Licensing. Journal THE DEVOTED TO LEADERS IN THE INTELLECTUAL PROPERTY AND ENTERTAINMENT COMMUNITY VOLUME 34 NUMBER 1

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1 JANUARY 2014 DEVOTED TO LEADERS IN THE INTELLECTUAL PROPERTY AND ENTERTAINMENT COMMUNITY THE Licensing VOLUME 34 NUMBER 1 Journal Edited by Gregory J. Battersby and Charles W. Grimes

2 Protecting and Exploiting Rights of Publicity Brian D. Wassom Brian Wassom is a partner with Honigman Miller Schwartz and Cohn LLP in Oakland County, MI. Mr. Wassom focuses his practice on intellectual property and First Amendment-related litigation. He has extensive experience in the areas of copyright, trademark, publicity rights, entertainment, and other related intellectual property litigation. Licensing professionals should be informed and proactive in the way that they handle issues concerning the right of publicity. It is apparent, however, that many, perhaps most, attorneys and business professionals do not have a solid understanding of what this right is, how they can monetize it, or how they can avoid liability for infringing it. The following is a short, high-level summary of what you need to know about this important and rapidly expanding area of law. What Is the Right of Publicity? The best summary of the right of publicity as generally understood across the United States comes from the Restatement (Third) of Unfair Competition, Section 46: One who appropriates the commercial value of a person s identity by using without consent the person s name, likeness, or other indicia of identity for purposes of trade is subject to liability. Unpacking this sentence, we find two core elements of the right: (1) indicia of identity and (2) commercial value; we also find two elements of an unlawful appropriation of that right: (1) use for purposes of trade and (2) lack of consent. Indicia of Identity Indicia of Indentity means exactly what it says it encompasses anything that indicates to a third party the identity of the rights holder. The Restatement expressly lists two examples of ways in which a person s identity can be indicated : (1) their name (which typically includes both the name itself and the person s signature) and (2) their likeness, or personal appearance. Many of the courts and legislatures that have articulated the right, however, recognize that any attempt to exhaustively list the forms that publicity right infringements can take is simply an invitation to creative infringers to devise some other means of appropriating someone s identity. Much like the concept of identity itself, therefore, the idea of appropriating that identity must necessarily remain fluid. Case law bears out this understanding. Various courts have found a plaintiff s identity to have been indicated by such other means as sound-alike voices (e.g., Bette Midler prevailed against a sound-alike singer used in a commercial); a catchphrase publically associated with the plaintiff (Johnny Carson prevailed against a company selling Here s Johnny Portable Toilets ); a picture of the race car that the plaintiff drives (as a famous NASCAR driver demonstrated); animatronic robots dressed like characters the plaintiffs play (in cases brought by Vanna White and the actors from Cheers); or in the distinctive style of dress associated with the plaintiff (several such claims have been brought, including by New York City s infamous Naked Cowboy ). In the same way that this open approach to defining identity protects against creative infringers, however, it also encourages plaintiffs and lawyers to devise increasingly inventive theories of liability. That makes defining the right of publicity in a contract a very slippery proposition. Commercial Value In nearly all jurisdictions, it is not simply enough for a right of publicity plaintiff to show that their likeness has been reproduced in some fashion. They must also show that their identity is worth something in other words, that it has commercial value. The most straightforward way of measuring commercial value is to ask the question: Does associating this identity with a product or service make a customer more likely to purchase that product or service? For this reason, most courts have historically described and to some degree, still do describe the right as belonging to celebrities. After all, a celebrity is a person who has a prominent profile and JANUARY 2014 The Licensing Journal 1

3 commands a great degree of public fascination and influence in day-to-day media. By definition, celebrities have great popular appeal, prominence in a particular field, and are easily recognized by the general public. It is this popular appeal and recognition on which a marketer seeks to capitalize by associating a celebrity with the product or service being marketed. In multiple ways, however, contemporary media has broken down the barriers between celebrities and the rest of us at least in terms of the ability to associate popular appeal and recognition with one s identity. Reality television, human interest news reporting, digital publishing, and social media have all accelerated this development. This development is best illustrated by the case Fraley v. Facebook, which was filed in the US District Court for the Northern District of California and settled in early Fraley involved Sponsored Story advertisements on Facebook, which turned one user s likes on a company s page into an advertisement for that company on the pages of that user s friends. The judge in that case relied on what she apparently considered a smoking gun admission from Facebook executives that user identities do, in fact, have great commercial value to social media service providers. For example, the judge quoted Facebook founder Mark Zuckerberg as saying that [n]othing influences people more than a recommendation from a trusted friend. A trusted referral influences people more than the best broadcast message. A trusted referral is the Holy Grail of advertising. Although the case was settled and this issue was never definitively decided, this opinion gives a strong indication that, at least under some circumstances, virtually anyone can have an enforceable right of publicity. Use for Purposes of Trade Similar to the requirement that the plaintiff s identity have commercial value is the need to prove that the defendant capitalized on that value in a commercial manner. This symmetry ensures that the punishment fits the crime, so to speak, and keeps the courts focus on protecting the interest that the right is designed to protect. Trade -related usage of a person s identity includes, but is not limited to, direct endorsements. Although publicity rights are related to laws preventing false endorsement, they offer substantially broader protection. The US Court of Appeals for the Tenth Circuit illustrated this point with a hypothetical example. Suppose, it said, that the Mitchell Fruit Company wanted to use pop singer Madonna in an advertising campaign to sell bananas, but Madonna never ate its fruit and would not agree to endorse its products. If Mitchell Fruit posted a billboard featuring a picture of Madonna and the phrase, Madonna may have ten platinum albums, but she s never had a Mitchell banana, Madonna would not have a claim for false endorsement. She would, however, have a publicity rights claim, because Mitchell Fruit misappropriated her name and likeness for commercial purposes. Publicity rights, then, are a form of property protection that allows people to profit from the full commercial value of their identities. Luxury fashion retailer Burberry recently found itself in a dispute very similar to the Mitchell Fruit hypothetical. In early 2012, Burberry took advantage of Facebook s then-new Timeline chronological display to showcase the use of its products by historical celebrities over time. The timeline began with the launch of the first Burberry store in Under the 1942 header, Burberry posted a photo of the actor Humphrey Bogart with the caption, Humphrey Bogart wearing a Burberry trench coat in the final scene of Casablanca. Burberry had licensed the copyright in the image, but an entity claiming to own Bogart s posthumous publicity rights threatened to sue for misappropriation of his likeness. In May 2012, Burberry filed a declaratory judgment action in New York seeking to confirm its right to use the image. The Bogart entity countersued for misappropriation of publicity rights and related claims. Both suits were later resolved out of court without adjudication. The breadth of this legal protection makes equally important the restrictions inherent in the use in trade language. There is broad consensus that these commercial limitations are mandated, at least to a large degree, by the First Amendment to the US Constitution. Protected too broadly, publicity rights could trample on forms of expression that have long been recognized as constitutionally privileged. One recent example of such overreaching came in the complaint by actress Lindsay Lohan against E*Trade, simply because a character in an E*Trade commercial was called Lindsay. In 2012 and 2013, college football players won separate class-action cases in the US Courts of Appeal for the Third and Ninth Circuits against the maker of college football video games, arguing that the games used their likenesses without permission. The band No Doubt won a similar claim against a video game company that used their images in another video game. These developments are of great concern, because they intrude into one of the fundamental limitations inherent in the right of publicity that historians, storytellers, and entertainers should be free under the First Amendment to tell stories about real people without needing to get their subjects permission. 2 The Licensing Journal JANUARY 2014

4 The US Supreme Court has been of no help in drawing this line. It has decided only one case involving the right of publicity, all the way back in There, the plaintiff was a circus performer named Zacchini whose act consisted of shooting himself out of a cannon. That act was the only thing that made him famous that is, the only thing that gave his identity commercial value. A local news station filmed and broadcast the entire act, thus entirely supplanting Zacchini s ability to draw audiences to see his act. He no longer had the ability to attract revenue using the commercial value of his likeness. The Court did acknowledge the tension between the media s First Amendment right to report the news and Zacchini s interest in protecting the commercial value of his identity. Because this case involved a wholesale appropriation, however, the Court found it unnecessary to balance Zacchini s publicity rights against First Amendment protections. Wherever the line in particular situations is to be drawn between media reports that are protected and those that are not, it said, we are quite sure that the First and Fourteenth Amendments do not immunize the media when they broadcast a performer s entire act without his consent. Left with no guidance, various courts have come up with their own tests for drawing that line. Consent It might seem that determining whether or not a plaintiff has consented to the commercial use of her likeness would be simple. That is not, however, a guarantee. For example, one federal judge in Michigan declined to hold that a musician plaintiff had consented to the recording and distribution of his likeness on DVD, even though the performance at issue was done on stage in front of television cameras for the purpose of being broadcast, because there was no authoritative precedent from the US Court of Appeals for the Sixth Circuit defining consent in the specific context of publicity rights. In a more recent example, the Fraley court rejected Facebook s argument that its users gave implied consent to the use of their names in Sponsored Story advertising, although Facebook has since reacted to the case by obtaining much more specific agreements from its users in its Terms of Use. In another case, a court in California determined that a celebrity s act of pausing and posing on the red carpet at a media event implicitly gave permission to the photographers in attendance to take and sell pictures of her. Despite the areas of general consensus listed above in what the right of publicity protects, substantial areas of difference, or outright uncertainty, remain. The law still varies significantly from state to state, and many fundamental components of the right remain woefully underdeveloped in many jurisdictions. That can be a source of challenge and excitement for trial lawyers, but it does little to assure business professionals or give clarity to those trying to avoid liability especially those who operate on a national scale, as virtually everyone on the Internet does by definition. What Is the Right Worth? The Fraley case got headlines not only because it involved Facebook, but also because of the amount of money Facebook paid to settle it $20 million, with half of that amount going to the Facebook users included in the class. That sounds like a lot of money, but given the enormous number of potential claimants, the settlement check will be no more than $10 apiece. Similarly, video game companies paid $40 million to settle the cases filed against them by college football players. But a large portion of those funds will go to the lawyers, and the remainder will be divided among thousands of players according to a complex formula that has yet to be determined. The amount of money at issue in these cases is interesting because the method of calculating damages in any right of publicity case is so uncertain. Many successful publicity rights plaintiffs end up settling for a relatively modest royalty. But great infringement sometimes brings great liability. Hockey player Tony Twist, for example, secured a $15 million verdict (upheld on appeal) against the publisher of the Spawn comic book, which used his name as an inspiration for one of its villains. A relatively unknown male model in California won an even larger sum from Nestlée after learning that his face had appeared for 16 years, without permission, on packages of Taster s Choice coffee, although that award was erased on appeal due to a procedural rule governing privacy law, from which the right of publicity developed. Compare those results to that in Johnny Carson s groundbreaking litigation against Here s Johnny Portable Toilets in the 1980s. It took three trips to the Sixth Circuit Court of Appeals and eight years of litigation, but Carson finally prevailed in a seminal decision that still appears in intellectual property casebooks. The damages award he received for his trouble, however, was only $31, As reflected in Section 49 of the Restatement (Third), the general common law measurement of damages for right of publicity misappropriation is the pecuniary loss to the other caused by JANUARY 2014 The Licensing Journal 3

5 the appropriation or for the actor s own pecuniary gain resulting from the appropriation, whichever is greater. Some states also offer statutory damages as an alternative remedy, although even this approach varies between jurisdictions. In Ohio, for example, the minimum statutory damage award is $2,500, while the maximum is $10,000. Most other statutory damages ranges are lower, although there are still a variety of approaches to calculating the amount. These remedies are in addition to several other forms of potential relief, including compensatory damages, punitive damages, and injunctive relief. This is one area of publicity rights law that the licensing community can directly influence. One reason that courts have such a hard time putting a number on the value of someone s publicity rights is that there is so little objective evidence to go on much like trying to appraise a home in a neighborhood where no comparable houses have been sold. The more licensing work that is done in this area, however, the more data there will be, and the more uniformity may start to emerge. The Ability to License Publicity Rights Generally speaking, publicity rights can be licensed. If a particular jurisdiction recognizes the right of publicity, it almost certainly will apply standard contract principles and enforce a person s agreement to grant a third party rights to use that person s likeness. Put another way, there is no reason to believe that any jurisdiction would make an exception for publicity rights to the freedom to make contracts that is enshrined in the US Constitution. There also have been plenty of cases in which such licenses have been validated. By Whom Can the Right Be Licensed? By default, publicity rights are owned by the person whose identity is at issue. As with virtually any other property, publicity rights also may be licensed on that person s behalf by a properly authorized agent. There have been a few interesting cases to date on exactly who has such authority. In the college football video game cases, for example, the National Collegiate Athletics Association s licensing agent, the Collegiate Licensing Company, had granted the exclusive right to use college players likenesses in video games, only to have the court find that the players were entitled to the proceeds from these licenses. In a 2010 Illinois case, a court rejected a minor child s suit against an advertising agency over the use of his image. The agency had obtained a license to the image from the child s talent agent. Even though that agent did not have actual authority to license the image, it was reasonable for the agency to believe that the agent was authorized (what contract law calls apparent authority ), and therefore it was off the hook. Back in 2006, Fred Goldman, father of murder victim Ron Goldman, fought a court battle to obtain ownership of O. J. Simpson s publicity rights, in order to pay off Goldman s wrongful death judgment against Simpson. The court ultimately rejected the effort, but it raised an important discussion about how far the law can and should go in depriving a person of the right to control the commercial exploitation of their own identity. The Need for Precision The terms identity and use for purposes of trade the core elements of the right of publicity are inherently ambiguous and fluid concepts. Simply restating phrases such as these in a licensing contract is to invite disagreement and litigation. Of course, you can never prevent someone from filing a lawsuit if that s what they choose to do, and no one can predict with certainty how any particular judge will rule in a given case. But as with any other area of potential liability, you can take simple, common-sense precautions to help reduce your risks. If you are drafting a license on behalf of a company obtaining the rights to use a person s likeness, you should include language in your contract with that person that is as broad and explicit as possible in the ability it gives you to make commercial use of the person s identity. Specifically, language should be broad enough to encompass all conceivable ways in which someone s identity may arguably be used, and explicit enough to make clear that publicity rights (and not just copyrights or other related areas of law) are covered. The following is an example: PERSON grants to COMPANY the right to make use of, and to authorize third parties to make use of, PERSON s likeness, image, voice, name, mannerisms, appearance, taglines, catchphrases, biography, or any other indicia of PERSON s identity for any purpose related to the promotion or carrying out of COMPANY s or PERSON s services, whether directly or indirectly, commercially or non-commercially, compensated or uncompensated, in any medium now existing or that may be developed. Examples of activity authorized under this provision include, but are not limited to, [INSERT EXAMPLES.] PERSON 4 The Licensing Journal JANUARY 2014

6 expressly waives any claim for infringement of the right of publicity, misappropriation of likeness, invasion of privacy, or similar claim for any activity authorized by this contract or by this provision. This provision will remain in force throughout the duration of any contractual relationship between PERSON and COMPANY (including any period during which PERSON is available for potential booking or co-booking through COMPANY, even if no active bookings are pending at the time). Further, PERSON acknowledges and agrees that the rights granted to COMPANY by this provision will continue as long as reasonably necessary for COMPANY to complete any activity begun in connection with any contractual relationship between PERSON and COMPANY, or for COMPANY to accurately portray and advertise its past work for PERSON. On the other hand, if you are, or represent, the person whose publicity rights are being licensed, contract language that favors your interests also will be explicit to avoid misunderstanding or ambiguity but narrow in the grant of rights it conveys: COMPANY acknowledges and agrees that PERSON s personal identity has significant commercial value and appeal, and that therefore COMPANY waives any right to dispute the fact that PERSON has an enforceable right of publicity. COMPANY agrees to respect that right by not making any use of PERSON s likeness, image, voice, name, mannerisms, appearance, taglines, catchphrases, biography, or any other indicia of PERSON s identity for any purpose, whether directly or indirectly, commercially or non-commercially, compensated or uncompensated, in any medium now existing or that may be developed, other than those uses that are expressly authorized (either in this contract or another signed writing) by PERSON or COMPANY. Examples of activity forbidden under this provision include, but are not limited to, [INSERT EXAMPLES.] Further, COMPANY acknowledges and agrees that the rights granted to COMPANY by this provision will end, and that COMPANY must cease all use of the rights described in this provision, upon the completion of the services described in this contract, other as expressly authorized in writing by PERSON or COMPANY. Of course, these sample provisions are only examples; I do not recommend that you use them in your final documents without consulting an attorney about your specific circumstances. One recent, on-point example of the need for precision in publicity rights transactions comes from the lawsuit filed by the band No Doubt. There, the band agreed to the use of their likenesses in a game that allows players to perform songs using actual celebrity musicians as their game avatars. Two No Doubt songs were included in the game, and the band spent an entire day in a motion-capture studio so that their game avatars would resemble their actual identities. The license agreement for the use of these likenesses included an Artist Approval Rights provision. It provided that Artist s likeness as implemented in the Game (the Character Likeness), any use of Artist s name and/or likeness other than in a billing block fashion on the back of the packaging for the Game, and the b-roll and photography or other representation of the Services or of Artist, shall be subject to Artist s prior written approval. The band approved the use of their images in conjunction with the two No Doubt songs included in the game. According to the lawsuit, however, they did not realize that the unlocking feature of the game would permit players to use No Doubt s avatars to perform any of the songs included in the game, including songs that No Doubt maintains it never would have performed. Two of No Doubt s members could be unlocked at the seventh level of the game, and the remaining members could be unlocked at level nine. The band also learned that female lead singer Gwen Stefani s avatar could be made to sing in a male voice, and the male band members avatars could be manipulated to sing songs in female voices. The individual band member avatars could be made to perform solo, without their band members, as well as with members of other groups. The band sued, not because the company was not permitted to use their likenesses in the game, but because it exceeded the scope of its license. The court agreed that they had stated a valid claim, and denied the company s motion to dismiss the case. Include an Escape Clause Companies associate celebrities identities with their goods and services because they perceive that the celebrity has goodwill in the public s eyes, and the company wants to share in the drawing power of that goodwill. But intangible attributes such as goodwill are fickle assets, especially when they are entirely dependent on the decisions of a single human being and one who is already operating under the pressures of fame, at that. JANUARY 2014 The Licensing Journal 5

7 Celebrity endorsement contracts typically include a morals clause, under which the company may terminate the agreement if the celebrity does something immoral or scandalous, thereby tarnishing the value of their celebrity and instantly turning their endorsement into a liability rather than an asset. One recent case tested the boundaries of these clauses. NFL player Rashard Mendenhall had been a celebrity endorser for Hanesbrands until he posted a series of controversial tweets about Osama bin Laden and the 9/11 attacks. When Hanesbrands fired Mendenhall under the morals clause in the parties contract, he sued. The case settled, but not before the court denied an initial motion to dismiss the case. Nevertheless, such clauses remain staples in endorsement contracts, and unpopular celebrities remain just as toxic to the goodwill of their business partners. Of course, as I ve described, publicity rights go beyond direct endorsements, but the concern remains the same. Indeed, in many circumstances in which a company has capitalized on a person s identity in a way more subtle than a direct endorsement, the company s exposure may be even more severe, because the nature of the use likely will make it harder to disentangle the identity from the product. Therefore, in many publicity rights licenses, it likely will be appropriate to include some type of morals clause, or at least a mechanism for recovering part of the licensee s investment if the value of the bargain becomes undermined by the licensor s own subsequent actions. Because the means of commercializing a likeness are so diverse, there is no one-size-fits-all version of such a clause. But being aware of the concern likely will enable you to spot a potential solution. Conclusion This has been a brief overview of some high-level issues associated with publicity rights. Case law in this field is developing at an accelerated pace along with the growth and diversification of digital technology. I wish you luck as you navigate these choppy seas. Your efforts will contribute significantly to the principles that will govern these rights in the future. Copyright 2014 CCH Incorporated. All Rights Reserved. Reprinted from The Licensing Journal, January 2014, Volume 34, Number 1, pages 10 15, with permission from Aspen Publishers, Wolters Kluwer Law & Business, New York, NY, ,