Dec 20 2016

New NYC Law Makes Written Contracts Mandatory for Freelancers

Every holiday season, many NY City companies employ freelancers to fill a variety of roles for when the business gets swamped. Well starting in 2017, those businesses will need to comply with a new law that goes into effect May 15 2017 in the five boroughs of New York City. The law, appropriately named “The Freelancers Aren’t Free Act” protects freelance workers by (1) requiring freelancer contracts to be in writing, (2) requiring timely payment, (3) prohibiting retaliation, and (4) providing specific remedies and damages available to aggrieved freelance workers. The law does not apply to sales representatives, attorneys or licensed medical professionals. Key Points:

A. Contracts with freelancers for services of $800 or more must be in writing. That total can be reached by including the amounts for contracts between the same parties in the immediately preceding 120 days. The contract must include the name and address of the hiring party and the freelance worker; an itemization of the services the freelancer will provide; a price schedule for those services; and the date for final payment to the freelancer. That will require companies to use their legal name in the contract to make it easier for freelancers to identify who or what entity is actually hiring them.

B. The hiring party must pay the freelancer on or before the date specified in the contract. If there is no date set in the contract, the law requires the hiring party pay the freelancer no later than 30 days after the completion of the freelancer’s work.

C. The hiring party may not threaten, harass, deny an opportunity to or take any action against a freelance worker that deters the freelancer from exercising any right under the Act.

So what happens if the hiring party violates one of these provisions? The law provides clear penalties:

nyc-labor-office1. A plaintiff who proves they requested but were denied a written contract before work began is entitled to statutory damages of $250.
2. If a hiring party violates the written contract requirement plus any other section of the statute, the statutory damages will be the full value of the underlying contract in addition to damages for the other sections violated.
3. Plaintiffs who are successful in claims under the payment provision are entitled to double damages; so a freelancer who is contractually entitled to $1,000 in unpaid fees is automatically entitled to $2,000 under this section.
4. Plaintiffs who are successful in claims under the retaliation provision of the act are entitled to damages in the value of the underlying contract for each instance of retaliation.
5. A successful plaintiff is entitled to attorney’s fees.

That last provision means that plaintiff employment lawyers will be looking for these cases as the value of the case will not be a deterrent to bringing a claim under the Act.

Like most labor regulations, waivers of these statutory rights are void as against public policy. That means employers cannot get freelancers to sign a general release saying they were properly paid. The Act states that the New York City Office of Labor Standards (NYCOLS) will collect data on the effectiveness of these new laws. It may be useful at the end of 2017 to file a Freedom of Information Law request for this data to see what industries were impacted and what were the average size of penalties and legal fees awarded.

One thing is clear: We continue to see a trend on placing additional requirements and burdens on employers – large and small – to ensure that workers aren’t taken advantage of. However, many small businesses that are not getting proper legal advice will be caught in the crossfire and could face significant financial penalties for breaking laws they did not even know existed.

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Dec 15 2016

“3:05 Cafecito Time” Case Shows Limits of a Good Idea

I’m sure Jenny Lee Molina, the founder and principal of the Miami public relations firm JLPR, publicist JennyLee Molina, thought she struck gold when she came up with “#305Cafecito” to designate 3:05pm as the official time in Miami to grab a little cup of Spanish coffee (“un cafecito”). After all, 305 is the area code for Miami and walking up to a restaurant’s ventanita (“little window”)for the afternoon cafecito is an Hispanic tradition. The marketing program caught a little fire in the Miami-Dade community and in 2013, Miami Mayor Tomás Regalado designated 3:05pm as the official coffee break time of the City of Miami. It was a great idea for sure.

So imagine her surprise when recently coffee giant Cafe Bustelo began using “3:05pm cafecito” in a series of pop-up activations in cities such as New York, Los Angeles, and Chicago where free coffee was distributed at 3:05 p.m., with signs depicting “305” and “cafecito time” held by attendees. Cafe Bustelo is owned by the J.M. Smucker megacorporation which owns Bustelo, Smucker’s Jam, Folger’s, and Café Pilon. In addition, J.M. Smucker sells coffee under the Dunkin’ Donuts brand in grocery stores across the U.S. and owns the Meow Mix, Kibbles N’ Bits, Milk Bone, and 9 Lives brands plus many others.

This past October, Molina asked the J.M. Smucker Company to properly recognize JLPR asking for creative credit. She told them that
she monetizes 3:05 Cafecito by using it as a marketing vehicle for events and using it as a social media influencer with other brands that she promoted on a 3:05 Cafecito channel.The Smucker Company was not impressed with her claim. They responded through their lawyer that they were not claiming trademark rights to 3:05 Cafecito as the term is merely descriptive to tell their followers at what time they will be offering a free cafecito at selected locations. What’s worse is they used JennyLee’s own success against her:

Our research shows that 3:05 p.m. has been recognized as “Miami’s official cafecito time” following the mayor’s proclamation in 2013. We do not believe that anyone has exclusive rights in celebrating a coffee moment at 3:05 p.m. To claim otherwise seems contrary to the idea of sharing pride in the afternoon cafecito ritual as a way to honor the Latin culture in Miami.

That’s right – they threw back in her face that since the Mayor proclaimed 3:05pm as the official coffee break time of Miami, the “305 Cafecito” movement stopped being a privately held trademark and instead became a generic term. But of course, 3:05pm was only selected by JennyLee as a clever use of Miami’s area code. There was no natural tradition of having a coffee at exactly 3:05 pm. And its just plain smarmy nonsense to claim that they are doing it to “share pride” in Latin culture in Miami. There can be no serious dispute that JM SMucker got the idea from JennyLee. Her and her company are named in the Mayor’s 2013 Proclamation. But that’s not enough under trademark law. Here’s another important passage from JM Smucker’s response letter:

“cafecito” and “cafecito time” are generic terms that are not subject to trademark protection, and 305 is geographically descriptive as a reference to the telephone area code of Miami, Florida, and also not protectable. In fact, the USPTO has required a disclaimer of exclusive rights to the terms “cafecito” and “305” in numerous third party registrations.

Smucker’s lawyer is likely right. There is nothing unique or fanciful about “305 Cafecito.” And while it may have been popular in Miami, it hardly was a national concept or household term. And that’s essentially what JennyLee would have to prove to be able to stop Smucker’s from using her idea – that it acquired “secondary meaning” under trademark law. Under trademark law, a mark associated with a marketed product generally cannot receive full trademark protection unless it is distinctive. Think about trademarks like “Exxon” or “Motrin” These are not real words; they do not describe the product or its use; they don’t just use a proper name or a geographical location. They are called “fanciful” because someone created them out of their imagination. Trademark protection gives the holder of a distinctive mark the exclusive right to use that mark in connection with a product. The mark is placed in the principal register of trademarks in the US Patent and Trademark Office. Descriptive and generic marks ordinarily do not qualify for the principal register. A person may not, for example, claim the right to the word “nice” in connection with a product because the word is merely descriptive. A descriptive or generic mark may, however, be placed on the supplemental register, which gives the holder of the mark a certain measure of trademark protection. If the mark acquires a secondary meaning after five years of continuous, exclusive use on the market, the mark may be placed on the principal register.

Trademark-SymbolA descriptive or generic mark attains a secondary meaning if the producer so effectively markets the product with the mark that consumers come to immediately associate the mark with only that producer of that particular kind of goods. Think of “Just Do It” – Nike’s trademark. That’s a common English phrase that is not distinctive. So to protect it, Nike made sure to roll it out in a national multi-million dollar ad campaign. They put “Just Do It” on billboards, TV and radio; they put it on every label of Nike clothes shipped out at the start of the campaign; they placed ads in just about every print magazine in the country. It was not long before “Just Do It” became synonymous with Nike so that when you hear it, you no longer think of the actual phrase but you think of Nike – “Just Do It” has acquired a secondary meaning. The other issue JennyLee has is that she is not even in the business of selling coffee, so Smucker’s and her are not really competitors. In her trademark application, she listed dozens and dozens of products that she used or intended to use 305 Cafecito on: coffee mugs, bumper stickers, adhesive tape and and so on. But “coffee” was not on the massive list. If she had a national coffee brand called “305 Cafecito” she would have a much better chance of stopping the Smucker’s campaign. I noticed in searching the USPTO records that in July 2016 someone applied for the trademark “Cafecito 305” in connection with the sale of coffee, coffee beans and ground coffee.

In the Miami New Times’ article about the case, JennyLee is quoted as saying:

“If they would have done a post saying to join the #busteloexperience and drink coffee at 3:05 p.m., brought to you by 3:05 Cafecito, I would have been more than fine. At the very least, they could have corrected what happened, but what they did was take a stance that my idea is not my idea, and that’s why I’m upset. It’s not fair. They gain nothing and lose nothing by giving us credit

JennyLee is missing the point: They are not disputing that its her idea really; they are disputing that her idea is protectable, because it is generic and not distinctive and because its just an idea and not a product. She is right however that Smuckers really had no reason to not give JennyLee accreditation. They likely did a quick assessment of the strength of the trademark (or lack thereof) and determined that it was not protectable, so why not use it? They also likely assessed the likelihood of a small Miami PR firm taking on one of the largest conglomerates in the world in a trademark lawsuit. JennyLee is trying to get their attention by starting a #boycottbustelo campaign but so far it has not had much in the way of activity. I wish her luck but I think this will be an uphill battle.

Follow me on Twitter @oscarmichelen

Dec 13 2016

Troll Lawyer Denied Attorney’s Fees in Copyright Lawsuit

In an important decision from the Federal Court for the District of Oregon, a court has denied attorney’s fees to a successful copyright litigant because the court ruled that in this instance the award did not further the purposes of the Copyright Act. The lawsuit involves the pervasive litigation filed by porn companies against folks who downloaded their movies over the Internet. Usually an adult film company hires one of a handful of copyright trolling lawyers who handle these massive claims and then seek to extract (or I as I say extort) settlements from folks who can’t afford a lawyer or who are embarrassed to be sued over downloading porn or who simply have no clue how to defend the case so paying $2,000 or so seems like a logical resolution.

Here, however, Cobbler Nevada Inc,. the porn producer, ran into Santos Cerritos, the downloading defendant, who retained Thomas Freedman of Pearl Law in Portland, Oregon. Together they mounted a simple defense based on the value of the claim. In the end, the successful management of the claim led to the court denying attorney’s fees. The decision has far-ranging ramifications as copyright trolling is not just for porn. Over the past eight years, my office has represented 3,000+ businesses in claims brought by Getty Images and other digital image warehouses for folks using one of their digital images in a blog post or on their website. We have handled similar trolling cases over the use of a poem called “The Dash;” bars and restaurants playing live or recorded music; and even fought lawsuits over the unlicensed use of clip-art. In most of these cases, the defendants did in fact use the work without permission, so liability is not an issue. The main thrust of all of these claims is that in addition to whatever the infringement is worth, the loser will face paying the legal fees of the copyright holder as under the Copyright Law, attorney’s fees are usually awarded to a prevailing plaintiff.

copyright logoSo why did the court refuse to award them in this case. First of all, the lawyer for the porno producer Carl Crowell has faced judicial scrutiny before. He was denied legal fees in another film downloading case recently and the court there noted that he has brought these lawsuits against folks on Social Security Disability and even against a foster home where there was no proof of who downloaded the film. Second of all his conduct in this case did not help his cause: he served the defendant even though his counsel would have accepted service on his behalf thereby avoiding process server fees; he turned down fair offers of judgment even after the defendant proved his indigency by turning over financial records; and he continued to serve discovery demands and motions even though the defendant had admitted liability and the court had frozen discovery while settlement talks were ongoing. The other factors in denying the fees was that the defendant and his counsel admitted liability (limiting discovery as I stated); made several offers of settlement in writing; and always focused the court’s attention on the minimal impact this infringement had on the plaintiff and the world at large. So when Crowell sought $17,400 in legal fees when he received only the statutory minimum award of $750, the court decided to make a statement. The result of this clash of styles of lawyering was a decision that had many elements that will be used by others (including myself) as they fight these plagues on the court system. I will give you a smattering of some of the most important language in the court decision (a link to the full opinion is at the bottom of the article).

1. “We do not believe Congress intended that the prevailing plaintiff should be awarded attorney’s fees in every case.”

2. “The Supreme Court noted that a court may also consider the need to “deter . . . overaggressive assertions of copyright claims.'”

3. The most important factor in determining whether to award fees under the Copyright Act, is whether an award will further the purposes of the Act and the primary purpose of the Act is to “encourage the production of original literary, artistic, and musical expression for the good of the public.” (Meaning its primary purpose is not to produce infringement awards).

4. The court noted that $17,346 in fees to get an award of $750 is excessive.

5. The court noted that stopping one infringer when thousands have illegally downloaded the same film is a de minimus (minor) success.

6. While the court certainly understands the need to protect and enforce one’s copyright, making an infringer pay $750 in statutory penalties plus $525 is a sufficient deterrent in this case.

7. An award attorney’s fees should be given only if doing so will further the purposes of the Copyright Act. In these mass copyright cases, the threat of fee-shifting has emboldened Plaintiff’s counsel to demand thousands of dollars to settle a claim, even where the infringing defendant admits early in the case that he illegally downloaded the movie.

8. The threat of fee-shifting in these cases has created an unjust scenario in this and other districts, in which enterprising plaintiffs’ counsel can demand thousands of dollars to settle these cases before the infringer is even named as a defendant, because the cost of federal litigation is prohibitive (for one party, let alone paying for both parties’ attorney’s fees). A startling number of [target defendants] are failing to show up for Rule 45 depositions, and alleged infringers are more often than not choosing default judgments over litigation. By allowing this scenario to occur for several years now, the federal courts are not assisting in the administration of justice, but are instead enabling plaintiffs’ counsel and their LLC clients to receive a financial windfall by exploiting copyright law.

9. When an individual who has illegally downloaded a movie is contacted by Plaintiff’s counsel, and faces the threat of a statutory damage award that could theoretically reach $150,000 (see 17 U.S.C. § 504(c)(2)), as well as the threat of a substantial fee award, the resulting bargaining process is unequal, and unfair. For this Court to award Plaintiff its attorney’s fees in this case would only contribute to the continued overaggressive assertion and negotiation of these Copyright Act claims.

The last two paragraphs are music to my ears as they summarizes why I call these trolling campaigns “legalized extortion.” Hopefully, the tide is turning against these lawsuits. The potent weapon of attorney’s fees needs to be taken away from the trolls. We need courts around the country to follow suit and recognize that the Copyright Act’s allowing of attorney’s fees should only be applied where it will further the purpose of the Act and should not be used as a threat to make minor infringers pay exorbitant penalties far in excess of the damages sustained.


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Nov 30 2016

Colorado Theater Shooting Victims Stuck with $700,000 in Defendants’ Legal Fees

In 2012, James Holmes killed twelve people and injured seventy others in a ten-minute rampage at a screening of “The Dark Knight Rises.” Forty-one victims filed lawsuits some in Federal court and others in State court. According to the state lawsuit, the theater companies failed to hire sufficient security personnel in light of a previous shooting and other violence in the shopping mall where the theater is located. It also cited a lack of surveillance cameras around the property, a faulty emergency exit alarm that failed to go off when the gunman launched his attack through the cinema’s rear door, and the failure of security personnel to intervene once the shooting started. Their claims against the movie theater relied heavily on a warning issued by the Department of Homeland Security just months before the massacre advising theater chains of the possibility of a mass shooting and suggesting they take precautions.

But just before the state trial was about to begin, Arapahoe County District Judge Phillip Douglass,the Colorado judge overseeing the trial, ruled the Homeland Security document inadmissible saying “it might mislead and confuse the jury.” The movie theater’s main argument was that it did not have the legal duty to foresee the mass murderous assault, nor did it have the legal duty to prevent it. So the court’s ruling opened a huge hole in the victims’ case as without a direct warning, the previous incidents at the mall were not enough to force the theater to screen patrons as they came in or to guard against a mass shooter more vigorously. In May of this year, the State Court jury ruled in favor of the defendants and dismissed the lawsuit. At the time, some plaintiffs grumbled that their lawyer, NY mass-tort specialist Marc Bern, dropped the ball. Bern and his firm made millions off of asbestos and 9-11 related claims. He represented twenty seven of the State court plaintiffs. According to the LA Times, his clients complained that he paid one expert $22,000 to testify while the theater paid five experts $500,000 to testify in a case that came down to a battle of experts. One attorney in the State court case who had taken a small settlement to end the matter told the LA Times “A blind guy in a dark alley could have seen it coming” (referring to the State jury verdict).

Colorado Killer James Holmes

Colorado Killer James Holmes

To make matter worse, Colorado law requires the losing party to pay the winning party’s legal fees. The State court just approved the theater’s $699,000 bill of costs and judgment was entered against the remaining State court plaintiffs in that amount. While it is not likely that the defendant will pursue getting those costs, each plaintiff is individually liable for the whole $699,000 and a judgment of that size will of course affect your credit rating and ability to manage your financial affairs.

The plaintiffs in the Federal case did not fare any better. After an eight hour settlement conference produced a $150,000 settlement offer to be split among forty one plaintiffs. While it was a paltry sum, the Federal judge presiding over the case had warned them that there was pending motion to dismiss in light of the State court verdict and that he was likely to rule in the theater’s favor. Once again, he warned them, Colorado law would apply and they would be liable for attorney’s fees and costs if they lost. All but one plaintiff decided to take the settlement but the deal was off the table unless it was unanimous. The final victim could not be swayed: Her child was killed in the shooting, she was left paralyzed and the baby she was carrying had been lost. The other plaintiffs noted that in addition to the money, the theater chain would make improvements in their security measures to protect its patrons. Still, she decided to reject the settlement offer. The next day, the Federal judge dismissed the case as well. The theater has not yet submitted its Federal bill of costs.

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