Targeting Piracy With Digital Millennium Copyright Act (DMCA)

The current mechanism for addressing internet piracy utilizes takedown notices through the Digital Millennium Copyright Act (DMCA). This allows rights holders to ask for the removal of specific infringing content. Generally, this approach narrows itself to specified content and it recognizes that online service providers may not be culpable for the actions of their users.

Most notably, under § 512 of the DMCA service providers hosting the infringing content may be exempt from liability upon meeting certain requirements. This safe harbor applies if the content host:

• Lacks actual knowledge of infringing use; or
• Lacks awareness of facts or circumstances that make infringing use apparent; or
• Removes or disables access to infringing material upon knowledge or awareness; and
• Informs users of its copyright infringement policy; and
• Complies in good faith with the takedown notice; and
• Does not receive a direct financial benefit from infringing use if it has the right and ability  to control such activity.

Targeting Piracy Through Stop Online Piracy Act (SOPA) and Protect IP Act (PIPA)

SOPA is the House bill and PIPA is the Senate version. Both seek to address Internet piracy differently from the DMCA approach. Instead of content removal and focusing on users, the bills propose targeting websites. This will widen the net beyond safe harbor such that content hosts must be more vigilant and self-police.

In relevant portion, under SOPA the Attorney General may take action against a website if at least a portion of it is directed to the U.S. and is used by users within the United States; offering goods or services in a manner that engages in, enables, or facilitates copyright infringement; or takes steps to avoid confirming a high probability of infringing use. In addition, SOPA also targets foreign websites or portion of such sites availing themselves to the U.S. that commit or facilitate infringing use or trafficking of counterfeit goods or services.

Upon a website allegedly falling under the aforementioned criteria, notified payment network providers (like credit card companies and PayPal) and internet advertising services would have 5 days within delivery of notification to suspend any services providing financial support to the website. Furthermore under SOPA, notified internet search engines have 5 days within delivery of notification to remove direct links to an allegedly infringing foreign website or a portion of such a site.

As of January 18, due to mounting pressure, legislators scrapped SOPA’s requirements for ISPs to block the domains for websites allegedly found in violation. Similarly, legislators are reconsidering this issue in regards to PIPA, which is quite similar to SOPA in it’s aim and enforcement measures. It specifically acts as a tool for rights holders to target foreign “rogue” websites. Like SOPA, measures include sending notices to suspend Internet financial services and transactions, and removal of direct links.

The Division Amongst Companies

Some of the biggest support for the bills comes from U.S. entertainment content providers who would be able seek enforcement against piracy by foreign websites, which generally remain outside U.S. jurisdiction.  The proposed bills would offer rights holders more options in terms of enforcement measures. Also, extending beyond removal of specific content, the measures would ostensibly throttle foreign “rogue” websites dedicated overall to piracy.

Part of the the opposition is comprised of U.S. tech and social media companies because Internet-based businesses will have to increase policing of suspected infringing use, and also comply with enforcement measures against alleged violating websites. Additionally, investors of Internet startups (such as these 55 venture capitalists in this letter) have expressed concern that enacting such measures will stymy innovation and growth, and be cost-prohibitive for legitimate ventures.

See below for links to the text

• Effect of Washington State’s new liquor law on local restaurants, bars, and craft distilleries.
• The annual adjustment of Washington’s minimum wage.
• New employment-related changes in Seattle.
• Requirement to post employee rights poster.
• Extension of tax rate for long-term capital gains and qualified dividends, along with a brief explanation of those terms.

Washington State Initiative Measure No. 1183
The initiative became effective as of December 8, 2011, but the Washington State Liquor Control Board (WSLCB) will be making the transition to private liquor sales and distribution throughout the next two years.

As of March 1, 2012 on-premise licensees, such as restaurants and nightclubs, can begin purchasing spirits directly from distillers and spirits distributors. The downside here is that until then, local craft distilleries have limited options for selling their liquor to the public. Since state liquor stores are no longer purchasing liquor from local distilleries, until March the distilleries are limited to making sales through their tasting rooms. (See WSLCB notices regarding Craft Distillers; and The Daily Herald and MyNorthwest.com’s coverage regarding this).
 
 
Washington State Minimum Wage Increase and Poster Changes
Effective January 1, 2012, Washington’s minimum wage increased to $9.04 per hour. The increase applies to both agricultural and non-agricultural workers. However, 14 and 15-year-old workers may be paid 85% of the adult new minimum wage, which comes to $7.68 per hour.

This increase comes as per Initiative 688, which was approved by voters in 1998. It requires the Department of Labor & Industries (L&I) re-evaluate and accordingly adjust the minimum wage every September based on cost-of-living under the federal Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

The CPI-W measures the average change in prices over time of consumer goods and services such as food, shelter, medical care, transportation, and other such living costs. In the past year, the prices for most consumer goods and particularly fuel rose. Washington is one of 10 other states that adjust the minimum wage in this way, and as of this year has the highest state minimum wage.

L&I also announced that while employers are still required to the post the “Your Rights as a Worker” poster, L&I shall no loner publish an additional poster just for minimum wage.
 
 
Addition of Paid Sick Time and Paid Safe Time to Seattle Municipal Code
City of Seattle passed an employment-related ordinance that sets minimum standards for the provision of paid sick and paid safe time. Ordinance No. 123698 is effective September 1, 2012.

Employees covered under the ordinance must either work in Seattle or perform more than 240 hours of work in a calendar year in Seattle. Employees here consist of traditional employees, temporary, workers, and part-time employees.

Employers will be required to notify employees of their rights under Title Chapter 14.16. Employers will also be required to retain for up to 2 years records documenting employees’ hours worked and paid sick and safe time both accrued and taken.

This paid sick and safe time is set forth based on a 3-Tier system that categorizes employers. Generally, most new businesses/employers that will be subject to this ordinance have 2 years from the hiring date of their first employee to comply. We hope to cover this in greater detail in the coming months along with any updates. (See here for Ordinance No. 123698 information).
 
 
National Labor Relations Board (NLRB) Poster Requirement
As of April 30, 2012, most private sector employers covered under the NLRA must post a notice that informs employees of their rights under the Labor Relations Act (NLRA). To see if your business falls under the NLRB’s jurisdiction and is required to post the employee rights notice, follow this link to the NLRB’s related FAQ page.

However, if your business was unsure about the posting deadline please note that the effective date for the notice-posting rule was originally set for November 14, 2011, then postponed until January 31, 2012, and now it has changed to April 30, 2012.

The poster is required to be 11 x 17 inches and can be in color or black-and-white. It is available for free through the NLRB via download on it’s website or paper mail by placing an order by phone or submitting an e-form. (See NLRB page here for details).
 
 
Extension of Long-Term Capital Gains and Qualified Dividends Tax Rates
This reduced tax rate continues for 2012. It remains at 0% for taxpayers in the 10% and 15% income tax brackets, and the maximum tax rate remains capped at 15%.

Personal tax rates remain for 2012. Also for 2012, the capital gains tax rates on long-term gains and qualified dividends remains at 0% for those in the 10% and 15% income tax brackets.

Long-term capital gains are capital gains on assets held for more than 1 year. Qualified dividends are ordinary dividends paid by a U.S. corporation or a qualified foreign corporation on stock that is held for more than 60 days during the 121-day period that begins 60 days prior to the ex-dividend date. To get more technical here, the ex-dividend date generally occurs two business days before the date (record date) on which a shareholder must be on record to receive a declared dividend. Shareholders will not partake in a dividend payment if the stock was purchased on or after its ex-dividend date. (See IRS Publication 550 and SEC explanation).

So why seek copyright registration at all? There are three key incentives to register your work:

1. Filing for copyright registration is a prerequisite for bringing a lawsuit for infringement.
2. Registration creates the presumption that the copyright is valid.
3. Most importantly, timely registration is a prerequisite for seeking certain remedies for infringement. (See 17 U.S.C. § 412 of the Copyright Act)

This third incentive is particularly beneficial because a copyright owner with timely registration may elect for statutory damages and may seek attorney’s fees. Copyright registration is timely if the filing occurred before the infringement of the published work, or the filing occurred no later than 3 months after first publication of the work.

Generally in an infringement suit an award of actual damages and any profits is available as one of the monetary remedies. Actual damages can consist of lost revenue, fair market value of a copyright license, or the actual price of the work and so forth. Calculating profits is more nuanced and it consists of examining gross revenue and deducting infringer’s costs and portion of profits not attributable to infringement of the copyrighted work. (See 17 U.S.C. § 504)

Electing for statutory damages can be a better incentive than actual damages and profits because the latter may be harder to show or be a smaller award than statutory damages. An award for statutory damages can be between $750 to $30,000 per infringed work in an action. Furthermore under statutory damages, if the court finds that the infringement was willful, then the award for statutory damages could be increased up to $150,000 per infringed work in an action.

However, where the court finds that the infringement was innocent (infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright), then the court may reduce an award for statutory damages down to $200. To counteract the innocent infringer defense, it’s best to affix a copyright notice in a position that will give reasonable notice. Generally for most works, copyright notice requires: the copyright symbol (c), the word “Copyright”, or abbreviation “Copyr.”; the year of first publication of the work; and the copyright owner’s name, abbreviation, or designation.

As for the copyright registration filing itself, the electronic filing fee for a basic copyright claim is currently at $35. So while not necessary, timely registration of a copyright is less burdensome, helps with copyright enforcement, and is a prerequisite for statutory damages and attorney’s fees in the event of infringement.

The spectrum of distinctiveness illustrates the strength of a mark. The more distinct the word mark is, the stronger it is in terms of legal protection. The reason for this is that a trademark is meant to identify the source of the goods or services being offered. A generic or descriptive term refers to the goods or services, but does not call to mind the source providing them.

Generic
A generic term is not distinctive and thus cannot be protected as a functioning trademark or registered as a trademark. A name is generic if it is the common term for a class of goods or services. Some examples of generic terms would “Coffee” for coffee, “Furniture” for furniture, or “Accounting Services” for accounting services.

A generic term is not distinctive and thus cannot be protected as a functioning trademark or registered as a trademark. A name is generic if it is the common term for a class of goods or services. Some examples of generic terms would “Coffee” for coffee, “Furniture” for furniture, or “Accounting Services” for accounting services.

It’s worth noting that if you offer a product or service first of it’s kind, avoid turning your trademark into a generic term. Come up with a generic term to use and promote separately so that your trademark doesn’t become the commonly used term. For example, Rollerblade is Rollerblade, Inc.’s trademark and “inline skate” is the generic term for its product. The term “escalator” is now a generic term, but it was the trademark of Otis Elevator Co. for their product “moving stairs”. The company’s interchangeable use of their trademark as a generic term lost it exclusive use of “escalator” as a trademark.

Descriptive
Descriptive terms are trickier because on the whole they are not distinctive if they are merely descriptive or deceptively misdescriptive. A merely descriptive term describes an aspect of the goods or services such as “an ingredient, quality, characteristic, function, feature, purpose or use of the specified goods or services.” TMEP §§1209.01(b). For example “Quick Copy” to describe copying services or “Cozy Comforters” for blankets. Other types of descriptive terms include surnames, geographic identifiers, and foreign translations.

A descriptive term may be adopted as a trademark if it acquires distinctiveness through a secondary meaning. In other words, the descriptive term is used continuously and exclusively such that the consuming public’s primary significance with the term is not the specified goods or services but with their source. See TMEP §§1212. An example of a descriptive mark with secondary meaning would be “Raisin Bran” or “Bank of America”.

Suggestive
Suggestive marks are inherently distinctive and require an extra step to connect the source to its goods or services.  Unlike descriptive terms, there is no immediate idea that calls to mind the goods or services. See TMEP §§1209.01(a). “Mustang” is a good example of a suggestive mark because it although doesn’t immediately refer to a car, it does connect the car with speed and horsepower.

Arbitrary
Arbitrary marks are also inherently distinctive and consist of ordinary words that do not relate to the goods or services in a descriptive or suggestive manner. A common example used to illustrate this category is “Apple Computers.” Another is “Virgin Mobile” for telecommunication services.

Fanciful
Not only are fanciful marks inherently distinctive, but they are also the strongest trademarks in terms of protection. Fanciful marks consist or coined or made-up words. Some examples are “Kodak”, “Mattel”, and “Starbucks”.

Practical Considerations
From a marketing standpoint, there is an incentive to adopt marks that are closer to generic and descriptive terms. Such marks signal to consumers a more obvious association between a business and its goods or services. However an established, more inherently distinctive mark diminishes the off chance that consumers will confuse your business with competitors (i.e. Apple Computers or Kinko’s).

Fanciful and arbitrary marks are the strongest in terms of legal protection and distinctiveness. Yet the drawback here is if the market comes to associate the trademark with the generic term for your business’s goods or services (i.e. Xerox for copying, Kleenex for tissues, Rollerblades for inline skates). To keep your mark from becoming weak or generic, promote awareness in the marketplace about the difference between your mark and the generic term. Here are some things you can do to maintain this distinction: avoid using the trademark as the name of the goods or services in internal and trade-related communication; draw attention to both terms properly in advertising to consumers; and develop and promote a generic term if one does not already exist for your goods or services.

A suggestive mark is a good option if you wanted the obviousness of a descriptive mark. While suggestive marks are not as strong as fanciful or arbitrary ones, they remain protectable. A suggestive mark is a good option if you wanted it to signal a more immediate association between your mark and the goods or services provided. Also, there’s less of a chance it can take the place of a generic term. Just be sure to test that the mark does not primarily describe or call to mind your goods or services first, but still requires some level of imagination.

While it is not necessary to file a § 83(b) election, doing so means that the restricted stock will be taxed at the time it is granted and not as it vests over time. Doing nothing means that the shares will be taxed as income as they vest.

What is Restricted Stock?

What is the difference between restricted stock and authorized stock? Authorized stock is the total amount of shares authorized at the formation of a company, but not all shares need to be issued. Restricted stock is a type of unissued stock that companies may award for employee or other equity compensation purposes.

Shares of restricted stock do not vest immediately. Restricted stock is issued with a condition imposed on when the shares vest. Generally accompanied by a standard vesting schedule. That is to say, the ownership rights in the shares do not fully transfer until some future occurrence or fulfillment of the condition.

The vesting of the shares can be tied to performance or to a length of time. For instance, in a startup the purpose behind restricted stock can be to incentivize founders to continue with the company and help build it for a length of time after which their shares will vest. For executive compensation models, vesting of shares could be contingent upon meeting company goals and growth benchmarks.

Understanding Section 83(b)

Section 83 of the Internal Revenue Code concerns property transferred in connection with performance of services. Through § 83(b), property granted with an imposed condition or restriction can be taxed before it vests.

For restricted stock then, an employee (or founder) can choose to be taxed on the excess of its fair market value at the time it was granted. Under § 83(b) it must be included as gross income for the taxable year in which the shares of restricted stock were granted.

The benefit here is that the tax would be lower since the shares would initially have a lower valuation as opposed to later if the shares appreciate in value as the company grows. Also, once the stock does vest it will not be taxed again as income once the § 83(b) election has already been made.

However, the downside to § 83(b) is having already paid taxes on shares that are unvested. If the condition has not been met by the time a person’s services are terminated with the company, then the unvested shares must be forfeited. While the company will buy back the stock for the original purchase amount, the person cannot seek a refund on the amount they were taxed on the unvested shares nor can it be deducted as a loss. Another drawback here is the off chance that the vested stock’s value happens to be lower than its valuation at the time of the § 83(b) filing, thus being taxed more on less income.

Lastly, keep in mind that the deadline for making a § 83(b) election is pretty strict and it must be timely filed within 30-days of when the stock is granted. No exceptions!

Past Presentations

"Going Solo"
University of Kansas School of Law
October 4, 2011
(Interactive workshop on the mechanics of launching a solo law practice)

"Social Media and the Cloud: The Rise of New IP Concerns"
Seattle Technical Forum
September 14, 2011 Bellevue City Hall

"Cloud Computing Essentials"
WSBA-CLE, WSBA Offices
August 25, 2011

"Business Development for your Law Practice"
Panel Discussion hosted by the South Asian Bar Association
June 9th, 2011; Perkins Coie PLLC

"Social Media and the Law: What Businesses Need to Know about Social Media Marketing"
May 5, 2010; June 3, 2010; February 22, 2011 hosted on Biznik

 

Here is a list of reasons you SHOULD incorporate in WA if you are located here:

1. Washington Courts usually look to Delaware courts as precedent anyways. WA courts recognize the depth of case law that DE courts have handled and will consider their decisions as persuasive.
2. If you get sued in the State of Washington you get to keep your attorney or hire a local legal counsel. You will not have to go to Delaware or hire someone there to defend you.
3. It’s cheaper to incorporate here and you can be your own registered agent. If you incorporate in Delaware you will have to pay the filing fees, plus maintain a registered agent in the State, and file as a ‘foreign’ corporation in the State of Washington and depending on the type of business you have in Washington you might have to get a city license as well.
4. WASHINGTON CORPORATIONS RECEIVE FUNDING from Venture Capital Firms (See reports on Techflash, Geekwire, etc.).  You can even look up the firms that received funding and it might surprise you to find out that a lot of them are incorporated here in WA.  However, If for some reason a Venture Capitalist/Investor asked you to reincorporate to DE it wouldn’t be that hard to do so don’t sweat it.

If you still want to incorporate in Delaware don’t worry I can’ help you do that but I may ask you why and ask if one of the reasons below applies to your situation?

Here are some reasons why you might incorporate in DE and reject what I have stated above.

• The VC told you to.
• The Angel Investor to asked you to.
• You plan on having ‘brick and mortar’ businesses all around the country.
• You are thinking about taking your business to the international level.
• You are planning on getting funding from VC’s around the world/nation.
• Your headquarters are not in the State of WA.

If you would like to discuss this more please feel free to contact me.

Key items to note before submitting your application.

1. How do they define Business Owner for purposes of applying for elective coverage:

• Sole Proprietor or Partner in Business
• Members of a Limited Liability Company (if they manage the LLC and there are no Managers)
• Managers of a Limited Liability Company who are also Members and exercise substantial control over the daily activities of the Company.  Note: Only 8 managers may be exempted.
• Corporate Officers of a Corporation can also apply if they meet the following requirements:
  • Non Public Corporation: Must be a Corporate Officer (elected in accordance with the ByLaws and Articles of Incorporation of the Corporation) and a Shareholder AND have substantial control over the daily management of the Corporation. (Note: Maximum is 8 officers)
  • Public Corporation: Same as Non Public PLUS you must also be a Director and can not perform manual labor.
  • Primary duties do not include manual labor.

2.  REPORTING REQUIREMENTS- The Department of Labor and Industries requires that you (business owner) report the following:

• Hours worked by the Business Owner (or Officer) in the classification assigned to your business that is applicable to the work being performed by the Business Owner (or Officer).
• Report and pay premiums for 480 hours or actual hours worked each quarter for each covered owner (or officer) and in the applicable workers compensation classification code.

If you are wondering why as a business owner you would even want workers compensation coverage? Here are three reasons to consider it:

1. Availability. It is actually available to you in the State of Washington. Its a program run and controlled by the State of Washington.

2. Affordability. Its not that expensive. For those of us who are not in jobs that carry a high risk of injury  the premium is fairly low.  Check out the base rate tables for more information.

3. Security.  As a Business Owner especially those of us who are solos we wear many hats and if we were to get injured on the job what would happen to the business?? Well wouldn’t it be nice to have a little extra money coming in to cover medical cost and some time off while you recover? I think so.

Click here to download to the application- Its only 2 pages!

CPA’s and Bookkeepers

Looking for help with just your taxes?

Need a banker or a new one?

Help Managing your Money?

Brand Design and Development

Website Development

Search Engine Optimization

Please note that all banks have different requirements to open a business account so it is best to contact your bank and find out what all is needed.

Required Business Information:

• Business Legal Name and any dbas (“doing business as”)
• Primary Contact Information
• Physical and Mailing addresses
• Business Phone, Fax and website information.

Additional Documentation by Entity

Corporation

• Certified Articles of Incorporation
• State of WA-Issued business license or a copy of website application containing the UBI (Unified Business Information) Number.
• Corporate Resolutions completed and SIGNED

Limited Liability Company

• Certificate of Formation issued by the Secretary of State
• Signed Operating Agreement
• State of WA-Issued Business License or website application with UBI (Unified Business Identification) information
• Declaration of Unincorporated Business completed and signed (Bank provides this form)

Limited Partnership

• Certificate of Limited Partnership
• Copy of Partnership Agreement
• State of WA-Issued Business License or website application with UBI (Unified Business Identification) information
• Declaration of Unincorporated Business completed and signed (Bank provides this form)

Partnership

• Partnership Agreement
• State of WA-Issued Business License or website application with UBI (Unified Business Identification) information
• Declaration of Unincorporated Business completed and signed (Bank provides this form)

Unincorporated Association or Non-Profit

• IRS 501 Exempt Letter for Non Profit Status
• Organizational documents (i.e. Articles of Incorporation and Bylaws)
• Declaration of Unincorporated Business completed and signed (Bank provides this form)

Sole Proprietorship

• Social Security Number
• State of WA-Issued Business License with information on Trade name or website application with UBI (Unified Business Identification) and trade name.
• Declaration of Unincorporated Business completed and signed (Bank provides this form)

If you are looking for a banker who is has integrity, is personable, and will do her best to help you and your business I highly recommend Francie Han at IronStone Bank.  I currently do not have an account with Ironstone but I consistently seek out advice from Francie about best practices for business owners. I’ve come to learn in my business that knowing the right banker and developing a real relationship with them makes all the difference.