Silicon Beach: The New IP Adventures of Old New Media

Gregory A Fayer and Elliot B Gipson of Fayer Gipson LLP provide a road map for dealing with two related IP challenges that confront new media companies: the acquisition of third-party content and application of the fair use doctrine.

"While the internet is fertile ground for creative fusion of content from many different sources, it also opens up a potential Pandora’s box of intellectual property issues."


Nietzsche spoke of the “eternal recurrence of the same” – the idea that everything that happens is simply a retelling of events that have occurred over and over again since the dawn of time. As Solomon said, “There is nothing new under the sun.” And so it goes in the ever-changing but somehow remarkably constant world of entertainment and technology, as entrepreneurs, content creators and attorneys grapple with the novel problems that arise in attempting to adapt old paradigms of copyright and trademark law into the uncharted waters of “new media”.

For those not familiar with these developments, in the past two years or so there has been a veritable explosion of funding for the production of entertainment content, of an increasingly high-quality nature, for initial release directly onto the internet – thus bypassing the tried and tested distribution forms of the television set and the cinema screen in favour of the iPad and the home computer screen. Over this time, new media companies have experienced a massive infusion of funding from internet giants such as Netflix, YouTube and Amazon as well as venture capital firms. The entertainment and technology industries meet in what some have dubbed Silicon Beach, the geographical space covering the Los Angeles neighbourhoods and surrounding cities (roughly stretching from Venice to Culver City) where dozens of new media companies have their production and post-production facilities. Some major motion picture and television studios, such as Time Warner (Maker Studios) and DreamWorks Animation (AwesomenessTV), have already begun to invest in and acquire these new media companies, recognising that the lines between new media and traditional forms of content distribution are increasingly becoming blurred.

But while the internet is fertile ground for creative fusion of content from many different sources, it also opens up a potential Pandora’s box of intellectual property issues. Among the biggest issues that confront new media companies on a daily basis is the use or acquisition of content from third-party sources. This problem is particularly acute for YouTube’s multi-channel networks (MCNs). A typical MCN’s business model is to aggregate content and then split the advertising revenues it receives from YouTube with its content creators. However, most MCNs do not entirely control content creation. MCNs often acquire pre-existing and independently created content – usually in the form of acquiring copyrights or distribution rights from independent YouTube channels – in order to distribute and cross-promote the acquired content on their own networks.

In traditional media, production methods are time-honoured and more or less fixed; but original content in new media often comes with a less-than-spotless chain of title. Not surprisingly, most independent content creators will not have the foggiest idea of concepts such as music clearance or a work made for hire – and if they do, they are unlikely to have controls in place to systematically implement chain-of-title best practices. An MCN looking to acquire such independently created content must do so at its own risk. The risks can be mitigated to a certain extent through due diligence and careful drafting of the content acquisition documents. However, we emphasise here the qualifier “to a certain extent” as no careful business or legal planning, however ingenious, can foreclose the possibility that someone will file a lawsuit (meritorious or otherwise) or that the acquired content will in fact be free of infringing material.

Nevertheless, even without documentation showing a traditional chain of title, a few simple steps can help minimise exposure. First, the party selling or licensing the content should represent and warrant that the content is original and does not infringe on the rights of third parties. Second, the seller or licensor should provide appropriate indemnification language in the agreement. The point here is to attempt to separate the liability from the content. Of course, the value of any indemnification or representation and warranty is dubious if the party making it has no practical financial ability to pay in the event that a dispute or lawsuit arises. Therefore it is crucial that the acquiring party perform its due diligence. This brings us to the final and most important step: the acquiring party should actually review the content being acquired prior to the deal closing to see if there are any indicia of unauthorised third-party content. Red flags include the use of famous music, video clips, or celebrity images. If these red flags are noticed, even if the licensor cannot demonstrate chain of title on all of the elements, the acquiring party may be able to fix or at least minimise such problems through editing the material, licensing it from the third-party owner, or carving out problem content that will not be acquired.

Often, possibly infringing third-party content makes its way into “original content” under the guise of fair use. Although most content creators on YouTube have not heard about “chain of title”, they have inevitably heard of the concept of “fair use” which is a potential liability pitfall for content creators and distributors of all types, from MCNs to major studios. The most important thing to note about fair use is that it is an affirmative defence in the copyright context, meaning that “fair use” is a recognised exception to liability for copyright infringement – but the onus is on the potential defendant to prove that its use of pre-existing copyrighted material falls under the fair use rubric.

Unfortunately, even though the concept of fair use has been codified as a statutory exception to copyright liability, it remains a fuzzy concept whose application is difficult to predict in any particular circumstance. In order to determine whether a use is fair, the Copyright Act at 17 USC § 107 directs one to consider:


(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.


In the realm of entertainment, one can never be certain that any particular use will fall into the fair use exception. For example, on the one hand, in Leibovitz v Paramount Pictures Corp, 137 F.3d 109 (2d Cir. 1998) the Second Circuit affirmed a district court’s ruling that a film studio could parody Annie Leibovitz’s famous Vanity Fair photograph of a naked and pregnant Demi Moore in its poster for Naked Gun 33 1/3: The Final Insult, which featured comedic actor Leslie Neilson’s head superimposed on a naked and pregnant model who recreated Ms Moore’s pose in meticulous detail. On the other hand, in Columbia Pictures Industries, Inc v Miramax Films Corp, 11 F.Supp.2d 1179 (CD Cal. 1998), a federal district court ruled that Miramax’s poster for Michael Moore’s documentary The Big One infringed upon Columbia Pictures’ and Sony Pictures’ poster for Men In Black. The Court found that Miramax’s poster featured Mr Moore posing in the same manner as Will Smith’s and Tommy Lee Jones’ characters and had the same “look and feel” of the Men in Black poster, even while disregarding the non-protectable poster elements such as the black suits and New York skyline.

If litigated, any fair use determination will largely be sui generis. In general, the briefer the amount of the original work that is borrowed and the more transformative such use is, the better. However, given the uncertainty of how the fair use exception applies in any particular situation, it is always safer to either license the original work, or absent that, not to use it at all.

In sum, while the risks associated with the acquisition and use of third-party content can never be wholly eliminated, and the contours of the fair use doctrine will remain fuzzy around the edges, a little knowledge and vigilance can go a long way in reducing the legal risks and in allowing content creators to get on with doing what they do best: create.

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