-size: 12pt;">Excerpt taken from Mark Litwak’s Risky Business, 2<sup>nd</sup> edition, 2009. <o:p></o:p></span></div><div class="MsoNormal"><br />
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</div></div>Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-85422489756064470152011-09-19T13:45:00.000-07:002011-12-25T09:57:04.481-08:00<div dir="ltr" style="text-align: left;" trbidi="on">
<span class="Apple-style-span" style="background-color: white; color: #333333; font-family: Arial,Tahoma,Helvetica,FreeSans,sans-serif; font-size: 15px; font-style: normal; font-variant: normal; font-weight: normal; letter-spacing: normal; line-height: 20px; orphans: 2; text-align: left; text-indent: 0px; text-transform: none; white-space: normal; widows: 2; word-spacing: 0px;"></span><br />
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<span style="font-size: large;"><b>Mark Litwak's Interview on Filmnut Now Online</b></span></div>
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Mark Litwak was recently interviewed on the program Filmnut by host Jeff Schubert. The show is distributed by <span class="Apple-converted-space">www.t</span>hestream.tv</div>
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<a href="http://tinyurl.com/3gcyx4n">Click Here to watch</a></div>
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<br /></div>
<span style="font-family: "Times New Roman","serif"; font-size: 12pt;"><a href="http://tinyurl.com/3gcyx4n" target="_blank"></a></span><br />
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The show can also be subscribed to on iTunes and YouTube, and followed on Twitter.</div>
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Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.comtag:blogger.com,1999:blog-5877672.post-8288452145062138252011-09-14T07:30:00.000-07:002011-09-14T07:30:01.940-07:00CROWD RELEASE<div dir="ltr" style="text-align: left;" trbidi="on"><!--[if gte mso 9]><xml> <w:WordDocument> <w:View>Normal</w:View> <w:Zoom>0</w:Zoom> <w:TrackMoves/> <w:TrackFormatting/> <w:PunctuationKerning/> <w:ValidateAgainstSchemas/> <w:SaveIfXMLInvalid>false</w:SaveIfXMLInvalid> <w:IgnoreMixedContent>false</w:IgnoreMixedContent> <w:AlwaysShowPlaceholderText>false</w:AlwaysShowPlaceholderText> <w:DoNotPromoteQF/> <w:LidThemeOther>EN-US</w:LidThemeOther> <w:LidThemeAsian>X-NONE</w:LidThemeAsian> <w:LidThemeComplexScript>X-NONE</w:LidThemeComplexScript> <w:Compatibility> <w:BreakWrappedTables/> <w:SnapToGridInCell/> <w:WrapTextWithPunct/> <w:UseAsianBreakRules/> <w:DontGrowAutofit/> <w:SplitPgBreakAndParaMark/> <w:DontVertAlignCellWithSp/> <w:DontBreakConstrainedForcedTables/> <w:DontVertAlignInTxbx/> <w:Word11KerningPairs/> <w:CachedColBalance/> </w:Compatibility> <w:DoNotOptimizeForBrowser/> <m:mathPr> <m:mathFont m:val="Cambria Math"/> <m:brkBin m:val="before"/> <m:brkBinSub m:val="--"/> <m:smallFrac m:val="off"/> <m:dispDef/> <m:lMargin m:val="0"/> <m:rMargin m:val="0"/> <m:defJc m:val="centerGroup"/> <m:wrapIndent m:val="1440"/> <m:intLim m:val="subSup"/> <m:naryLim m:val="undOvr"/> </m:mathPr></w:WordDocument> </xml><![endif]--><!--[if gte mso 9]><xml> <w:LatentStyles DefLockedState="false" DefUnhideWhenUsed="true"
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<div class="MsoPlainText">When producers shoot a scene at a place open to the public people in the background might be captured on camera. It is often not practicable to get every member of the crowd to sign a release. Consequently, producers may post a sign at the entrances to the event alerting participants that they may be captured on screen and stating that by entering the venue they are consenting to be recorded. Alternatively, a release might be presented to persons when they purchase a ticket to an event and printed on the ticket as well.</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">Persons do not have an absolute legal right to prevent publication of any photo taken of them without their permission. If every person had such a right, no photo could be published of a street scene or a parade. Liability usually exists only if publication of a photo would be offensive to people of ordinary sensibilities, or is defamatory or invades their right of privacy. See, for example, Gill v. Hearst Publishing, 40 Cal. 2d 224 (1953). However, the use of a person's image or likeness without their permission to sell a product would likely infringe their right of publicity and give rise to liability.</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">If you are using a posted crowd release, it is good practice to take a photo of all the entrances with the sign clearly posted in public view. The notice should<span style="mso-spacerun: yes;"> </span>be large enough that those passing by will clearly see it.</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">CROWD RELEASE</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">(Post outside of entry doors or on perimeter of filming area)</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">By entering and by your presence here, you consent to be photographed, filmed and/or otherwise recorded. Your entry constitutes your consent to such photography, filming and/or recording and to any use, in any and all media throughout the universe in<span style="mso-spacerun: yes;"> </span>perpetuity, of your appearance, voice and name for any purpose whatsoever in connection with the production presently entitled:</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">____________________________________.</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">You understand that all photography, filming and/or recording will be done in reliance on this consent given by you by entering this area.</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">If you do not agree to the foregoing, please do not enter this area.</div><div class="MsoPlainText">~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText"><span style="font-size: large;"><b>3rd Edition, Contracts for the Film and Television Industry Coming Soon</b></span></div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">Silman-James Press will soon be publishing a revised and updated edition of Mark<span style="mso-spacerun: yes;"> </span>Litwak's Contracts for the Film and Television Industry. The second edition of this book was released in 1998. The new third edition will be expanded to 80 contracts and commentary. In addition to updated versions of the 62 contracts in the Second Edition, the new agreements to be published include the following contracts:</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">Website Content Provider Agreement, Guestbook Release, Talk Show Appearance Agreement, Certificate of Engagement, Synchronization License TV Series, Cable TV Production Agreement, Studio Rental Agreement, Internet Acquisition Distribution Agreement,<span style="mso-spacerun: yes;"> </span>Website Content Provider Agreement, Video on Demand Agreement, and Theatrical Exhibition Agreement.</div><div class="MsoPlainText">~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText"><b><span style="font-size: large;">Mark Litwak to be Interviewed on Filmnut</span></b></div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">Mark Litwak will be interviewed on the program Filmnut by host Jeff Schubert and<span style="mso-spacerun: yes;"> </span>distributed by<span style="mso-spacerun: yes;"> </span>TheStream.tv</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">The live interview will take place on Wednesday September 14th at 8pm PST and can be watched at:</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText"><a href="http://www.thestream.tv/">http://www.thestream.tv</a></div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">Viewers who wish to ask questions during the netcast can do so by posting questions on twitter on @thestreamdottv</div><div class="MsoPlainText"><br />
</div><div class="MsoPlainText">The show can also be subscribed to on iTunes and YouTube, and followed on Twitter.</div></div>Mark Litwakhttp://www.blogger.com/profile/16898892847306731483noreply@blogger.com