Arbitration – not boilerplate, and not necessarily quick, easy, or inexpensive!

If you have basic familiarity with contracts, you’ve likely heard the term “boilerplate,” which is often used to mean standard language that the contract writer uses in many of its contracts or even that you may find in contracts across the board.  Of course, just because language might be “standard,” that does not mean that it is innocuous or that you can safely ignore it!

So-called boilerplate language, it it exists, is often found near the end of the contract.  Some contracts stipulate that if a dispute arises from the contract the parties agree to submit the dispute to binding arbitration.  While this clause may be brief and, coming at the end of a contract, may appear almost like an afterthought, it is important to understand that agreeing to arbitrate has very real consequences.

Arbitration clauses are most often seen by consumers in credit card agreements and service agreements with large companies (e.g., “Any dispute in connection with this Agreement shall be subject to binding arbitration in Chicago, Illinois”), but they are also sometimes poorly understood features of contracts between small businesses who somehow heard from an uncle that arbitration was easier or cheaper than going to court.

In  November 2013, a long and expensive arbitration proceeding concerning a Gwinnett County software company came to a conclusion.  The process took three (3) years and cost $3.5 million in legal fees in addition to approximately $150,000 in arbitration costs.

The victors, Kenneth Shumard and Kenneth Shumard Jr. won the right to control the use of medical billing software that is anticipated to be highly valuable.  The Shumards also won $800,000 in attorneys’ fees.  Initially, the Shumards sought a restraining order from the Gwinnett County Superior Court preventing their other partners from making certain use of the software.  Judge Ronnie Batchelor referred the dispute to arbitration, because the partnership agreement between the Shumards and their partners required that disputes go to arbitration.

As such, the Shumards did not have the option to seek judicial process, but instead, were forced to go to arbitration.

Arbitration is conducted under its own standards and is a creature of state law.  In some ways arbitration resembles court proceedings.  For example, in the above-mentioned dispute, the arbitrator received briefs on the matter and received testimony from witnesses.  The arbitrator then required post-trial briefs and issued a written decision.

In other ways, however, arbitration is an animal unto itself.  Arbitrators are not bound the same rules as judges and their decisions are often final.  Their decisions are not subject to normal appellate court review, and only subject to attack in specific instances, such as when the arbitrator is not impartial, failed to make a final determination of the issues, or manifestly disregarded the law.  Basically, arbitration is like “private court.”

A court rarely finds that an arbitrator has committed such failings, and thus, it is best to plan on any arbitration award being the final word.  Case in point, in the above-referenced dispute, the Shumards’ partners, who were unsuccessful in arbitration, went back to Gwinnett County Superior Court Judge Batchelor seeking to have the arbitration award vacated.  Judge Batchelor denied those motions and confirmed the arbitration award.

In Georgia, Chapter 9 of Title 9 of Georgia Statutes sets out the standards for arbitration (the “Georgia Arbitration Code,” O.C.G.A. § 9-9-1 et seq.).  In Georgia, the contract controls.  If a contract that requires disputes be arbitrated is enforceable, the dispute cannot be heard by the courts and must be submitted to arbitration.  The courts do have power, however, to determine whether the contract with the arbitration clause is valid, to compel arbitration, and to validate and enforce an arbitration award.

From partnership agreements and operating agreements to construction deals and a variety of other contracts, a seemingly innocuous arbitration clause can be but a brief paragraph nestled neatly in the final pages of the contract, but nonetheless has great importance.  Before entering into a contract, seek the counsel of a contract attorney to ensure you understand the implications of every section of the agreement.

Can You Copyright Your Label? Yes… well, no… well, partly.

A client of ours recently sought to copyright its label and wanted to know if that was possible. Understandably, the company didn’t want competitors copying its hard work in creating a unique and visually distinctive label for its product.

We first addressed the obvious, which is trademark protection for the name of the product. Ok, but the label is more than just the name, it is the artistic creation of a designer who was hired to give my client’s product a very purposeful and contemporary look.

So, can we copyright the label?

This seemingly simple question brings to bear a number of interesting issues. As a threshhold matter, Copyright protects original expression. The United States Supreme Court has held that with regard to copyright, originality means only that the work was independently created by the author and possesses at least some minimal degree of creativity. See Feist Publications, Inc. v. Rural Telephone Service Co., Inc., 499 U.S. 340, 346 (US 1991). The requisite level of creativity is typically extremely low; even a slight amount will suffice. See FMC Corp v. Control Solutions, Inc. 369 F.Supp.2d 539, 561 (E.D. Pa. 2005). Classic copyright material (like prose or photographs) typically meets the minimum threshold of creativity with ease. But that is not to say that the threshold is so low as not to exist at all.   Indeed short phrases, basic shapes, and lists of ingredients do not present the sufficient amount of creativity for copyright protection.

Labels, however, are typically a combination of pictures, text, short phrases, and shapes. So are they copyrightable because of the pictures and process, or not, because of the short phrases and basic shapes?

There are a number of cases that indicate that labels are subject to copyright protection. See Kitchens of Sara Lee, Inc. v. Nifty Foods Corp., 266 F.2d 541 (2d Cir. 1959). Based on case law, it appears that consumer product labels containing more than a mechanical list of ingredients manifest the amount of creativity necessary to enjoy copyright protection. See FMC Corp. 369 F.Supp.2d at 572 (citing Sebastian Int’l, Inc. v. Consumer Contact (PTY) Ltd., 664 F.Supp. 909, 913 (D.N.J.1987), rev’d on other grounds,847 F.2d 1093 (3d Cir.1988); Drop Dead Co. v. S.C. Johnson & Son, 326 F.2d 87, 92–93 (9th Cir.1963), cert. denied,377 U.S. 907, 84 S.Ct. 1167, 12 L.Ed.2d 177 (1964) (copyright on aerosol wax product label held valid); Kitchens of Sara Lee, Inc. v. Nifty Foods Corp., 266 F.2d 541, 545 (2d Cir.1959) (defendant’s use of identical pictures on cake labels infringed plaintiff’s copyrights on the labels).

For example, in one case, a label on a bottle of shampoo was found copyrightable for a small bit of text describing the product:

“Hair stays wet-looking for as long as you like. Brushes out to full-bodied dry look … WET is not oily, won’t flake and keeps hair wet-looking for hours, allowing you to sculpture, contour, wave or curl. It stays looking wet until it’s brushed out. When brushed, hair looks and feels thicker, extra full. Try brushing partly, leaving some parts wet for a different look.” See Sebastian, 664 F.Supp. at 913.

The court held that “[n]o one can seriously dispute that if plaintiff were to discover that a competitor’s package utilized the exact language as above with the exception of the product’s name, plaintiff would be entitled to protection.” Id.

The court in Sebastian instructed that the language on a label is entitled to copyright protection when it is “more than simply a list of ingredients, directions, or a catchy phrase.” See Sebastian, 664 F.Supp. at 913.

Even shorter phrases can be sufficiently original to garner copyright protection, even for commercial works, such as labels. See Abli Inc. v. Standard Brands Paint Co., 323 F.Supp. 1400 (C.D. Cal. 1970) (label was copyrightable when it contained phrases such as “Cut to desired length … Will not run … Simply slide top bead into rod as illustrated”). Indeed, the length of a sentence is not dispositive of whether it is subject to copyright protection. See Rockford Map Publishers, Inc. v. Directory Service Co. of Colorado, Inc., 768 F.2d 145, 148 (7th Cir. 1985).

In addition to text, drawings or photographs typically are protectable.

Now when you register a copyright, you have to select whether it is a work of visual art, literary work, etc. As a whole, a label certainly seems like a visual work. Indeed, often it is registered as such. Federal courts have held that the form of registration of a work has no effect on the scope of copyright. See S.C. Johnson & Son, Inc. v. Turtle Wax, Inc. 1989 WL 134802 (N.D. Ill. 1989) (finding that a work registered as a nondramatic literary work rather than a work of visual arts does not negate copyright protection in visual elements of the work). Nonetheless, you will sometimes find pushback from the Copyright Office based on the nature of the work you claim.

Where the rubber really meets the road is in compilation, meaning, the compilation of multiple elements. As with my very first example, what is the result when you combine copyrightable elements like pictures and prose with non-copyrightable elements like lists of ingredients, brand names, titles, or short phrases?

Many have and many will continue to argue that the work is registrable as a whole work in the arrangement and selection of the components. Indeed, the Copyright Act itself provides that a work as a whole can be copyrightable due to the originality expressed in the overall selection, organization, and arrangement of the work, and the United States Supreme Court has agreed. See Feist at 360; see also 17 U.S.C. § 103. Yes, originality can be displayed in taking commonplace materials and making them into a new combination and arrangement. See Drop Dead Co. v. S.C. Johnson & Son, Inc., 326 F.2d 87 (9th Cir. 1963) (finding arrangement of color, layout, design and wording on bottle of PLEDGE furniture polish is copyrightable as a whole, including laudatory and instructional text); see also X-IT Products, LLC v. Walter Kiddie Portable Equipment, Inc., 155 F.Supp.2d 577, 609-611 (E.D. Va. 2001) (finding that although short phrases and bullet points on packaging were not protectable, label as a whole was protected under copyright, which necessarily includes the arrangement of the individual elements). Even very simple arrangements can be sufficiently original to be entitled to copyright protection. See S.C. Johnson & Son, Inc. v. Turtle Wax, Inc. (finding that a label with red stripes on a yellow background with a ribbon and the company name is sufficiently original for copyright protection).

Now hold on to your hat…

Despite this line of case law, it is the well-articulated policy of the Copyright Office to deny registration of the arrangement of elements on the basis of physical or directional layout in a given space. See Darden v. Peters, 402 F. Supp. 2d 638 (E.D.N.C. 2005). Not only does this apply to labels, it applies to websites, too!! To perhaps put it another (and more awesome) way, on a phone call with an examiner from the Copyright Office wherein I recited the above mentioned case law, the examiner told me, “Well the court can say that, but that’s not how we see it.

So where to go from here?

Are labels copyrightable?

Yes.

Can you successfully register a label for copyright?

Um, maybe not.

Can you successful register just those creative elements of a label, like a picture, drawing, or prose?

YES. The way you do this is to submit the entire work, but claim only the creative elements, essentially disclaiming the rest.

There you have it – the more creative the elements of your label, the better your shot of gaining copyright protection from the Copyright Office.

Intellectual property issues like copyright and trademark can be tricky. If you or your business have a question about an intellectual property issue, contact a trademark attorney, copyright attorney, or intellectual property attorney at Briskin, Cross & Sanford.

The Hobby Lobby Decision: What does it really say?

Besides the United States’ unexpected, and truly awesome, performance in the World Cup, the topic that has attracted the most attention and commentary this week is the already infamous US Supreme Court Hobby Lobby decision.

Unfortunately, much of the information being disseminated does not accurately report what actually happened in the case or what the Supreme Court actually decided.

So what does the Hobby Lobby decision really say?

Let me break it down for you.

The laws at play:

The Religious Freedom Restoration Act of 1993 (the “RFRA”) prohibits the government from substantially burdening an individual’s exercise of religion, even if the burden arises from a general rule (as opposed to a rule specifically targeting religion or the exercise of religious beliefs). As of 2000, when it was amended by the Religious Land Use and Institutionalized Persons Act of 2000, the RFRA also includes “any exercise of religion, whether or not compelled by, or central to, a system of religious belief.”

The lawsuit:

The owners of three (3) closely held, for-profit corporations sued the federal Department of Health and Human Services (among other agencies).

The lawsuits claimed that the requirement under the Patent Protection and Affordable Care Act of 2010 (the “ACA”) that a corporation must provide employees access to contraceptives designed to prevent the development of an already fertilized egg violates the sincerely held religious belief of the owners (not of the corporation) that life begins at conception. Thus, the owners argued, this portion of the ACA violates their rights under the RFRA and the Free Exercise Clause.

Points to know:

  • The Decision Only Applies to Contraceptives that Prevent an Already Fertilized Egg from Further Development.

The ACA generally requires non-exempt employers to provide twenty (20) separate types of contraceptives approved by the federal Food and Drug Administration. Only four (4) of the twenty (20) contraceptives are designed to prevent an egg that has already been fertilized from attaching to the uterus wall and developing further (i.e., the “morning after pill” and IUDs).

The three (3) lawsuits only objected to those four (4) contraceptives designed to prevent a previously fertilized egg from further development.

The Hobby Lobby decision does not affect the remaining sixteen (16) contraceptives designed to prevent the fertilization of an egg. The Supreme Court’s decision thus does not prevent Hobby Lobby employees from access to those forms of contraceptives, nor does it release Hobby Lobby (and other qualifying corporations) from the responsibility to provide insurance coverage for those remaining sixteen (16) contraceptives.

  •  The Decision Only Applies to For-Profit, Closely Held Corporations.

The Hobby Lobby decision does not exempt all employers from the contraceptive requirements of the ACA; rather, it only applies to closely held corporations. Generally, a “closely held corporation” is one owned by a small number of individuals. The Internal Revenue Service defines “closely held corporation” as a corporation where (i) five (5) or fewer people own more than fifty percent (50%) of the company’s outstanding stock at any time during the last half of the tax year, and (ii) the company is not a personal service corporation. Thus, the employees of publicly traded companies (like Coca-Cola) are not affected by the Hobby Lobby decision.

The Future of Hobby Lobby

The Supreme Court’s majority opinion in Hobby Lobby clearly limits the scope of its decision to closely held, for-profit corporations. Justice Ginsberg’s dissent, however, hints at a potential broader application of the Hobby Lobby decision by identifying other cases from courts across the nation where “commercial enterprises [have sought] exemptions from generally applicable laws on the basis of their religious beliefs.”

Justice Ginsberg questions whether this particular decision will also apply to other religious-based objections to the ACA’s requirements, such as blood transfusions, antidepressants, medications derived from pigs (such as anesthesia, intravenous fluids, or pills coated with gelatin), and vaccinations.

Of course, it is impossible to predict exactly how the Hobby Lobby decision will be applied by state legislatures and courts, or whether publicly traded companies will challenge the ACA under the same arguments as the three (3) closely held corporations. A savvy business owner, however, will remain cognizant of any new developments stemming from the Hobby Lobby decision or other objections to the ACA.

If you are ever in any doubt about how a state or federal law or recent court decision may impact your business, speak to a business attorney at Briskin, Cross & Sanford.  Our business is to know.

Water, Water, Everywhere – Or Is it Firearms? What Georgia businesses need to know about the Safe Carry Protection Act

Samuel Taylor Coleridge wrote the line “Water, water everywhere/and all the boards did shrink…” in his epic poem “The Rime of the Ancient Mariner,” but is “firearms, firearms, everywhere/and all the businesses did shirk” now more applicable for Georgia businesses?

The Georgia Safe Carry Protection Act (a.k.a., the “Guns Everywhere” law) goes into effect today, July 1, 2014. These new laws substantially expand the rights of licensed gun owners to carry their guns into myriad locations previously barred to those carrying firearms. Some of the new gun-friendly places may surprise you, as they include bars, public housing, government buildings without screening checkpoints, and churches (with the permission of the church’s governing body).

Most importantly for private businesses, the Safe Carry Protection Act reinforces the rights of both licensed and unlicensed gun owners to carry guns in their private (non-company owned) cars and trucks. Practically, both the Act and the 2010 Business Security and Employee Privacy Act not only allow employees to bring firearms onto a private employer’s parking lot but also bar employers from prohibiting concealed guns on their property.

Georgia law also limits the ability of private employers to search locked, privately owned vehicles owned by both employees and their invited guests.

So what is an employer to do?

  1. First, business owners with should determine whether or not their businesses are subject to the new Safe Carry Protection Act and/or the Business Security and Employee Privacy Act, as these laws do not apply to all types of businesses.
  2. Next, companies subject to one or both of these laws then should reevaluate any firearm policies to make sure they comply with Georgia law.
  3. Finally, business owners should contact their commercial insurance representative to ensure that the current policy covers any potential liability created by the Safe Carry Protection Act or the Business Security and Employee Privacy Act.

If, as a business owner, you are ever unsure how a new (or existing) state or federal law, or perhaps a new court decision you may have read or heard about in the news, applies to your business, that would be a great time to pick up the phone and talk to a business attorney at Briskin Cross and Sanford.