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Writing the Law: Legal Tips for Writers

 Copyright Royalties : No R-E-S-P-E-C-T

       

 

 

        The recent passing of Aretha Franklin has highlighted the issue that artists, whether they are musicians, visual artists or writers, truly get no R-E-S-P-E-C-T in terms of statutory royalties due under the copyright laws. When Ms. Franklin died in August 2018, her cry of empowerment, "Respect", had been played over seven millions times on American radio stations, and she'd never received a penny for any of these performances. That's because under the copyright law, only writers and publishers of musical compositions, in this case, Otis Redding, are entitled to receive royalties.
        One major impediment to receiving compensation is that the copyright law has been weak in keeping pace with technology. In the 1990s, Congress passed a bill to allow performing artists to collect royalties from internet and satellite radio, but songs recorded before 1972 were exempt. In 2014, the "Respect Act" (Respecting Senior Performers as Essential Cultural Treasures Act- named with the blessing of Aretha Franklin) was designed to remedy the problem by requiring that digital music streaming services pay the same royalties as terrestrial radio for songs prior to 1972. The act was referred to committee and it died there. However, in January 2018 the "Music Modernization Act" was introduced to accomplish the same goal, passed the House and was referred to Senate Judiciary Committee for review. Unfortunately, the law only protects the copyright owner, not the artist.
        In January 2018, General Motors was sued by Adrian Faulkner (aka Smash 137), a Swiss graffiti artist, for using one of his art pieces in an ad campaign called "Art of the Drive". Graffiti art is entitled to copyright protection, but GM claimed that since the artwork was installed and displayed on a parking garage, it was actually an architectural work which is exempt from copyright protection. The matter is pending before the California federal courts to determine whether Mr. Faulkner is entitled to payment from GM for the use of his art.
        How do Aretha's and Mr. Faulkner's sad stories relate to writers? Because, similar to musicians, we are faced with the issues of contractual and copyright royalties which are sorely out of date.
        In publishing, an advance is a lump sum amount that is paid to the writer before the book is published, and is credited against income due to the writer by the publisher as royalties for the sale of a book. Usually, one-half is paid at the time of the signing of a publication contract and the balance is paid upon the acceptance of the manuscript. Many factors are calculated into the size of the advance, such as the success of the last book, the topic, and author's reputation. For example, last year the Financial Times reported that Michelle and Barack Obama had scored more than $65 Million for the rights to their memoirs and books deals. The previous record, $15 Million, was held by Bill Clinton for is 2004 memoir, My Life.
        The advance is the writer's hedge against poor book sales as generally there is no repayment of unearned advances back to the publisher. Mr. Clinton had no worries as his book sold a record 400,000 copies on the first day, and neither to the Obamas based upon their track records.
        Today, many independent publishers are opting to offer the writer a greater share of the profits as substitute an advance. This spreads the potential loss between the writer and publisher, and makes the arrangement much more of a partnership between the two.
        Royalties are a payment made by the publisher to the writer for each copy of the book that is sold. This is a key term that is negotiated in the Publishing contract between the writer and the publisher, and it is usually paid on the "net price" of the book rather than the "list price", or cover price. This means that the royalty is calculated after the deduction of the publisher's expenses discounts to the bookseller or wholesaler. Often there is a discount of 40%, so if a book retails for $14.99, after subtracting the 40% ($6.00), the royalty will be paid on the balance, $8.99.
        The Writer's Legal Guide: An Author's Guild Desk Reference (4th Ed.) and Model Book Contract, www.authorsguild.org, set forth schedules for standard royalty payments for trade, deep discounts, trade and mass market books starting at 10% of the retail or list price, and more established authors can often obtain better terms as high as 15%. New writers should beware that it is often difficult to obtain the 15% upon the "list price".
In contrast to the contractual royalties, there are statutory royalties due to the writer under the copyright law. However, there are several huge provisos. First, under the copyright law, the "Fair Use" exception permits the free use of the work without permission of the author or copyright owner when it is used for educational, criticism, comment, news reporting, scholarship or research.
        It is not "fair use" to copy or use the work for a commercial motive in the educational setting, such as the inclusion in a textbook or classroom lessons, unless the material is in the public domain. For example, if a high school English class is reading a portion of Elie Weisel's Night, and the teacher includes excerpts in their materials, a copyright license fee is due Mr. Weisel's estate for such use. To qualify as "fair use" the use should be spontaneous, like making a photocopy for research, not widespread dissemination of the materials.
        Another issue is the mechanism for monitoring the collection of the statutory copyrights monies due an author. Although the nature of our writing makes us all amateur detectives, it would be virtually impossible to locate every magazine, newspaper, school, or Internet site that has used our work. Fortunately, the Authors Registry, www.authorsregistry.orgis a clearinghouse designed to monitor the use of literary works, collect the fees due U.S. resident authors and distribute them. To date, they have collected and distributed over $30 Million in statutory copyright license fees to U.S. writers.
        Many literary agencies and organizations such as Sisters In Crime, Mystery Writers of America, and The Authors Guild are enrolled with the registry, allowing their members to obtain a free listing in the registry. Once an account is created, the registry will not only collect the fee but they will maintain the necessary tax records of the transactions. They charge a minimal 7.5% commission for the money they distribute.
        As authors, we are extremely fortunate that the Authors Registry exists, and as members of Sisters In Crime, we should take advantage of the free listing to protect our rights and collect our statutory royalties.        
        Similar to visual artists, writers are not entitled to any resale royalties of books. In July 2018, the United States Court of Appeals for the Ninth Circuit in San Francisco ruled that visual artists can no longer receive royalties for the resale of their works in California and invalidated the California Resale Royalty Act for art sales conducted after the 1978 effective date of the Copyright Act. In "The Estate of Robert Graham, et al vs. Sotheby's Inc.," artists Chuck Close and Laddie John Dill filed a class action lawsuit against Sotheby's for failing to pay royalties under the California act. The court held that the state law was in conflict with the 1978 copyright law's first sale doctrine, which provides that once a copyright owner sells the work for the first time, they lose control over future sales.
        While massive, wall-size paintings like Chuck Close's are different than a standard book, the same restriction applies to writers. Recently, a friend discovered a first edition of Truman Capote's "In Cold Blood" in her bookcase. An appraiser valued the book at $6750.00. While she does not intend to sell the book, if a resale law existed, she would owe the Capote estate a nice chunk of change upon any sale of the volume.
        Aretha's passing should be a call to arms for all artists. Whether we are painters, sculptors, clothing designers, graffiti artists, playwrights, musicians, songwriters or writers, we work hard to bring works of personal expression into the world. As writers, we possess contractual rights that can be negotiated with publishers and we have statutory rights that exist from the moment of creation. Those rights should not be taken for granted and we should do everything within our power to protect, preserve and receive their benefits due under the law.
        Perhaps, we should use the power of words to become more vocal and assist all artists to expand their rights under the law as well.
           
 

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2018 Adriance Honors

The Top 5 Things that you didn't know about me and my relationship with the library
Many Thanks to the Friends of the Poughkeepsie Public Library District for his prestigious award

     On October 15, 2018, my friends, family and supporters of the PPLD gathered to celebrate the 32nd Adriance Honors. Chris Silva, Executive Director of the Bardavon 1869 Opera House was the master of ceremonies as her presented myself and Mark and Julie Nelson with the awards.

 

     I have had a long, wonderful relationship with the Poughkeepsie Library and below is the speech I presented in honor of this wonderful occasion.

 

 

 

     I would like to thank the Friends of the Poughkeepsie Public Library District for this prestigious Adriance Honor.


     Many of you have known me for a long time. We've worked together, played together and some of us have even rock and rolled together.


However, there are probably things about me that you don't know, especially concerning my life-long friendship with the Poughkeepsie Public Library District. So, I'd like to share the Top 5 things you didn't know about me, and my relationship with the library.


     1. Throughout my life, the library has played an instrumental role in my development as a person. My father, Sandy Millman, was a native Poughkeepsian and, among other things, an author who loved spending time at the "liberrry" as he called it. My mother, a Baltimorean, calls it the "librey". Whether my Dad was working on a project with Issac Assimov or a travel article or a book, you could find him at Adriance doing research among the stacks.


     As a kid, my parents brought me to the musty Children's Room located in the basement of Adriance Memorial Library. There were no kindles or Ipads, and kids didn't really own books except an Encyclopedia, if we were lucky. If we wanted to read a book, we'd borrow them from the library.


     Now, I was an avid reader –Nancy Drew, To Kill a Mockingbird and A Wrinkle in Time – were some of my favorites – so I was there a lot.    


     2. When I attended Forbus Junior High School, and my friends were all becoming Candy Strippers at Vassar Brothers Hospital, my first volunteer job was at Adriance Library. I stacked the shelves and I especially loved the Children's room where I'd read to the kids and travel around the city in the Story Bus.


     Somehow, I think I knew back then that literature was going to play an important role in my life.


     During High school, if my assignments required more in depth information than could be found inside our white and green leatherette World Book Encyclopedia, the library was the place to go. And yes, I occasionally used a trip to Adriance as a subterfuge for hanging out with my friends.


     After law school, my first assignment as Assistant Corporation Counsel for City of Poughkeepsie was, you guessed it, Adriance Memorial Library where I worked closely with Kevin Gallagher on a variety of legal matters affecting the library.


     3. When my kids, Max and Ben, were little, we'd make weekly trips to see Barbara Hayman Diaz in the Children's rooms. At that time, I had the honor of serving as a Library Trustee when the town and city library districts were about to merge, and the proposition for the new tax was placed on the ballot. That was an exciting time to be a Trustee and to see my sons' excitement every time they attended a story time.


     The library fostered their desire to explore the world and helped contribute to the interesting and successful people they are today.


     4. Some of you know that my Dad and I have written a guide to Broadway called SEATS, but you don't know that I have a dark side. Oh yes, I'm a crime fiction writer. I like to read this genre as well, the bloodier and gorier the better. All of the murders in my novels are inspired by crimes that have occurred in the Hudson Valley, and for some strange reason, there's been a lot of murder and mayhem in the Queen City. My historical research always leads me back to the microfliche at Adriance. And I'm proud to say that I've finally mastered those damn machines. Tom, it's time to digitize the back issues of the Poughkeepsie Journal. Please!


     5. Currently, as one of the lead partners of Movies Under the Walkway, the library works closely with our family foundation, the Millman Harris Romano Foundation, as well as Walkway Over the Hudson and New York Parks, to produce our movie nights. For the past four years, they've provided guidance in operating the free summertime movie program; organized children's activities like hoolah hoops, karate demonstrations and the Reptile Guy, and they've been present onsite to sign up a whole new generation of library goers. They've also generously loaned their graphic artist to create the beautiful posters, banners and printed materials that we use to promote our movie nights.


     6.  I know that I said FIVE, but here's a bonus fact. In the 1970's, I was a rock and roll DJ on WPDH, which is where I met my husband, Mike Harris. That has nothing to do with the library, except that I wouldn't be receiving this award if not for his support in everything that I do.


     As you can see, I've had a long, lasting relationship with the Poughkeepsie Public Library District. Longer than most of the other friendships in my life. The library has been a good friend, and I've tried to give back whenever possible.


     I'm sharing my Top 6 with you because I hope that you'll think about your life and the part that the library has played in it. I guarantee that there's not one person in this room who wouldn't consider the library as a family friend. It's been an implacable community resource for your grandparents, parents, children and grandchildren as well.


     It is incumbent upon each of us to continue the legacies of the Poughkeepsie Public Library District and the Friends of the PPLD as information technology expands and changes our world so that the library will continue to provide its excellent services, classes and programming to your children, grandchildren and the community. With your generous support, the library will remain a place of unification that is accessible and open to everyone, and a place that fosters unhampered access to the free exchange of ideas.


     With an honor like this, I'd like to acknowledge Rob Dyson and the Dyson Foundation for offering me the platform to support the library and many other worthwhile non-profits throughout the Hudson Valley.


     I also must thank my parents for instilling in me the importance of public libraries, my children for reminding me that libraries are not just for grown-ups, my friends for showing up tonight, and as I mentioned, my husband for encouraging me draw outside the lines.


     Also, you know that when you have a true friend, you take for granted that you appreciate one another. You don't have to constantly reassure them of your friendship because you know they're there for you. It is unspoken between you.


     That's why receiving the 2018 Adriance Honor from the Friends of the PPLD is so special and meaningful to me. Thank you again.
 
 
 
 
 

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Choosing a Business Entity : Mind your Business

         

 

 

          In July, Immortal Works Publishing of Salt Lake City, Utah accepted my debut thriller novel, The Midnight Call, for publication. As a writer, this is a dream come true, and as an attorney, it raised certain questions about how to handle the business side of writing.
          We all know that there is the writing and the business of writing. The former is act of creative expression, where the thoughts fly out of our heads quicker than we can capture them on the page. The later is the dollars and sense of the writing biz. It's the monetary investment in your craft - joining organizations like Sisters in Crime, taking classes and seminars, attending conferences, hiring an editor, self-publishing expenses, book promotion and touring. It's also the Holy Grail – getting a publishing deal and receiving royalties.
          For many years, I've been writing a theater guide series, SEATS : NEW YORK, but the business of non-fiction writing is a completely different animal then fiction. I've experienced the process of trying to figure out what kind of business entity would be best suited for me. In this article, we'll review they types of business entities so that you can make an informed decision when you mind your business.          
          Many authors wonder what legal form their writing business should take. Should it be a sole proprietorship, a partnership, a corporation or an LLC?


Sole Proprietorship


          As you're reading this article, you are a sole proprietorship. Whether you write in your real or pen name, you are the owner of your own writing enterprise. All of your expenses and profits are automatically income and expenses for you, personally. Also, if you get sued, you are personally liable as well.
          The upside to a sole proprietorship is that it is absolutely free. If you are using a pen name, you could file a Certificate of Doing Business with your County Clerk to protect that name. For example, "J.K.Rowling d/b/a/ Robert Galbraith," is a DBA, although she's undoubtedly protecting her vast empire through corporations and subsidiaries.
          Even if you're not J.K. Rowling, and your making $50K a year from your writing, then a corporation or LLC might be helpful.


Corporation


          What is a corporation? It's an entity created by filing a Certificate of Incorporation with the Division of Corporations of your state. In my case, it would be the New York State Department of State, Divisions of Corporation, State Records and UCC. Here is the link: https://www.dos.ny.gov/corps/bus_entity_search.html. Forms are available on the website to create corporations online for a minimal filing fee. In addition to the Certificate, you would create a business with by-laws, minutes, directors and issue shares to your company. All shareholders would share in the profits and losses of the writing business as well as the management of the operation. Can you imagine getting in on the ground floor of the Pottermore empire?
          If you hit the big time and receive a fantastic advance, a few good reasons for incorporating are for estate planning purposes or to immediately shift income to family members in lower tax brackets, or to raise capital for projects like a theme park or movie based on your book.
          There are two types of corporations: "C" Standard corporations, like most companies on the stock exchange or sub-chapter "S" corporations which is a "flow through" entity so that income is treated like personal income. "C" corporations are taxed twice – once when the business when it earns income and, again, when the shareholder when the income is disbursed to them. With the additional IRS required tax filings, corporations can be an expensive way to operate your writing business. For a deeper discussion of taxes and bookkeeping, check out The Writer's Legal Guide: An Authors Guild Desk Reference at www.authorsguild.org.
           In my situation with SEATS, I had a small research and graphic art team working with me, had made investments in software and had inherited the franchise from my father, Sandy Millman. SEATS was really a family affair, so we formed a Sub-Chapter S corporation. For a while, SEATS was a bestseller for Hal Leonard Publishing, but over time, royalties dwindled and it became expensive to maintain the entity. Each year we had burdensome corporation tax filings with little income. Ultimately, after consulting with our accountant, we dissolved the corporation, but it's had served it purpose at the time.


Limited Liability Company


          Another choice is an LLC or Limited Liability Company, which is similar to a partnership without certain IRS restrictions like a corporation. In New York, you can create an LLC with the Article of Organization forms available online at https://www.dos.ny.gov/corps/llccorp.html, but take notice of the publication requirements. A notice of the formation of an LLC must be published in the newspaper as required by statute. An LLC can be organized with one or more members, and insulates the members from personal liability. Like a Sub-Chapter S corporation, an LLC is a "flow through" mechanism where income or loss flows directly to the writer or partners.


Partnership


          In contrast, a partnership is a sole proprietorship with more than one partner. It is extremely flexible, often formed with a handshake. However, it is advisable to put your agreement down on paper, just in case you split ways. I've always advised clients who are creating a partnership to put their agreement in writing so that they will remain friends in the future. There's nothing more heartbreaking than losing a friend or family member over a dispute concerning money, as many plots have described. Irwin Shaw's Rich Man, Poor Man and Cynthia D'Aprix Sweeney's The Nest, are two good examples of familial contention over the mighty dollar.


          With the newest chapter in my writing career, I've opted for an LLC. For tax purposes, it was easier to organize my accrued writing expenses as a separate entity. This time, the bookkeeping will be simplified when it comes to April 15th. And when the royalty checks being to arrive, I'll be all set.
          Which entity is best for you? The decision as to whether to become a sole proprietorship, LLC, partnership or corporation shouldn't be taken lightly. It depends upon your professional goals, income, desire for control, and estate and tax planning, just to name a few considerations. If you're an emerging writer –take it slow. It's rarely cost effective to rush into a corporation.
          I hope that my personal experiences have provided insight into the benefits and burdens of the business of writing. As you know, each writer's situation is different, so it always best to seek professional advice from a trusted tax professional and attorney to help you mind your business.

 


 This article appeared in the September 2018 issue of inSinC Quarterly, the newsletter of Sisters in Crime.
 

 
 
 

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