The highly regarded “Guide to the Top Lawyers and Law Firms” described CDAS as a “highly skilled boutique offering excellent capabilities handling trademark and copyright infringement cases, as well as substantial portfolio management matters. [CDAS] exhibits expertise acting for market-leading entertainment, media and digital platform clients.” In addition to recognizing the firm for Intellectual Property: Trademark, Copyright & Trade Secrets (New York), Nancy Wolff was also recognized as “a leading attorney in IP issues relating to digital media, counseling clients in a broad range of matters including disputes and licensing.”
With the recent spread of the novel coronavirus COVID-19 and its unprecedented precipitation of social-distancing, work-from-home policies, shelter-in-place orders, and limitations on foreign travel, many individuals may be questioning whether certain contractual obligations are excused. This article provides a primer on the contract concepts of force majeure, impossibility and impracticability, and related provisions that affect, and may in certain instances excuse, performance of contractual duties owing to changed circumstances outside any signatory’s control.
A force majeure clause is a contract provision that excuses a party’s performance of its obligations under a contract when events beyond the party’s control make performance impossible. To invoke a contract’s force majeure clause, a party must typically demonstrate that (1) a disruptive event enumerated by the force majeure clause has occurred; (2) the risk of nonperformance was not foreseeable; and (3) that the event has rendered the party’s performance impossible.
A party looking to invoke a force majeure clause must follow several steps:
First, a party must examine the contract’s definition of what constitutes a “force majeure” event and demonstrate that the change in circumstances was included within the definition. Force majeure events will have been enumerated within a force majeure clause and generally include: Acts of God; severe acts of nature or weather events including floods, fires, earthquakes, hurricanes, or explosions; war; acts of terrorism; epidemics; acts of governmental authorities such as expropriation or condemnation; changes in laws and regulations; and strikes and labor disputes.
Determining whether a force majeure clause applies is a highly fact-intensive exercise, because whether a party is excused for non-performance stems from the specific contractual language used within an agreement. For example, some contracts’ force majeure provisions may specify disease, epidemics, or pandemics as cause for non-performance, while others may only refer to disease-related disruptions by reference to “Acts of God” or catch-all phrases such as “any event or circumstance beyond the reasonable control of the affected party.”
Where disease-related occurrences have been specifically enumerated, a party may find it easier to invoke its force majeure clause in the context of COVID-19. It may be more challenging where, instead, there is only catch-all language in place; however, a catch-all phrase, or similarly broad language (such as a force majeure clause that begins its list with “including, but not limited to”), may provide some protection, particularly if courts relax their traditional preference for excusing performance solely based on clearly enumerated circumstances, in response to an onslaught of COVID-19 related contract disputes. Additionally, where a party can point to a governmental restriction in place because of COVID-19, it may have additional grounds to defend nonperformance.
Second, an affected party must demonstrate a causal link between the force majeure event and its failure to perform. In other words, a party’s performance must be impossible because of the changed circumstances surrounding the contract. For example, in light of COVID-19, the owner of a performing arts venue may successfully argue that recent government orders in his or her state have made it impossible to continue under contract with scheduled performances and obligations to performers, considering the widespread uptick in closures of non-essential businesses. On the other hand, should both parties to a contract be capable of conducting transactions online and/or having a history of remote online transactions, it may be more difficult to argue that COVID-19 has rendered performance impossible (at least without demonstrating other exigent circumstances).
Upon successfully invoking a force majeure provision, a party may either suspend performance or terminate the contract outright, depending on the scope of its force majeure clause. It is thus important to verify the terms of the clause, which may also dictate that force majeure coverage will only kick in after a certain period has elapsed, such as 90 days.
If the contract does not contain a force majeure clause, a party may turn to the common law defenses of impossibility or impracticability to excuse performance (though note that New York only recognizes impracticability in rare circumstances, such as in connection with sales of goods under the Uniform Commercial Code). A party may also invoke additional contract provisions where present, such as the “Material Adverse Effect” provision common to many commercial contracts.
Impossibility & Impracticability
Impossibility and impracticability exist where circumstances extraneous to a contract render a party’s performance either impossible or impractical. Although the contract itself was adequately formed and would otherwise maintain its binding effect, these defenses recognize that a post-formation change in circumstances has fundamentally altered the ability of the parties to perform under it. A party’s performance will be excused if the following elements are met:
- An unforeseen event has occurred. Akin to the events enumerated in force majeure clauses, these may include natural disasters, strikes, and other major events.
- The nonoccurrence of this event was a basic assumption of the contract. At the time of contracting, the parties did not foresee the event that has since occurred, regardless of whether it was theoretically “foreseeable”. This assumption of nonoccurrence need not be explicitly outlined within the contract, but must be generally apparent from the nature, terms, and purpose of the contract. Under the Uniform Commercial Code, which governs sales of goods, a “[d]elay in delivery or non-delivery in whole or in part by a seller . . . is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made.” U.C.C. § 2-615. For example, this provision may apply in the event of a labor dispute where striking workers fail to deliver a shipment of the seller’s goods. In such cases, a seller must seasonably notify the buyer of the delay or non-delivery, and, where a seller may still partially perform, must allocate production and deliveries among customers in a “fair and reasonable” manner.
- The effect of the event has rendered the party’s performance impossible or impracticable. The changed circumstance must be extreme, such that it is unduly burdensome or impossible for the party to comply as originally planned; where impossibility is concerned, under New York law, the subject matter of the contract must have been destroyed or the means of performance must have been rendered objectively impossible. The party seeking relief from its obligations under the existing contract must also show that it was not at fault in causing the event. The reasoning behind this requirement is clear: a party should not be able to take advantage of his or her own misconduct. Here, it is also important to determine how risk has been allocated between the parties under the contract. Even where the other requirements are met, if the adversely affected party assumed the risk of the occurrence of the changed circumstances during contract formation (impliedly or explicitly), it will not be able to invoke impossibility or impracticability. To gauge risk allocation, a party should examine the express language of the contract (i.e., what disruptive events the parties contemplated, and which party was to bear the associated loss and expense), or even the parties’ course of business and dealings. Industry customs may also provide clues to proper risk allocation. For example, industry custom in property rentals is for a premises owner to obtain casualty insurance rather than the party hosting its event on site. As such, risk for the loss of the property would flow more naturally to the owner.
Other Contract Clauses
Various additional contractual provisions may relate to an unexpected event like COVID-19.
- Material Adverse Change (MAC) Clause
Many commercial contracts include a material adverse change clause (otherwise known as “material adverse effect”). Where present, this clause could excuse performance or allow a party to suspend performance should a materially adverse change occur. Events constituting a materially adverse change are, as with force majeure provisions, commonly enumerated specifically within the contract and typically also involve wide-scale disruptions.
Historically, MAC clauses have been difficult to enforce, as courts are wary of excusing contractual performance for short-term changes in circumstances, but as is possible with force majeure and related defenses, courts may shift their stance in the coming months. For example, following the September 11, 2001 attacks, New York courts were more amenable to viewing declining rental prices in Manhattan as grounds to declare a material adverse change (See In re Lyondell Chem. Co., 567 B.R. 55, 123 (Bankr. S.D.N.Y. 2017), aff’d, 585 B.R. 41 (S.D.N.Y. 2018) (citing River Terrace Assocs., LLC v. Bank of N.Y., 10 Misc. 3d 1052(A), 2005 WL 3234228 (N.Y. Sup. Ct.), aff’d, 23 A.D.3d 308 (N.Y. App. Div. 2005))). Further, New York courts have allowed commercial parties to cease contractual performance based on demonstrated extensive financial losses during the pendency of a merger (see Katz v. NVF Co., 100 A.D.2d 470, 471 (N.Y. App. Div. 1984)).
Commercial contracts commonly contain covenants obligating parties to undertake or refrain from certain behavior. While it is unlikely that parties would have allocated obligations or risk regarding COVID-19 in a covenant, it is worth revisiting covenants within a contract to gauge whether they will affect or be affected by current circumstances. For example, many agreements include covenants obligating parties to provide notice that they are invoking force majeure or that material events have occurred that could give rise to litigation or loss beyond the ordinary course of business.
- Termination Provisions
Even if parties may not utilize force majeure or other contractual provisions to justify non-performance under a contract, there may be termination provisions that kick in based on the occurrence of certain contingencies, whether at-will or otherwise, such as for late delivery or a breach of a “time is of the essence” clause. It is worth viewing any such provisions within the context of the larger defenses of impossibility, impracticability, and force majeure excusal of nonperformance, in case the other party nonetheless attempts to invoke these doctrines to negate invocation of a termination provision.
This is not the law’s first brush with the unexpected, and although this is a time of wide-reaching uncertainty, woven into contract law, particularly, is a system to guide parties through the serious impacts that unexpected events may have. Our team at Cowan, DeBaets, Abrahams & Sheppard LLP will continue to provide updates on legal developments related to the present circumstances and we are available should you request further or specific guidance.
Briana Hill, Co-Head of the Beverly Hills office of Cowan DeBaets Abrahams & Sheppard LLP, joins Fred Bimbler and Simon Pulman in leading the firm’s Entertainment group, which includes televison (traditional to broadband), streaming, film, new media, talent, theatre and podcasting. The group assists clients with their entertainment projects through early development, the solicitation of investment, production and ultimate distribution, securing all necessary rights and negotiating agreements with top-tier talent.
Ben Jaffe joins Joshua Sessler in leading the Digital Media & Technology group that represents top digital talent, including game developers and distributors, digital agencies, production houses, broadband video networks, mobile app developers, podcasters and social media ventures. The group provides counsel to a wide range of social media, transmedia and mobile plays that are using emerging software and hardware technologies to create, develop and distribute content in new ways.
Although podcasts have been around in one form or another since the early aughts, their ubiquity and popularity has skyrocketed in recent years. Apple, Spotify, Pandora, Google, and Stitcher, among other platforms, have changed the game when it comes to distribution, variety, and access. Wildly popular programs like Serial, Pod Save America, My Favorite Murder, and The Daily have set the standard for content excellence across the news and mystery genres, while The Joe Rogan Experience, Comedy Bang! Bang!, WTF with Marc Maron, and Conan O’Brien Needs a Friend are leading the way in the comedy space.
If you want your dulcet tones to break into the digital airwaves and bring your audience information or entertainment and laughs (or maybe all three), you will of course need solid distribution and top-notch content. But you also need legal protection both for you and for your content. While podcasting may seem straightforward enough to not warrant the involvement of a lawyer, there’s more to it than you might think. Here are five things to do to protect yourself and your content when entering the world of podcasting.
- Form a Company: You may have already done this, but setting up a company, whether a corporation, partnership, or LLC, is a smart first step in becoming a content provider. Apart from tax implications (which your accountant can explain to you), the corporate form creates a shield around you to protect your personal assets from certain forms of liability (for instance, breach of contract), limiting legal exposure to the assets of the company where it can be said that the company is the liable party. The corporate form may not protect you from torts such as defamation and copyright infringement if you (intentionally or not) slip up in your individual capacity, but the company can still potentially absorb the exposure for torts it is deemed to have committed. You may also want to use a corporation or LLC to hold your intellectual property (more on IP below) or “loan out” your services as talent, which can be helpful from a financial standpoint (again, talk to your accountant). Setting up a company can be simple enough to be a DIY project but might become more complicated, requiring professional advice, depending on the arrangement you want and if you have multiple shareholders or members. But it’s generally not that expensive and could save you headaches in the long run. Once you’ve formed your company, make sure that you assign any existing contracts to the company (an attorney can help you with this as well), and that future contracts are in the name of the company – not your own name.
- Obtain Copyright and Trademark Protection: To protect your original content, you should apply to register copyrights in that content. While ideas and concepts are not copyrightable, the tangible expression of those ideas is, including scripts, sound recordings, skits or sketches, songs, and even, in some instances, individual jokes. If the content is original to you (i.e., not simply copied from someone else) and is in a “fixed” medium of expression, you can apply to register your work with the U.S. Copyright Office. The application process is more straightforward than the trademark process (discussed below) and the basic fees are reasonable; the bar to obtaining a registration is also pretty low in that “originality” for copyright purposes requires only minimal creativity, and it is far less likely that another copyright owner will challenge your application. While it may seem onerous to register each episode of a podcast – especially if you release episodes more than once a week – there are ways to potentially streamline the process and keep costs down, and copyright counsel can be helpful in this regard. Registering copyrights will also help you if your podcast one day moves into other media, such as television or a published book.
Have a clever name for your podcast? You should consider applying for a trademark registration. If you offer goods or services (including entertainment services like podcasts) using a name, logo, or short phrase as a source indicator, you may be eligible for federal trademark protection through the U.S. Patent and Trademark Office. Simply using the word, phrase, or logo “in commerce” is enough to give you some rights to enforce against infringers, but registration gives you more rights and enhanced damages if someone tries to rip off your mark. It’s important to note, though, that there are filing fees and other expenses involved in applying to register a trademark (and in maintaining a trademark once it is registered), and during the application process other trademark owners have a chance to challenge your mark if they think it is too similar to theirs. The application process is also more complex than applying to register a copyright and it is usually advisable to seek legal counsel to help ensure your mark is not “blocked” or otherwise rejected.
- Obtain Necessary Licenses, Releases, and Permissions: If you are using third-party content (playing audio clips or music, reading from a script or a book, etc.), you should make sure you have permission to do so from the owner of the copyright. Despite popular misconceptions, there is no magic percentage that you can use without consequence (e.g., 8 measures of a song, 30 seconds of a comedy bit, 5% of a book) and the question of whether something is “fair use” is complex, gray, and extremely fact sensitive. The best practice is to make sure you have a license (whether written or oral) to use content that is not exclusively yours or seek out content from royalty-free libraries or that can be used under Creative Commons licenses. And when that content includes the voice or other identifying aspect of a third party, you’ll need to get that person’s permission as well, separate from the necessary copyright permissions. A person’s voice is part of their “right of publicity” which is distinct from copyright and generally (with some exceptions) requires permission to use.
If you have guests appear on your podcast, make sure they sign an appearance release that allows you to use their names and likenesses (e.g., voices) including for commercial, advertising, and promotional purposes and that releases you from liability for the ways in which guests’ names and likenesses are used. While the best practice is to get written permission, you can also secure this consent verbally by having the guest read a brief script on air. There are special considerations when dealing with minors that are beyond the scope of this article, and in such situations, it is best to consult a lawyer familiar with minor talent.
- Vet Your Content and Read Your Contracts: Related to number 3, if you are using third-party content (assuming you have permission), you should make sure that content doesn’t infringe anyone else’s rights. Issues in the podcasting space, especially in comedy, usually arise in the context of defamation. For example, if you source a clip of another comedian’s latest standup special and that comedian makes a defamatory statement about another identifiable person, you may be liable for re-publishing that defamatory statement. The best practice is to review content before using it and consult a lawyer if you have concerns about any piece of content.
Also, if you sign any contracts, whether to acquire or license content, or for a third party to distribute or host your own content, read them before you sign them. If you sign a contract you normally are bound even if you haven’t read it, so always understand what you are signing before you put pen to paper or fingers to keyboard. When licensing third-party content, make sure you’re indemnified in case the person who provided you with the content didn’t have sufficient permission to do so, and when reviewing terms set out by hosting platforms, know who controls your RSS feed; typically, the host will control it for the period they host it, but unless your content is exclusive to one platform (for instance, Spotify), the platform should not own the stream or the content. And note that in many jurisdictions, an email agreement is considered a binding contract – so be careful what you agree to via email. Usually the best time to engage an attorney is when an offer is initially made to you – even if it takes the form of an email as opposed to a formal contract. There are obviously more issues that may arise than just these, so don’t sign away your rights unknowingly!
- Get Errors and Omissions Insurance: Many insurance companies offer E&O insurance for media and entertainment companies (such as AXIS Capital, AXA XL, QBE, and OneBeacon) and getting coverage is a smart idea particularly given how much litigation arises out of media and entertainment properties. Media insurance policies often cover copyright and trademark claims, contract claims, defamation claims, and other risks that commonly arise in the media and entertainment space. While this may seem like an unnecessary cost, especially for an individual or small business, those who make their living in media and entertainment should seriously consider it – and as the podcast business becomes more mature and sophisticated, insurance is increasingly being required in connection with certain forms of distribution.
Cowan, DeBaets, Abrahams & Sheppard LLP is delighted to announce that partners Eleanor M. Lackman and Nancy E. Wolff and both CDAS’s Entertainment and IP, Copyright and Litigation Practices have been recognized by Chambers and Partners in the Chambers USA 2018: America’s Leading Lawyers for Business guide.
This is the fifth consecutive year Ms. Lackman and the second consecutive year Ms. Wolff have been ranked in the Chambers USA guide. They are both among just 41 New York lawyers ranked in the field of “Intellectual Property: Trademark, Copyright & Trade Secrets – New York.”
“Impressed sources” told Chambers that Ms. Lackman is “an absolutely incredible trademark litigator” and added: “She is very practical and always seems to make the right call.” She also has notable experience handling copyright matters, often advising clients across the media and entertainment industries.
Chambers describes Ms. Wolff as “very well-known and well-respected.” She receives plaudits for her expertise in a range of complex copyright matters and is highlighted for her particular skill across the photography and visual art industry.
CDAS’s Entertainment Practice was awarded a regional designation of “Noted Firm” in “Media & Entertainment: Film, Music, Television & Theater – New York” for the third consecutive year, while the Firm’s IP, Copyright and Litigation Practice received a “Noted Firm” designation in “Intellectual Property: Trademark, Copyright & Trade Secrets – New York” for the second consecutive year.
The annual guide ranks law firms and lawyers based on in-depth interviews with clients and lawyers, technical legal ability, professional conduct, client service, commercial astuteness, diligence, commitment, and other qualities most valued by the client.
The special publication recognizes female practitioners in private practice who have performed exceptionally for their clients and firms in the past year.
Managing IP explains that these leading female practitioners have been selected from the general “IP Stars” list, which will be officially announced next month. The list is based on information obtained during the research for this year’s edition of “IP STARS.” The research was concluded in February to 2018.
See the full list here: THE TOP 250 WOMEN IN IP (2018)
Yesterday President Obama signed the Defend Trade Secrets Act of 2016 (“DTSA”), the culmination of several years of bipartisan efforts to federalize trade secret protection, placing it alongside the federal copyright, trademark, and patent statutes. The DTSA – an extension of the Economic Espionage Act of 1996 – should be significant, generally, to businesses concerned about protecting competitively sensitive information from misappropriation by former employees, industrial spies, and foreign nationals. It should prove particularly useful to those in the online and digital media space as an important tool in the prevention and remedying of the theft of software-based products. The DTSA has strong support from the software industry, including from Microsoft, IBM, Adobe, Micron, and the Software Information Industry Association. Here are three key takeaways from the passage of the DTSA:
Cowan, DeBaets, Abrahams and Sheppard LLP Partner, Eleanor M. Lackman, and Associate, Joshua Wolkoff, have been appointed to International Trademark Association (INTA) committees for the 2016-17 term.
Ms. Lackman will serve on the International Amicus Committee. The committee provides expertise concerning trademark and other IP-related laws to courts and trademark offices around the world through the submission of amicus curiae briefs or similar filings.
Mr. Wolkoff will serve on the Young Practitioners Committee. The committee develops services and programs specifically designed for young practitioners who wish to advance their careers in the trademark field.
The U.S. District Court for the Central District of California in Maloney v. T3Media, Inc. recently held that state right-of-publicity claims brought by former college basketball players complaining of photographs licensed of their likenesses without consent warranted dismissal with prejudice pursuant to California’s anti-SLAPP statute, which prohibits suits aimed at inhibiting free expression. Members of the 2001 NCAA Division III champion Catholic University basketball team sued T3Media, a cloud storage, hosting, and digital licensing service, alleging violations of their rights of publicity when photographs of the players from the NCAA championship were displayed and made available for licensing on T3Media’s website.