Recent Developments in Governmental Takings


Takings by the government have long been a murky area.  The Fifth Amendment of the U.S. Constitution does not proffer a great deal of insight into how takings were to be effected.  Recent case law adds some clarity to the murky sediment, but it remains a complex topic.  The Takings Clause of the Fifth Amendment exists to recompense private citizens in the event that government effects a taking of private property.  It states, “nor shall private property be taken for public use, without just compensation.”  The intent behind this was to limit government in its task of maintaining public interest rather than empower it, but it also serves also to give the private citizen recourse when government (local, State or Federal) takes physical possession of land for public use.  Over the years, use of the Takings Clause has evolved to include instances where the government regulates in a manner that reduces the value of private property or regulates such that it renders use of the land null.  These are the two types of per se taking: physical and regulatory. 

 

 

Fifth Amendment | Law firm of Dayrel Sewell
Fenced-off house in Turner (August 2013)

 

Two recent cases have served to clarify previously muddy areas of takings actions: the 2017 U.S. Supreme Court case of Murr v. Wisconsin[1] and the later 2017 New York Second Department Appeals Division case of Matter of New Creek Bluebelt, Phase 3 (Baycrest Manor Inc.)[2].

 

Murr v. Wisconsin and the Denominator Problem

 

Murr v. Wisconsin concerned the children of the Murr family who had been devised two separate, but abutting, lots along the St. Croix River by their parents.  One lot was improved by a cabin while the other was undeveloped and smaller than 1 acre.  The children wished to sell the smaller lot to fund repairs of the cabin on the larger lot, but state ordinances prohibited the development or sale of adjacent plots under common ownership if they are substandard, i.e. smaller than 1 acre.  The Murrs sued the state and county claiming that they had been subjected to an uncompensated taking as the ordinance had deprived them of “all, or practically all, of the use of Lot E because the lot cannot be sold or developed as a separate lot.”  The case made its way to the Supreme Court which found for the State, that the two lots were to be treated as one lot.  The Court outlined a new three-pronged test for the “denominator question”, the question of what property or portion of the property has been taken, which has commonly been a difficult and fact-intensive analysis for the courts to make.  

 

The seminal case of Penn Central Transportation Co. v. New York City[3] gave the previous test which provided the courts broad discretion by considering the “parcel as a whole”, however, while it gave broad discretion, it did not offer much guidance in delineating the property for the purposes of analyzing a taking.  The Murr Court outlined the following considerations in determining what constituted the denominator: “(1) the treatment of the land under state and local law; (2) the physical characteristics of the land; and (3) the prospective value of the regulated land.”  Chief Justice Roberts gave a dissent that criticized the majority’s three-pronged test as one that would almost punish the private citizen as the test would perform a “clear double counting” of the government’s interest – in both considering the denominator and then the ultimate takings inquiry. 

 

St. Croix River |  U.S. constitution
Dalles of St. Croix

 

The third factor of this new test requires an analysis of the concept of reciprocity of advantage which states that, despite the unequal givings and takings, a thing may benefit despite being burdened.  In this instance, the Murrs’ substandard lot was unequivocally burdened; it could not be developed or sold as a single unit, but it also benefited from the development restriction that protected the natural vista of the St. Croix River as it increased the value of the surrounding area.  Indeed, the value of the two lots together far exceeded their combined worth singly.  Murr is the first SCOTUS case to include this concept in its denominator inquiry, and it adds fairness and balance to the outcome by allowing the courts to consider the equitable benefit that the regulation in question has given to the property as opposed to considering only the burden.  Takings law is not a vehicle for compensation against every decrease in property value caused by regulations, it is a method of providing compensation when a regulation has gone too far.  So, even though Murr seems like a decision that favors the government over the aggrieved citizen, in actuality, it favors fairness and balance once all benefits and burdens have been considered.

 

Baycrest Manor

 

While Murr serves to clarify the initial takings inquiry, in New York, the case of Matter of New Blue Creek, Phase 3 (Baycrest Manor Inc.) (“Baycrest Manor”), serves to clarify parts of the final inquiry. It provides that subsequent purchasers with knowledge of stringent regulations on the purchased land are permitted to bring takings claims as it would be unfair for successors to title to be precluded from challenging unreasonably onerous regulations. This ruling follows the Supreme Court case of Palazzolo v. Rhode Island[4] and overturned four previous cases known as the Kim Quartet[5] wherein the New York Court of Appeals, in a single day, held that a purchaser with knowledge of restrictions cannot maintain a claim for a regulatory taking.  

 

Manhattan, Freshkills Park | US Governmental Takings
Downtown Manhattan view over Freshkills Park

 

Baycrest Manor concerned an area of land that was condemned by New York State as 100% wetlands and therefore lacking any economic use.  Baycrest Manor, Inc. brought an action seeking just compensation and argued in the first that the land was unjustly deprived of all use due to the strict wetlands regulations, that the economic value of the land was decreased as a result, and also that a hypothetical future purchaser would pay more than the restricted-use price based on New York’s reasonable probability incremental increase rule.  New York, however, is a strange beast and wetlands areas do hold some non-economic value as was the case here where the owner was awarded higher compensation than the value of the land under a typical regulatory takings claim.  The New York Court of Appeals upheld this decision and outlined instances where departure from the Penn Central ad-hoc test for determining a taking would be considered.  The Penn Central test requires a court to analyze the economic impact of the regulation, the regulation’s interference with reasonable investment-backed expectations and the character of the governmental action, but the Court in Baycrest Manor realized that there are instances, such as here, when non-economic factors play a more important role.  This causes issues for the economic elements of the Penn Central test.  Instead, the Court found that there was a reasonable probability that a takings claim would succeed as the value of the property was reduced by 88% and the wetlands regulations prohibited practically all development of the land, thus removing all economically beneficial use of the property. 

 

After determining that a takings claim could be sustained, the Court moved on to consider whether the reasonable probability incremental increase rule could still apply.  The Court held that the rule applies when the Court finds there is a reasonable probability that the condemned land will be rezoned or the use restriction will be deemed invalid.  Then, the Court performed a calculation to determine the hypothetical value that a hypothetical future purchaser might pay given the continuing right to bring a claim and reasonable probability of success of that claim.  This figure is the just compensation awarded to the property owner. 

 

Baycrest ManorThis notice is much fairer than before where challenges to unreasonable regulations that cause a taking could only be brought by those who had purchased land before the enactment of the regulation.  It is wholly unfair that a subsequent purchaser not be able to challenge such a regulation merely because he had notice of it when he purchased the land, as it remains unreasonable no matter when a challenge is brought. 

 

Conclusion

 

While both cases focus on different elements of a takings inquiry, both add to the fairness of the outcome.  Murr ensures that the benefits provided by the regulation to commonly owned lots are fairly considered in determining the denominator, while Baycrest Manor ensures that, in New York, subsequent purchasers of restricted land are able to bring takings challenges and also that calculations for just compensation consider the price that a hypothetical purchaser might pay due to the maintenance of a takings claim and the reasonable probability of its success.  It can be argued that one case favors the government and the other favors the claimant, but both cases favor fairness overall, however, the complexity of takings law is only deepened.

 

 

[1] Murr v. Wisconsin, 582 US _ (2017)

[2] Matter of New Creek Bluebelt, Phase 3 (Baycrest Manor Inc.), ___ A.D.3d ____, 2017 N.Y. App. Div.

[3] Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978)

[4] Palazzolo v. Rhode Island, 533 U.S. 606 (2001)

[5] Kim v. City of New York, 90 N.Y.2d 1 (1997); Gazza v. Dep’t of Envir. Conserv., 89 N.Y.2d 603 (1997); Basile v. Town of Southampton, 89 N.Y.2d 974 (1997); and Anello v. Zoning Board of Appeals, 89 N.Y. 2d 535 (1997)



The Effect of Tax Laws on Commercial Real Estate


Recently the Supreme Court decided the case South Dakota v. Wayfair, Inc., in which they addressed whether remote sellers of goods and services can be required to collect and remit sales taxes imposed by the consumer’s State.[1] According to S. 106, 2016 Leg. Assembly, 91st Sess. (S. D. 2016) [hereinafter “the Act”], remote sellers are required to collect and remit sales tax to the State in which the goods are sold.[2] Plaintiff, the State of South Dakota, filed of an injunction requiring respondents to register for licenses to collect and remit sales tax.[3] Respondents Wayfair, Overstock.com, Inc., and Newegg, online merchants selling goods such as furniture and electronics, moved for summary arguing that the Act is unconstitutional.[4] The Supreme Court granted certiorari to determine how to interpret precedent cases “in light of current economic realities.”[5]

Wayfair, online shopping | Tax and Commercial Real Estate | The Effect of Tax Laws on Commercial Real Estate
Wayfair logo

 

In order to decide this issue, the court had to interpret and analyze the Commerce Clause and review the scope determined by two precedent cases, National Bellas Hess, Inc. v. Department of Revenue of Illinois and Quill Corporation v. North Dakota, which were decided in 1967 and 1992, respectively.[6] These cases determined that an out-of-state seller’s ability to collect and remit the tax depended on whether the seller had a physical presence in the State.[7] If the seller only permitted people to order from a catalog, it did not have a physical presence.

 

According to two key primary principles, state regulations cannot disfavor interstate commerce, and States cannot impose undue burdens on such commerce.[8] These principles, in combination with the

Commerce Clause, aid courts in determining outcomes in cases challenging state laws.[9] The Court laid out the guidelines for state taxation in Complete Auto Transit, Inc. v. Brady, where it held that a State can exclusively tax interstate commerce as long as the tax doesn’t create effects prohibited by the Commerce Clause. The Court determined that it would allow a tax as long as it applies to an activity with a significant connection to the taxing State, is fairly divided, doesn’t “discriminate against interstate commerce,” and is sufficiently connected to the services provided by the State.[10]

 

The concern about a significant connection arises from the established due process requirement that requires a business to have minimum contacts with the state in which they are selling goods or services.[11] Additionally, in Miller Brothers Co. v. Maryland, the Court held that there must be a connection between a state and the property or transaction it wishes to tax.[12]

 

The Court found that the physical presence rule is a flawed interpretation of the Commerce Clause in the ever-growing digital age as it gives online out-of-state businesses a significant advantage over companies with a physical presence in the state.[13] In addition, it creates market distortions.[14]

 

The issue of competition from online vendors has been an important one for South Dakota and the States more generally due to the fact that the States have lost revenue in the amount of $8 and $33 billion each year as a result of the rulings in Bellas Hess and Quill.[15] As a result, South Dakota residents had to “foot the bill” and pay the use tax on their purchases from other states.[16] These taxes constitute an important income source for South Dakota in funding state and local services, such as police and fire departments, as it has no state income tax.[17] Some states, such as Colorado, have imposed notice requirements on remote vendors just below collecting taxes. As a result, in the

future courts may encounter arguments regarding the meaning of physical presence.[18] Courts may also face the issue presented by small businesses seeking relief from tax collection.[19]

 

online shopping, e-commerce | The Effect of Tax Laws on Commercial Real Estate | Commercial Real Estate
Consumers have moved increasingly towards online shopping in the past few years due to convenience and efficiency

 

Ultimately the Court overruled Quill and Bellas Hess, finding that the physical presence rule was untenable.[20] Subsequently, the Court analyzed the tax under the Complete Auto test and found that the connection between the activity and the taxing State was sufficient, as respondents had significant economic and virtual contacts with the State. However, it remains to be seen whether another Commerce Clause principle could nullify the Act.[21]

 

In his dissent, Chief Justice Roberts argued that Bellas Hess was incorrectly decided and that deference should be given to Congress (rather than the Courts) to determine interstate commerce issues, citing the importance of stare decisis.[22] Further, Roberts argues that the harm caused by the physical presence rule, if there is any being done, is decreasing over time.[23]

 

Additionally, Roberts asserts that the Court’s decision will disproportionately and arbitrarily impose unjustified costs on various goods, which will burden small businesses. He opines that imposing taxes on each sale will harm the market by increasing costs for businesses and thereby decrease the variety of goods available.[24] Roberts argues that Congress is most suited to determine competing interests of businesses and analyze the Commerce Clause and might be able to avoid such a drastic policy change and determine any retroactive effect the change might have.[25]

 

This ruling is vital for commercial real estate and states as stiff competition from online retailers has injured sales.[26] It will have far-reaching implications for large online venders such as Amazon, which does not currently collect state sales taxes on products of third-party sellers (in all states except Washington and Pennsylvania). Following the publication of the decision, Amazon shares tanked. Stocks of other large online marketplaces are expected to show similar decline.[27]

Amazon, e-commerce, online shopping | The Effect of Tax Laws on Commercial Real Estate | Commercial Real Estate
Amazon

 

As a result of the decision, South Dakota can require online out-of-state vendors that conduct sales numbering over 200 transactions or generating revenues of over $100,000 to collect taxes on items purchased by South Dakota residents. It is anticipated that other states will change their laws regarding the physical presence requirement to align similarly with South Dakota’s new requirement. It is estimated that the decision could create as much as $13 billion in tax revenue.[28] As the online market grows and improves and more stores face bankruptcy, it will be important to keep an eye out for additional legal issues and tax policies that are likely to arise in the online marketplace arena.

 

[1] South Dakota v. Wayfair, 138 S. Ct. 2080, 2093 (2018).

 

[2] Id. at 2088.

 

[3] Id. at 2089; see U.S. Const., Art. I, §8, cl. 3.

 

[4] State v. Wayfair Inc., 901 N.W.2d 754, 759-60 (S.D. 2017).

 

[5] South Dakota, 138 S. Ct. at 2089.

 

[6] Id. at 2087-88. National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753 (1967); Quill Corp. v. North Dakota, 504 U.S. 298(199).

 

[7] South Dakota, 138 S. Ct. at 2089.

 

[8] Id. at 2084.

 

[9] Id.

 

[10] Id. at 2085.

 

[11] Id. at 2093.  See Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); Burger King v. Rudzewicz,  

   471 U.S. 462, 476 (1985).

 

[12] Miller Brothers Co. v. Maryland, 347 U.S. 340, 344-45 (1954); South Dakota, 138 S. Ct. at 2093.

 

[13] South Dakota, 138 S. Ct. at 2092.

 

[14] Id.

 

[15] Id. at 2088.

 

[16] Id.

 

[17] Id. at 2097.

 

[18] Id. at 2098.

 

[19] Id. at 2099.

 

[20] Id.

 

[21] Id.

 

[22] Id. at 2101.

 

[23] Id. at 2103.

 

[24] Id. at 2104.

 

[25] Id.

 

[26] Erin Stackley, Supreme Court Ruling in Wayfair Case a Win for Real Estate and States, RISMEDIA (August 12, 2018), http://rismedia.com/2018/08/12/supreme-court-ruling-wayfair-case-win-real-estate-sales/#close.

 

[27] Erin Stackley, Supreme Court Ruling in Wayfair Case a Win for Real Estate and States, RISMEDIA (August 12, 2018), http://rismedia.com/2018/08/12/supreme-court-ruling-wayfair-case-win-real-estate-sales/#close.

 

[28] Jeff Mengoli, The Impact of the Supreme Court’s Ruling in South Dakota v. Wayfair, BigCommerce, https://www.bigcommerce.com/blog/south-dakota-v-wayfair/.



High Court Fashion: Is there Copyright Protection for Trade Dress?


Copyright Protection of Non-Utilitarian Designs under the Copyright Act of 1976

Designers in the high fashion industry face many obstacles in receiving intellectual property protection for the utilitarian aspects of their clothing. Congress has provided copyright protection only for original works of art, but not for industrial designs that embody utilitarian functions.  See 17 U.S.C. 101.  Copyright protection does not extend to utilitarian aspects of objects because it would open up a flood of litigation over exclusive monopoly rights that would “burden competition, raise prices, and also harm consumers.”  See Star Athletica, L.L.C. v. Varsity Brands, Inc., Brief for United States as Amicus Curiae 5-6.  This proves problematic, however, when art and industrial design are intertwined, especially in the fashion industry which combines aesthetic elements with utilitarian garments.  Under the separability doctrine, these pictorial, graphic, and sculptural works on the design of a useful article are copyrightable so long as they “can be identified separately from, and are capable of existing independently of, the utilitarian aspects of the article.”  See  17 U.S.C. 101.  But what happens when pictorial, graphic, sculptural works are inseparable from the utilitarian aspects of a garment?  See Star Athletica, L.L.C. v. Varsity Brands, Inc. provided fashion designers with newfound intellectual property protection for aesthetic aspects that are incorporated into utilitarian aspects of their garments.

 

Obstacles Designers Faced in the High Fashion Industry Prior to the Star Athletica Decision

 

It is without a doubt that fashion, namely high fashion, has now become a status symbol that relies heavily on its branding and aesthetic more so than any utilitarian value its designs may serve.  So much of the value that these high fashion designs derive is from its rarity and accessibility to only the elite and wealthy.  Accordingly, it is not too surprising that fast fashion powerhouses have copied these high fashion runway looks along with several other brand elements available to the more general public.  

 

Fast fashion brands, i.e. Zara or Mango, have often tried emulating high fashion ad campaigns by recreating the featured garments for an exponentially lower price.  For example, Celine’s ad campaign for the 2011 fall and winter collection consisted of models in a natural setting surrounded by aloe plants.  Zara later emulated this in black and white during the Spring and Summer 2014 season and again during the Fall and Winter 2015 season with a minimalist focus on a model in black and white and an aloe plant.

 

 

Fashion Industry | copyright protection
High fashion Black & White

 

A few other examples of this are pictured below where Zara emulated Balenciaga’s Fall and Winter 2016 collection with its red parka and comparable styling to Lotta Volkova or a cream colored trench coat with athletic zip up wear underneath for the Burberry Fall 2016 season, which was a distinctive look for that season featuring model Chris Wu.

 

copyright protection zara
Balenciaga on the left and Zara on the right

 

The similarities between the campaigns are not entirely identical, and even if they were, there were not rigidly defined protections under the Copyright Act.  Zara and other fast fashion powerhouses such as Mango and Forever 21 have a legally cognizable right to provide their own independent expressions about their fashion ideas.  Accordingly, they continue to use these similarities with the intention that consumers create a psychological connection between the high fashion brand and the fast fashion brand.  Fast fashion powerhouses strengthen these connections by recreating the styling, colors, and design to produce the same high fashion look elite fashion designers were inspired by without infringing logos, patents, or trademark protected designs.  This leaves high fashion designers left fairly powerless and unprotected by copyright laws.  This all changed with the holding of Star Athletica, L.L.C. v. Varsity Brands, Inc., which provided high fashion designers with much more expansive intellectual property protection.

 

Burberry coat on left and Zara coat copyright
Burberry coat on left and Zara coat on right
Fashion Industry intellectual property protection | Law Firm of Dayrel Sewell
Gucci on left and Mango on right

 

Star Athletica, LLC v. Varsity Brands, Inc.: Progress Toward Copyright Protection of Fashion Design

 

In March 2017, the Supreme Court established a test for determining the copyright eligibility of design elements in fashion in Star Athletica, L.L.C. v. Varsity Brands, Inc. Respondent Varsity Brands, Inc. obtained more than 200 copyright registrations for two-dimensional designs that appear on their cheerleading uniforms.  Respondent employed designers who sketched design concepts of uniforms consisting of “original combinations, positionings, and arrangements of elements which include V’s (chevrons), lines, curves, stripes, angles, diagonals, inverted V’s, coloring, and shapes.” 137 S. Ct. 1002, 1007 (2017).  Respondent Varsity Brands, Inc. sued Star Athletica, L.L.C., a competitor that also markets cheerleading uniforms, for copyright infringement for using 5 of Respondent’s copyrighted designs.  Id.  The District Court granted the petitioner summary judgment holding that designs could not be conceptually or physically separated from the uniforms, and therefore were not copyrightable designs.  Id.  The Sixth Circuit later reversed this and concluded that graphics “could be identified separately and were capable of existing independently” of the uniforms under 17 U.S.C. 101.  Id.  Specifically, they found that the graphic designs were separately identifiable because “the designs and a blank cheerleading uniform can appear ‘side by side’ and . . . are capable of existing independently.”  Id. The Supreme Court found these conflicting perspectives on the separability analysis warranted certiorari to resolve this widespread disagreement over the proper separability test.  Id

 

Varsity Brands, Supreme Court
Appendix to Opinion of the Supreme Court

 

The Supreme Court relied solely on a statutory interpretation of 17 U.S.C. 101, rather than a free-ranging interpretation of the best copyright policy for the case at hand.  See Mazer v. Stein, 347 U.S. 201 (1954).  The Court looked at the “whole provisions of the law” to determine the meaning of 17 U.S.C. 101.   See United States v. Heirs of Boisdore, 8 How. 113, 122 (1849).  The statute provides that:

 

A pictorial, graphic, or sculptural feature incorporated into the design of a useful article is eligible for copyright protection if it (1) can be identified separately from, and 2) is capable of existing independently of, the utilitarian aspects of the article. 17 U.S.C. 101.

 

The Court focuses more on the second requirement, stating that the burden of proof for the first requirement is not that difficult to satisfy.  See Star Athletica, L.L.C. v. Varsity Brands, Inc., 137 S. Ct. at 1010.  The Court states that the trier of fact must determine whether the separately identified feature can exist apart from the utilitarian aspects of the article.  Id.  This means that it has to be able to exist on its own if its imagined independent from the useful article.  Id.  If it cannot be imagined separately from the useful article, then it is not a pictorial graphic or sculptural feature of the article itself, but rather as part of one of the utilitarian aspects of the garment.  Id.

 

The Copyright Act provides that the owner of the copyright can reproduce this work copies on any kind of article regardless of whether it embodies a utilitarian property.  See 137 S. Ct. at 1005.  The Court states that this is a mirror image of 17 U.S.C. 113(a) which protects an authorship fixed on some tangible medium that is non-utilitarian and then later applied to a utilitarian object.  Id.  On the other hand, 17 U.S.C. 101 protects the art that is first fixed in the medium of a useful article.  Id.  Accordingly, the Court holds that the copyright protection extends to pictorial, graphical, or sculptural objects regardless of whether they are affixed to utilitarian or non-utilitarian objects.  Id.

 

The Court held that this interpretation of the statute is consistent with a past holding in the Copyright Act’s history.  Id.  In Mazer, the Court held that the respondents owned copyright protection for a statuette that served as the base of the lamp and it was irrelevant if can be identified as a freestanding sculpture or lamp base.  Id.  The Copyright Office used the Mazer holding in the modern separability test to copyright law in section 101 of the 1976 Act. Id.

 

Using statutory interpretation and case law, this Court held that the surface decorations on the cheerleading uniforms can be considered separate under the separability test mandated in Section 101 of the 1976 Act.  See 137 S. Ct. at 1006.  They reasoned that if the decorations were removed from the uniforms and affixed to another medium, they would not copy the uniform itself.  Id.  They analogized that just as two-dimensional fine art are aligned with the shape of the canvas on which it is painted, these decorations are aligned with the shape of the uniform itself.  See 137 S. Ct. at 1012. Respondents may only prohibit the reproduction of these surface designs; however, the Court holds that they have no right to prevent others from manufacturing a cheerleading uniform identical in shape, cut, or dimensions.  See 137 S. Ct. at 1006

 

Ultimately, the design of the uniforms satisfy the requirements of Section 101 of the 197 Act because they 1) can be perceived as a two- or three- dimensional work of art separate from the useful article; and 2) would qualify as a protectable pictorial, graphic, or sculptural work either on its own or in some other medium if imagined separately from the useful article. 137 S. Ct. at 1016. Based on this interpretation, the Supreme Court affirmed the Court of Appeal’s judgment.  Id.

 

Now high fashion designers can turn to this holding when any aesthetic design is affixed to a utilitarian design.  This holding has revolutionized high fashion designers’ intellectual property interests for their designs in the high fashion industry that is victim to fast fashion’s intellectual property theft.

 

 



Landlord-Tenant Battle Over NYC Rent Stabilization


 

 

NYC Rent Stabilization | Best Law firm in Brooklyn NYC
Rent Stabilization

 

New York’s first step towards rent regulation can be traced back to the 1920s.[1]  The history of rent control in New York has been a battle between owners and tenants for quite some time.  In general, rent controlled apartments must be in buildings of three or more units constructed on or before February 1, 1947 and tenants must have occupied their apartment since at least July 1, 1971.[2]  Under rent control, the maximum rent is determined by statute, through the Maximum Base Rent formula.[3]  The Maximum Base Rent formula allows a landlord to increase monthly rent charges in order to recoup the costs of owning the building.[4]  In addition, hardship increases may be allowed in specific circumstances, including when there is substantial rehabilitation to the building, and to recover the cost of major capital improvements.[5]  When a rent-controlled apartment becomes vacant, it is subject to rent stabilization, or, if it does not meet the requirements of rent stabilization, it is deregulated entirely.  If a rent-controlled apartment becomes vacant, and the maximum legal rent exceeds $2,000.00 instead of remaining under rent stabilization, the unit is deregulated.

 

Under the NYC Rent Stabilization Law, rent-stabilized apartments are subject to certain statutory rent increases, including a 20% increase for a two-year lease upon vacancy.[6]  In addition, rent Stabilization Law §26-504.2 [a] provides for the deregulation of rent-stabilized apartments that reach a threshold of legal regulated rent.  Specifically, deregulation will apply to:

 

“any housing accommodation which becomes vacant on or after [April 1, 1997] and before the effective date of the rent act of 2011 and where at the time the tenant vacated such housing accommodation the legal regulated rent was two thousand dollars or more per month; or, for any housing accommodation which is or becomes vacant on or after the effective date of the rent regulation reform act of 1997 and before the effective date of the rent act of 2011, with a legal regulated rent of two thousand dollars or more per month.”[7]

 

Owners have been abiding by Rent Stabilization laws for years but, when Richard Altman decided to sue his owner for illegally deregulating the unit he leased in 2003 by counting the 20% rent increase allowed by statute to push his rent over the $2,000.00 threshold, uncertainty spread throughout New York.  For apartments involuntarily placed under rent regulation in New York City, those regulations were removed when a vacant apartment crossed a certain rent level. However, previously unresolved in the case law was whether, in order to effect deregulation, that rent level had to be reached during the tenancy of the last tenant prior to vacancy, or could be reached through implementation of various increases allowed to owners between two actual tenancies, such as the 20%.

 

Initially, in 2015 the New York Appellate Division for the First Department ruled in favor of Richard Altman, holding that although the owner was entitled to a 20% rent increase for Altman’s initial lease, that increase did not serve to deregulate the apartment because the rent was not over $2,000.00 at the time the prior tenant vacated the premises.  The decision by the Appellate Division caused mass uncertainty by owners and tenants who had been previously deregulated by the 20% increase. Tenants believed they had won and were ready to start filing lawsuits to return their units to rent stabilized and collect damages for over paid rent.  While tenants were excited about the court’s ruling the decision left landlords in a very difficult position because they had previously followed the law by including the 20% to deregulate the apartments and were facing potentially thousands of dollars in back-pay to tenants and thousands of apartments being re-stabilized. However, the Altman decision was appealed and heard by the New York Court of Appeals.

 

NYC Rent Stabilization | Best Law firm in Brooklyn NYC
The Final Decision

 

April 26, 2018 was a monumental day for landlords who were facing potential re-stabilization of thousands of previously deregulated apartments.  The Court of Appeals introduced Altman with the statement that it must determine whether the 20% vacancy increase should be included in determining if the rent of a unit exceeds the $2,000.00 threshold.  To tenant’s dismay, New York’s highest Court ruled in favor of the landlords allowing vacancy rent increases to be used to boost a unit’s cost over the deregulation threshold.  Ultimately, the Court of Appeals ruled that the 20% increase should be considered when determining the legal regulated rent at the time of the vacancy.  The decision was a massive defeat for Altman and all other tenants hoping to re-stabilize their rent.  The Court of Appeals Chief Judge Janet DiFiore wrote in her decision that state law makes it clear the vacancy rent increase should be counted when figuring if any apartment has reached the deregulation threshold.  “The legislative history could not be clearer and leaves no doubt that the Legislature intended to include the vacancy increase,” DiFiore wrote.[8]  The unanimous ruling by the Court of Appeals prevents the unjustified re-stablization of thousands of apartments that were appropriately deregulated according to law.  It also prevents thousands of deregulated tenants from receiving a windfall in the form of a rent-stabilized apartment with a below-market rent.

 

NYC Rent Stabilization | Best Law firm in Brooklyn NYC
New York City landscape

 

The New York Court of Appeals decision will continue to allow landlords to deregulate units and buildings that were once rent stabilized. In a city where rent is continuing to increase and become unaffordable, rent stabilized apartments will continue to decrease. Unfortunately, for tenants seeking rent stabilized apartments there are not many left and there will not be new rent stabilized apartments appearing on the NYC real estate horizon. The endless new construction taking place all over New York will continue to make landlords deregulate apartments and drive rent prices up.  Bear in mind if you are one of the lucky few living in a rent stabilized apartment, hold on to it for as long as you can.  Otherwise, it will be like looking for a need in a haystack of brand-new, highly-priced, luxury apartments.

 

 

 

 

 

 

 

[1] Peter D. Salins & Gerard C.S. Mildner, Scarcity By Design: The Legacy of New York City‘s Housing Policies, 120-21, 52-53 (1992).

[2] N.Y.C. Admin. Code 26-403(e)(2)(h).

[3] N.Y. Comp. Codes R. & Regs. tit. 9, 2201.4.

[4] Id.

[5] N.Y. Comp. Codes R. & Regs. tit. 9, 2201.4(b)-(c).

[6] Rent Stabilization Law §26-511 [c] [5-a].

[7] Altman v. 285 W. Fourth LLC, 2018 NY Slip Op 02829.

 

[8] Id. at 6.



Piece of Cake: What’s Behind Supreme Court Opinions?


On June 4, 2018 the United States Supreme Court issued a decision in the controversial case, Masterpiece Cakeshop, Ltd. v. Colorado Civil Rights Commission. The case concerned a baker, Mr. Jack Phillips, a devout Christian, who in 2012 declined to create a wedding cake for a same-sex wedding on the basis that doing so would require him to express himself artistically in a way that was inconsistent with his religious beliefs. At the time, gay marriage was not legally recognized in Colorado. However, the state had an anti-discrimination act regarding goods and services available to the public. See C.R.S. 24-34-601. The Commission determined that Mr. Phillips violated the anti-discrimination act. On review, the Supreme Court held that the Commission violated the First Amendment’s Free Exercise Clause by egregiously treating Mr. Phillips’ case with hostility towards his religious beliefs. The Free Exercise Clause requires that states not base regulations and laws on hostility towards a religious belief, but that they remain neutral. The Supreme Court reversed the lower court’s decision stating that Mr. Phillips had been “entitled to a neutral decision-maker who would give full and fair consideration to his religious objection as he sought to assert it . . . ” Masterpiece Cakeshop, Ltd. v. Colo. Civil Rights Comm’n, 201 L.Ed.2d 35, 46 (U.S. 2018).

 

Masterpiece Cakeshop, Supreme Court Decision
Jack designing cake

 

 

Critical to the effect of this decision on similar future cases is that the Court did not decide for the states the limits and boundaries between anti-discrimination and freedom of speech. Rather, the Court narrowly held that these disputes “must be resolved with tolerance, without undue disrespect to sincere religious beliefs . . . ” while avoiding “subjecting gay persons to indignities when they seek goods and services in an open market.” Id. at 50. In other words, the Supreme Court simply held that state courts must be neutral decision-makers who faithfully uphold the entire Constitution.

 

Nevertheless, the case was not decided without much disagreement among the nine Supreme Court Justices, despite the final 7-2 decision. With three concurring opinions (one such written and joined by two of the four liberal Justices) and one dissenting opinion, it is no wonder why the case has caused such controversy. What might cause even more shock is that Justice Kennedy, who wrote the majority opinion, also wrote the 2015 landmark decision which legalized gay marriage nationwide. Because of the different opinions, this case becomes an effective model for answering the following questions. How do Supreme Court Justices decide who writes each opinion? Why do they write concurring and dissenting opinions? What precedential value do concurring and dissenting opinions have?

 

 

The Majority Opinion is Assigned by the Chief Justice

 

After oral arguments, the Justices convene in a conference to express how each of them would decide the case; the conference is followed by a vote. Once the votes have been counted, the Chief Justice assigns a Justice in the majority to write the opinion of the Court or does so himself. However, if the Chief Justice is not in the majority, the most senior Justice in the majority has the authority to assign writing the opinion of the court. In Masterpiece Cakeshop, Chief Justice Roberts was a part of the majority and assigned writing the opinion of the court to Justice Kennedy. They were joined by Justices Breyer, Alito, Kagan, and Gorsuch. Often, a Justice in the majority will agree with the outcome of the case, but not with the majority’s reasoning for it. That Justice may write a concurring opinion, which can be joined by other Justices. Here, Justice Kagan filed a concurring opinion in which Justice Breyer joined. Justice Gorsuch filed another concurring opinion, joined by Justice Alito. Justice Thomas wrote an opinion concurring in the judgment, but only concurring in part as to the majority’s rationale. Any Justice who disagrees with the majority judgment can write a separate dissenting opinion. Here Justice Ginsberg, who was joined by Justice Sotomayor, filed a dissenting opinion.
Often, the opinions reference each other, each Justice arguing their reasoning in comparison to another’s. The following sections briefly describe the main points of each opinion and illustrate how the Justices agree and disagree with each other.

 

 

Majority Opinion:

 

Written by J. Kennedy; Joined by JJ. Roberts, Breyer, Alito, Kagan, Gorsuch

“While it is unexceptional that Colorado law can protect gay persons in acquiring products and services on the same terms and conditions as are offered to other members of the public, the law must be applied in a manner that is neutral toward religion.” Id. at 37. The commissioners made hostile comments about Mr. Phillips’ faith, casting doubt on the fairness and impartiality of the Commission’s adjudication of the case. Justice Kennedy compared this case to another where other bakers prevailed before the Commission despite refusing to create a cake for a client (because it depicted anti-gay messages, which the bakers opposed) while being willing to sell other products with a different message to the same customers. The cases are all too similar, he argues, and yet the Commission reached opposite decisions.

 

Concurrence:

 

Written by J. Kagan; Joined by J. Breyer

“[A] proper basis for distinguishing the cases was available—in fact, it was obvious.” Id. at 50. The three bakers, Justice Kagan argues, would have denied making the anti-gay cake for any customer, regardless of his religious beliefs. However, Mr. Phillips would have created a wedding cake for an opposite-sex couple, but refused to create one for the same-sex couple. Nevertheless the commission made their decision with hostility and bias.

 

 

Concurrence:

 

Written by J. Gorsuch; Joined by J. Alito
Pushing back against the Kagan and Ginsberg opinions, Justice Gorsuch argues that the different bakers’ cases were legally almost identical and should have resulted in the same determinations. He argues that the Commission treated them differently because they deemed Mr. Phillips’ beliefs offensive. The courts should not be deciding what is offensive. “[T]he place of secular officials isn’t to sit in judgment of religious beliefs, but only to protect their free exercise. Just as it is the ‘proudest boast of our free speech jurisprudence’ that we protect speech that we hate, it must be the proudest boast of our free exercise jurisprudence that we protect religious beliefs that we find offensive.” Id. at 55.

 

Concurrence:

 

Written by J. Thomas; Joined by J. Gorsuch Justice Thomas addresses the freedom of speech argument that Mr. Phillips made. He believes creating a custom wedding cake for a couple is “expressive conduct” and should therefore be protected by the First Amendment. “States cannot punish protected speech because some group finds it offensive, hurtful, stigmatic, unreasonable, or undignified.” Id at 65.

 

Dissent:

 

Written by J. Ginsberg; Joined by J. Sotomayor

Justice Ginsberg argues that neither the commissioners’ statements about religion nor the commission’s prior treatment of other bakers amounts to hostility towards religion. The Court’s decision is therefore unjustified. She argues that the other bakers refused to make an offensive cake because of the cake itself, but that Mr. Phillips refused to bake the wedding cake because of their sexual orientation.

 

Precedential Value of Concurring and Dissenting Opinions

 

While lower courts must follow the Supreme Court’s majority opinion (under stare decisis), there are times when a concurring opinion, and even a dissenting opinion, can influence future decisions and the development of law. Overtime, the view of the courts might therefore shift drastically.

 

As for the Masterpiece Cakeshop case, it will take careful consideration by lower courts of the decision as they apply it to similar cases. Courts will need to balance applying the law in a manner that is neutral towards religion while protecting people from discrimination.



Can Crypto-Currency Revolutionize the Music Industry?


It was only a matter of time before cryptocurrency [1] pervaded the music industry.  The proliferation and potential applications of blockchain seem to be the perfect fit for the challenges struggling musicians face.  While musicians are the creators of their art, it’s the record labels that distribute the music who tend to own the songs.  It is for this reason Paul McCartney has now been fighting for 40 years for the rights to The Beatles albums.[3]  As technology evolves, some crafty music executives have been devising new ways for musicians to protect and sell their songs.

 

Paul McCartney and Michael Jackson, Can Crypto-Currency Revolutionize the Music Industry?
Paul McCartney and Michael Jackson from 1983—before McCartney sold Jackson a significant amount of the rights to The Beatles Catalog 

 

The Crypto Solution

 

Hakim Draper, cofounder of Boogie Shack Music Group, has been creating a new means for every artist in the music industry to have their very own digital currency.  Boogie Shack has teamed up with Tao Network, a blockchain-based content distribution platform for the music industry, and plans to use XTO tokens (XTO = Tao Network’s abbreviation for it’s cryptocurrency) to create a unique currency for music artists.  Each artist will be able to sell rights to their songs in exchange for XTO tokens.[4]

Tao Network’s Logo for their Crypto-Currency, the currency itself is also referred to as XTO
Tao Network’s Logo for their Crypto-Currency, the currency itself is also referred to as XTO

 

The potential for musician’s intellectual property (IP) to be converted into monetized data will serve as a direct pipeline between artists and their fans.  Artists and fans may very well collaborate on songs, merchandising, and tours, meaning the level of fan involvement will directly correlate to an artist’s success.  The more artists rely on other funding sources, the more of their rights they are forced to give away.  This has the potential to be a great step forward for artists in the music industry assuming that the fans who support these artists using cryptocurrency will have the artist’s best interests in mind.  It should also be noted that cryptocurrencies such as XTO—especially in their early phases with limited funding—are controlled by a very small number of people who could potentially thwart/control the artist.  It should also be noted—even despite all the traction it has been gaining—cryptocurrency is not regulated by the SEC, so it is new ground that many are skeptical about.  There has been no legal entity or other organizational form that governs and protects the ongoing developments and ensures fair decision-making for cryptocurrencies in the United States.[5]

 

Current Issues in the Music Industry

 

Most issues stem from the complexities around who “owns” a song.  Ownership is critical as it secures the right to royalties for any use of the song for the owners fortunate enough to be royalty holders.[6]  As we are in the year 2018, it’s not surprising that streaming has emerged as the most important source of incoming royalties representing 62% of royalty revenue in 2017 (worth about $5 billion).  Record companies tend to walk away with the lion’s share of revenue, while only the most popular artists and songwriters gain relatively small sums of money relative to the popularity of their output.  To put it in perspective, struggling artists have complained that a million listens on a streaming service are worth about $100 to the writer of the song once the music industry has taken its cut.[8]

 

Other Music Cryptos are starting to Join the Mix

 

There are a few blockchain-based solutions that exist for paying musicians via crypto-currency.  Bitmark—a crypto startup that uses blockchain technology to enable property rights for digital assets—has partnered with Asia’s largest streaming platform KKBOX to create a mechanism for artists to see instant payments when their songs are streamed on the service.[9]

 

Another huge startup crypto contender in the blockchain world goes by the name of Vezt.  The Los Angeles-based blockchain startup brought in its funds via initial coin offering (ICO) worth $4.7 million, which it’s planning to use to launch its royalties management platform.[10]  The team at Vezt has already landed the rights to some 30 songs from music icons: Dr. Dre, Kanye West, Jay-Z, John Legend, and Drake.

 

The platform allows the rights holder to a song to sell their portion of the rights through an initial song offering (ISO).  Artists and rights holders can then choose how much they would like to raise from a fraction of their song, set the reversion term and set a date for the ISO.[11]  Rights are purchased with the tokens issued by Vezt.  Musicians are paid with the funds from the crypto offering (after Vezt takes its cut), and the digital rights to the song move to the buyer’s Vezt digital wallet.  The song rights information is encoded on Vezt’s blockchain, and the startup will distribute purchaser royalties and allow users to store profits on the platform.[12]  It should be noted that changing those profits out of Vezt tokens and into fiat currency, or even another form of digital currency, comes with a fee of at least 5%.

 

Music Industry and Cryptocurrency, Can Crypto-Currency Revolutionize the Music Industry?

 

Where do Music Cryptos Currently Stand?

 

Vezt still has a long way to go before it makes a name for itself among the ASCAPS and the BMIs.  Drake and J. Cole’s, “Jodeci Freestyle” (strong verse from a younger Cole very Born Sinner) became the first song to ever be featured as an ISO as a Beta test for Vezt last November.[13]  However, Drake only offered 10% of the publishing of the song, not the actual master, which means artists are still hesitant to go all in on the platform.[14]

 

At this stage it is an interesting idea, but one that is not likely to make a lot of money for either artists or investors in the near future until it gains some serious traction.  While the current generation of musicians may not become fully acclimated with crypto currency, it is most certainly likely to only gain in popularity among the younger generations.  In other words, as musicians from younger generations become pertinent, IP will be more commonly valued as monetized data.  Thus, musicians and the music industry alike are looking forward to seeing how monetizing data will impact (and potentially revolutionize) the Intellectual Property industry as a whole.

 

[1] A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

[2] A digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded chronologically and publicly.

[3] Jonathan Stempel, Paul McCartney settles with Sony/ATV over Beatles music rights, Reuters Entertainment News (June 30, 2017), https://www.reuters.com/article/us-people-paulmccartney/paul-mccartney-settles-with-sony-atv-over-beatles-music-rights-idUSKBN19L2ET.

[4] Lisa Abeyta, How Cryptocurrency and Blockchain Will Revolutionize the Music Industry, Inc.com (November 17, 2017), https://www.inc.com/lisa-abeyta/how-cryptocurrency-blockchain-will-revolutionize-music-industry.html

[5] Stuermer, M., Abu-Tayeh, G. & Myrach, T. Sustain Sci (2017) 12: 247. https://doi.org/10.1007/s11625-016-0412-2.

[6] Id.

[7] Id.

[8] Id.

[9] Ian Allison, Bitmark partners with Asia’s biggest streaming service KKBOX for music rights and royalties, International Business Times (January 11, 2018), http://www.ibtimes.co.uk/bitmark-partners-asias-biggest-streaming-service-kkbox-music-rights-royalties-1654831.

[10] See https://vezt.co/.

[11] See https://vezt.co/.

[12] Id.

[13] Max Greenwood, Vezt Wants You to Buy Rights to Drake’s Music with Blockchain, Techvibes (November 15, 2017), https://techvibes.com/2017/11/15/vezt-wants-you-to-buy-rights-to-drakes-music-with-blockchain-technology.

[14] Id.



Playing Politics with the Internet – Dangerous game with Net Neutrality


Background

 

The idea behind the concept of Net Neutrality arose in the early 2000s, when, inter alia, the High Tech Broadband Coalition (“HTBC”) filed comments before the Federal Communications Commission (“FCC”).  At the time, the HTBC urged the FCC to “vigilantly monitor” the provision of internet services to consumers to ensure rights to access content of their choice.  

 

Today the matter has, to a great extent, become a political battle largely drawn along ideological/party lines.  Nonetheless, the issue remains an important one that should not be ignored, especially in today’s world where access to the internet is essential to daily personal and business life.  

 

The regulations, put in place by the Obama administration in 2015, enshrined the principle of net neutrality in U.S. law.  The basic tenet of Net Neutrality is that Internet Service Providers (“ISPs”), like ComCast, Spectrum or Verizon, should treat all internet traffic ‘traveling’ through their infrastructure to the end consumer in the same manner.  Essentially, Net Neutrality ensures that these ISPs act as mere conduits to data that travel between the content provider/originator and the end consumer.   

 

The argument for, and against, net neutrality

 

Some of the initial proponents of Net Neutrality were content providers, such as Amazon and Google, who put forward the view that regulation was needed to ensure broadband providers were not unfairly, or otherwise, prioritizing the internet.  It was argued that such prioritization would lead to consumers receiving substandard service and experience, especially when the providers themselves were competing in the provision of similar services.  

 

Since these initial days, the arguments for net neutrality has gained widespread support, amongst them from the American Civil Liberties Union (ACLU).  They argue that there is no guarantee the internet will remain a free and open medium should Net Neutrality be taken away.  Rather, they argue, the pursuit of profit and corporate policies, may favor the monitoring and playing favorites to what individuals see on the internet and/or the quality of their connection.  There were well known instances in the past where AT&T interfered by censoring a rock star’s political speech and Comcast decreasing the quality of the internet services to those who use BitTorrent programs.  The ACLU also cites to an occasion where a Canadian Wireless provider, Telus, blocked its users from accessing the website of a Labor Union that was on strike against Telus.

 

The repeal of Net Neutrality concerns are well-founded.  In other jurisdictions, where net neutrality laws were not to the standard set forth by the Obama Administration, ISPs have been experimenting with plan offerings of piecemeal media and data offerings.  

 

In Portugal, with no net neutrality, internet providers are starting to split the net into packages.  In Portugal, mobile carrier MEO offers regular data packages, but it also offers, for €4.99 a month, 10GB “Smart Net” packages.  One such package for video provides 10GB of data exclusively for YouTube, Netflix, Periscope and Twitch, while one for messaging bundles six apps including Skype, WhatsApp and FaceTime.

 

Net neutrality, Internet service provider
European example of possible aftermath of net neutrality repeal

 

In New Zealand, Vodafone offers a similar service: for a daily, weekly, or monthly fee, users can exempt bundles of apps from their monthly cap.  A “Social Pass” offers unlimited Facebook, Instagram, Snapchat and Twitter for NZ$10 for 28 days, while a “Video Pass” gives five streaming services – including Netflix but not YouTube – for $20 a month.

 

However, when discussing the issue of Net Neutrality, it should not be discussed without analyzing the arguments of the ISPs outside of the political prism. The reality is the provision of internet services to data hungry consumers is an expensive endeavor.  Hence, the reason why common carriers, such as telecom and now internet service providers, have been traditionally allowed a natural monopoly.  High entry costs and barriers to entry meant only a few large companies are able to provide a service to the end consumers.  The present composition of FCC, trying to undo (or palm off the policing of the internet to the FTC) argue that since 2015, when Neutrality regulations came into force, investment in broadband infrastructure has diminished.  This in-turn, they argue, would mean areas where broadband services are unavailable or less available would fall further behind in infrastructure investments as the revenue streams for the providers are harder to come by.  

 

Conclusion

 

Thus, it is clear that the debate about Net Neutrality is a serious and could decide the future of America’s superhighway.  Decisions on such a wide ranging and important subject matter should be taken after careful consultations with all parties concerned and devoid of the toxic political climate.  This issue, effectively, if not decided properly has the potential to adversely affect America’s edge in innovation and competition.  The vote is planned for Thursday, December 14, 2017 and the net neutrality repeal proposal is expected to pass along party lines.



The first time that you need a corporate lawyer?


One thing that many new business owners don’t realize, is that they also should make sure that they have the right legal assistance for their business. They are waiting until it is too late, or when they desperately need some assistance, before they are starting to look for legal help.

 

Corporate Lawyers, Best corporate lawyers nyc

 

You need to make sure that you know that you should consider hiring a corporate lawyer when you are going to start a new business. This is just making things easier when you have legal assistance ready at hand, for when the business might need one. To hire legal assistance, you need to make sure that you know what to look for in hiring the best in the field.

 

The law firm with the most experience

 

You should consider hiring the law firm that has the most experience in the corporate world. You don’t want to hire just the first and best law firm that you can find, and they don’t even have experience in businesses.

 

Asking them about their experience in assisting businesses is essential. Especially, if you are looking to hire a business litigation lawyer for your business.

 

The attorney needs to have a knowledge about your business

 

corporate lawyer doesn’t always have the right knowledge for the type of business that you have or that you want to start. This can mean that the legal assistant will give you the wrong advice and make your problems just bigger and not assisting you in getting rid of the law problems that you might have.

 

You should make sure that you are asking a couple of questions about your type of business, before you are going to decide if this is the law firm that you want to hire for legal problems in your business.

 

Hiring the one that is offering the best fees

 

Different business litigation lawyers offer different fees. Fees that you need to pay on a monthly basis or fees that you need to pay when you are in need of a lawyer.

 

You should ask the lawyer about the fees that he is asking and if you are going to pay per case or per month to use his services. You should make sure that the fee he is asking is going to work for you and your business.

 

Don’t wait until you need a lawyer before you are hiring one

 

You shouldn’t wait until you need the services of a corporate lawyer before you start looking for one and hiring a lawyer. This is going to make the risk of hiring someone that might not be the best for your business, higher.

 

The more time you have to find a lawyer, the better the change that you are going to find the best possible law firm that is offering the best prices and fees.

 

Take your time in hiring the best legal assistance for your business

 

Even if you need to hire a business litigation lawyer as soon as possible, you need to make sure that you are taking your time to search and hire the best possible one. The less research you are going to do, to find the best assistance possible. Don’t wait until your business have a problem before you are going to look for a law firm. The sooner you are looking, and the more thorough you are going to be in searching for your attorney the better assistance you are going to have.

 

People that aren’t taking their time in searching for a law firm, are ending up regretting their decision. There are different ways that you can search for a law firm, and you need to ask around what law firm other businesses are using.

 

When it comes to hiring a corporate lawyer, you need to make sure that you know all these things before you are considering hiring a law firm. Many business owners wait until they encounter a problem before they start looking for legal assistance. When you are taking your time and making sure that you are hiring the best one, the better the change that you are going to have one of the best lawyers in town that will assist you in all the legal issues that your business might came across.

 

 

 

 

 

 



Graffiti: Legal or Illegal?


In the rapidly changing world of Intellectual Property Law, street art protection is less commonly discussed than that of other innovative creations.  Street art is somewhat ambiguous in its meaning.  It is common to associate street art with the graffiti spray-painted tags on a building or subway.  However, actual street art is something created with more depth.  Legally, the distinction between permanent graffiti and art is permission.  Street art becomes vandalism when that permission to publicly paint is not granted.[1]  Because of the complexity of public art, the amount of protection warranted to street art is unclear.  Graffiti law is not yet a legal practice; however, graffiti-related disputes have been stirring across the country.[2]  

 

Graffiti: Legal or Illegal?
Unauthorized graffiti name tagging on government property is vandalism, as seen here on a NYC transit train

 

In a case close to home, 5Pointz graffiti curators have been wrestling with building owners over their famous murals being torn down without notice in Long Island City, New York.[3]  5Pointz, the outdoor art exhibition once praised as an international “graffiti mecca,” is undergoing construction as it transforms into two residential high-rises with luxury apartments.[4]  Strikingly, the apartments will keep the 5Pointz name.  The newly constructed buildings will showcase street art-style decorations in memory of the destroyed exhibit, much to the dismay of original 5Pointz artists.  The building may even display replicas of 5Pointz if the artists grant permission.  That may be unlikely, though, considering their adversarial stance against the building owners.  

 

Christopher Wallace, Biggy, BIG, Notorious BIG
The “RIP wall” at 5Pointz in Queens, NY paid tribute to lost iconic figures, like Notorious B.I.G.

            

graffiti art
5Pointz name behind the reception desk of the new luxury apartment building

 

The legacy of 5Pointz began with curator Jonathan Cohen in the early 1990s.[5]  Nearly three decades ago, the site was merely made up of unused artist studios.  So, Cohen asked the building’s owners, Jerry and David Wilkoff, for permission to paint on the walls of the buildings.[6]  After agreeing to the artist’s use, Cohen went to work and, over time, local and international artists joined him, turning the buildings into the colorful outdoor art exhibit it came to be known as over time.[7]

 

5Pointz graffiti
The 5Pointz graffiti mecca stood tall and colorful before its demolition

 

The building owners were issued a permit on August 21, 2013 by the City Planning Commission to convert the 5Pointz buildings into high rise apartments.  On October 10, 2013, Cohen and other aerosol artists sued the owners of the buildings that housed 5Pointz to prevent their works’ destruction, asserting VARA (Visual Artists Rights Act) and common law tort claims in the Eastern District Court of New York.  In the case of Cohen, et al. v. G&M Realty, L.P., the court denied the artists’ request for injunctive relief.[8]  Despite the suit, the 5Pointz artwork were quickly whitewashed in one night, erasing all artwork to allegedly prevent the property from being able to claim landmark status.  The artists accused the owners of deliberately whitewashing the art so rapidly in an attempt to sabotage their plan to get the building landmarked because they had already prepared over 20,000 landmark forms for submission to the Landmarks Commission that were collected during a rally several days before the destruction.  The stigma behind graffiti being an act of vandalism is blurred when building owners consent to having street art on their property, and then forcefully remove it without giving the artists an opportunity to preserve their work.

 

Twenty-three artists had accused Jerry Wilkoff of removing the murals without giving the artists a fair opportunity to remove and preserve their work, or even the minimum notice required by law.[9]  In March 31, 2017, Senior District Judge Frederic Block ruled against the real estate developers, who made a motion to dismiss the artists’ third and final complaint.  Judge Bloc stated that: “For VARA, the plaintiffs would have no right to prevent 5Pointz’s destruction by its rightful and legal owner; hence, the plaintiffs’ “moral rights” to prevent another’s disposition of his property arise purely under VARA.  Because the plaintiffs’ conversion and property damage claims wholly depend on the viability of their VARA claim, the Court finds them to be fully preempted.”[10]  This significant legal victory for the artists is meaningful for the entire art community because the judge is allowing the case to go in front of a jury who may be more sympathetic to the wronged artists than to the real estate owners and developers.[11]

 

Cohen and his fellow artists asserted that their street art is protected under VARA, a federal act that grants visual artists limited rights over visual works of art they created but do not own, and thus they are entitled to monetary damages for the destruction of their visual works of art.[12]  VARA offers limited protections to only visual works of art.  A “work of visual art” is:

 

(1) a painting, drawing, print, or sculpture, existing in a single copy, in a limited edition of 200 copies or fewer that are signed and consecutively numbered by the author, or, in the case of a sculpture, in multiple cast, carved, or fabricated sculptures of 200 or fewer that are consecutively numbered by the author and bear the signature or other identifying mark of the author.[13]

 

Evidently, the 5Pointz street art exhibition can be classified as a visual work of art because the murals were spray painted at the site and signed by the artists, and Judge Frederic Block agreed.  The developers unsuccessfully argued that the rights warranted by VARA were “narrow and inapplicable given that, while the artists are well-known, the works are not.”  

 

The judge ruled that the evidence provided by both developers and artists on VARA claims were sufficient to allow this case before a jury.  VARA states:

 

(a) Rights of Attribution and Integrity.—Subject to section 107 and independent of the exclusive rights provided in section 106, the author of a work of visual art—

(1) shall have the right—

(A) to claim authorship of that work…

(3) subject to the limitations set forth in section 113(d), shall have the right—

(A) to prevent any intentional distortion, mutilation, or other modification of that work which would be prejudicial to his or her honor or reputation, and any intentional distortion, mutilation, or modification of that work is a violation of that right, and

(B) to prevent any destruction of a work of recognized stature, and any intentional or grossly negligent destruction of that work is a violation of that right.

 

(b) Scope and Exercise of Rights.—

Only the author of a work of visual art has the rights conferred by subsection (a) in that work, whether or not the author is the copyright owner. The authors of a joint work of visual art are co-owners of the rights conferred by subsection (a) in that work.

 

(c) Exceptions.—

(1) The modification of a work of visual art which is a result of the passage of time or the inherent nature of the materials is not a distortion, mutilation, or other modification described in subsection (a)(3)(A).

(2) The modification of a work of visual art which is the result of conservation, or of the public presentation, including lighting and placement, of the work is not a destruction, distortion, mutilation, or other modification described in subsection (a)(3) unless the modification is caused by gross negligence.

(3) The rights described in paragraphs (1) and (2) of subsection (a) shall not apply to any reproduction, depiction, portrayal, or other use of a work in, upon, or in any connection with any item described in subparagraph (A) or (B) of the definition of “work of visual art” in section 101, and any such reproduction, depiction, portrayal, or other use of a work is not a destruction, distortion, mutilation, or other modification described in paragraph (3) of subsection (a).

 

(d) Duration of Rights.—

(1) With respect to works of visual art created on or after the effective date set forth in section 610(a) of the Visual Artists Rights Act of 1990, the rights conferred by subsection (a) shall endure for a term consisting of the life of the author.

 

(e) Transfer and Waiver.—

(1) The rights conferred by subsection (a) may not be transferred, but those rights may be waived if the author expressly agrees to such waiver in a written instrument signed by the author…[14]

 

Interestingly, real estate and copyright law seem to intersect where VARA applies, and so real estate owners, like those of the 5Pointz site, need to be aware of its protections.  Title 17 of the United States Code, Section 106A(a)(1)(B)(3)(A) provides that the author of a visual art has the right to prevent intentional mutilation of a work, and any such mutilation is a violation of that right.  Undoubtedly, the developers have violated the artists’ VARA-granted right.  None of the statutory exceptions apply to the developers.  The works were not naturally distorted over time or modified for improvement.  Furthermore, 5Pointz comprised of original visual works based on each artist’s own perception; they were not reproductions or depictions of other works, so the third exception does not apply either.  VARA grants visual artists these rights for the duration of the artist’s life, unless that right has been waived in a written instrument and signed by the artist, and there is no evidence of such waiver by the artists here.  

 

While some perceived Judge Block’s ruling against the developers as an “unexpected turn” for the graffiti artists, it’s almost clear-cut that VARA is written in the artists’ favor.  Despite the undefined realm of graffiti law, VARA is not so ambiguous as to the protections it warrants; nonetheless, it is narrowly construed.  With the support of articles on 5Pointz, corporate and worldwide recognition, and “aerosol art” experts’ testimonies, it seems quite feasible that a jury will sympathize with the 5Pointz artists who, with the permission of the owners, worked on the demolished buildings.  In the meantime, the art world awaits and anticipates the trial that turn out to be a landmark case for street artists in need of protection for their recognized works.

 

[1] Nicole Martinez, Street Art or Vandalism? Art Law Journal (2017).

[2] Marie-Andree Weiss, “Spray” the Word: Graffiti Law is a New Legal Niche, The 1709 Blog (2016), http://the1709blog.blogspot.com/2016/11/spray-word-graffiti-law-is-new-legal.html (last visited Aug. 4, 2017).

[3] Claire Voon, A Glimpse Inside the Street Art–Themed 5Pointz Condos, Hyperallergic (2017), https://hyperallergic.com/386244/a-glimpse-inside-the-street-art-themed-5pointz-condos (last visited Aug. 4, 2017).

[4] Corey Kilgannon, 5Pointz Graffiti Artists Whose Works Were Erased Will Get Day in Court, The New York Times (2017), https://www.nytimes.com/2017/04/09/nyregion/5pointz-graffiti-artists-whose-works-were-erased-will-get-day-in-court.html (last visited Aug. 4, 2017).

[5] Bruce Wallace, Remembering 5Pointz: A Five-Story Building That Told Plenty More, NPR (2013), http://www.npr.org/2013/11/21/246549375/remembering-5pointz-a-five-story-building-that-told-plenty-more (last visited Aug. 4, 2017).

[6] Jessica Meiselman, 5 Pointz Graffiti Artists Score Major Win in Suit against Developers, Artsy (2017), https://www.artsy.net/article/artsy-editorial-5-pointz-graffiti-artists-score-major-win-suit-developers (last visited Aug. 4, 2017).

[7] Leonard Greene, Two high-rise towers will pay homage to graffiti mecca 5Pointz, NY Daily News (2017), http://www.nydailynews.com/new-york/high-rise-towers-pay-homage-graffiti-mecca-5pointz-article-1.3207741 (last visited Aug. 4, 2017).

[8] See Cohen v. G & M Realty L.P., 988 F. Supp. 2d 212 (E.D.N.Y. 2013).

[9] Laurel Babcock & Bob Fredericks, Graffiti mecca 5 Pointz erased overnight, New York Post (2013), http://nypost.com/2013/11/19/5-pointz-graffiti-erased-in-overnight-paint-job/ (last visited Aug. 4, 2017).

[10] Cohen v. G&M REALTY LP, Case No. 13-CV-05612 (FB) (RLM) (E.D.N.Y. Mar. 31, 2017), https://scholar.google.com/scholar_case?case=13462150384806350539&q=COHEN+V.+G%26M+REALTY+L.P.&hl=en&as_sdt=3,33&as_vis=1 (last visited Aug 24, 2017).

[11] Corey Kilgannon, 5Pointz Graffiti Artists Whose Works Were Erased Will Get Day in Court, The New York Times (2017), https://www.nytimes.com/2017/04/09/nyregion/5pointz-graffiti-artists-whose-works-were-erased-will-get-day-in-court.html (last visited Aug. 4, 2017).

[12] Cohen v. G&M REALTY LP, Case No. 13-CV-05612 (FB) (RLM) (E.D.N.Y. Mar. 31, 2017), https://scholar.google.com/scholar_case?case=13462150384806350539&q=COHEN+V.+G%26M+REALTY+L.P.&hl=en&as_sdt=3,33&as_vis=1 (last visited Aug. 24, 2017).

[13] See 17 U.S.C. § 101 (1994).

[14] Id.



Intellectual Property Implications for the Booming E-sports Industry


The term e-sports is short for electronic sports and has come to be associated with describing video games competitions.  Much like traditional sports, there are amateur and professional scenes for the sports in question.  There are also teams and contracts, leagues, and sponsorships.  However, e-sports are very early in their lifespan and thus the infrastructure is not as well developed as traditional sports in many ways.  Visas, for example, are routinely denied to competitors to go to events because they do not fit the traditional definition of an athlete or businessman.  Specific contracts between players and teams are kept secret with unethical strategies being used.  The basic terms of these contracts also are slanted heavily in favor of the organization, with players unable to argue for better conditions.  Many of these issues do not exist for traditional sports; contracts in the NFL for example are highly regulated, teams must abide by clearly defined rules, (including forced buyouts in the NBA, such as what happened to the L.A. Clippers) and rarely are athletes denied visas to compete.

 

This lack of infrastructure, direct precedent, and general lack of legal knowledge on both the parts of players, organizations, and to an extent the companies, is likely the cause behind all of the issues that exist in the e-sports scene.  It must be stressed that there is very little scholarly research done about e-sports, even less so in legal scholarship.  For many of the issues discussed in this blog post, very few have any research of any sort conducted and most of the sources will be press articles that are not peer-reviewed or under any formal scrutiny.  In this sense, the issue of lack of infrastructure also extends to the scholarship itself.  This blog post seeks to be an introduction to the field of exports, while highlighting some potential issues that may exist in the field regarding copyright and trademarks.

 

E-sports has been growing year after year in its size and has never been bigger.  In terms of viewership the largest e-sports event of 2015 was the League of Legends LCS 2016 with over 43 million unique viewers and a peak of 14 million concurrent viewers worldwide.  The prize-pool for the event was $6.7 million USD.  The second largest event, called the International 2016, an e-sports event featuring the game DotA 2, had a peak viewership of 8 million  and an $20 million USD prize pool.  Championships matches for LCS and the International have filled up entire sports stadiums and smaller events still are able to occupy large convention spaces.  These statistics are not very surprising in light of the fact that over 150 million Americans play video games, with more than half of all households owning some sort of dedicated games console and 40% of Americans responding that they play three hours or more of video games each week.  Of course, these statistics are not directly translatable to e-sports because the study did not specify between e-sports titles and non-e-sports titles.  The study for instance, did not differentiate between individuals who played video games on mobile devices (phones, tablets) as opposed to traditional gaming devices (portable, home, personal computer).  Of the largest e-sports titles in terms of revenue, sponsorship, and prize money, the vast majority of them are only available on personal computer (League of Legends, DotA 2, Starcraft II, Counter-Strike Global Offensive are all personal computer exclusive games), so it stands to reason that there may not be direct correlation between the figures.

 

Nevertheless, the size of the e-sports industry is hard to deny, even when it is evaluated separately from the gaming industry as a whole.  According to SuperData research, the e-sports industry generates around $748 million USD in sponsorships, pro-players, ticket sales, gambling, merchandising, ticket sales, and other direct revenue.  This figure does not include game sales, sales of downloadable content, or microtransactions; (in game payments which can offer direct benefits ingame, most often in mobile games such as the ability to purchase extra plays in Candy Crush) it only looks at the revenue that e-sports directly generates through competitions).

 

Unlike traditional sports, e-sports themselves are software that some entity has copyright control over.  No individual or entity owns football for instance, so theoretically one could organize a football tournament and no one could stop the tournament on the basis of the organizers not having the rights to the game.  Originally, Blizzard Entertainment (the creators of Starcraft) found it more difficult to restrict Korean broadcasting of games and tournaments.  When the successor to Starcraft, Starcraft 2 was released, the game could not be played without a direct connection to Blizzard, thus allowing Blizzard to control licensing more directly. This mistake has not been repeated by League of Legends, in which the game cannot be played offline and thus allowing for Riot to have complete control over the game.  Interestingly enough, both Counter-Strike Global Offensive and DotA 2 can be played on local area network (allowing for non-internet multiplayer gameplay on multiple computers) and are both owned by Valve Entertainment.  However, this likely ties into Valve’s business strategy with these two games, which relies heavily on community generated content and will be detailed later in the paper.

 

Proprietary control is very important when it comes to e-sports.  Many gaming companies have learned from the mistakes of Blizzard Entertainment, who was unable to control KESPA (Korean Esports Association, which was responsible for organizing pro players, granting licenses, scheduling showtimes on Korean television, etc.) for many years and as a result did not receive a portion of the direct revenue generated from the e-sports scene for Starcraft Brood War.  For the most part, now all of the largest tournaments are sponsored and funded by the companies themselves.  The International is funded by Valve, LCS is funded by Riot, Starcraft II is funded by Blizzard and they sublease broadcasting rights to several different Korean companies.  Nearly all of these games have their largest tournaments broadcast on Twitch.tv, an online streaming website that allows for people to watch gameplay footage in real time.  Because of the primarily online distribution of e-sports content (with the exception of South Korea) this furthermore allows the companies not to have to rely on other broadcasting companies to show their tournaments.  Indeed, streaming has become so lucrative that YouTube is beginning to expand their streaming capabilities for games.

 

Blizzard and Kespa reaching - e-sports

  (Blizzard and Kespa reaching an agreement regarding broadcasting rights)

 

Third party e-sports leagues are being brought into line, but instead of shutting them down they allow them to continue with a license.  A great example of this happening occurred with the Super Smash Brothers community.  In 2013, EVO was sent a cease and desist letter by a lawyer in Nintendo stating that they were not allowed to broadcast Super Smash Brother Melee.  However, after online backlash, especially considering that Melee had been a staple at EVO for years, Nintendo reversed the decision.  To this day, there are those who believe (like myself) that this decision was actually made in error, given that the decision was immediately reversed and no such decision was made before, there is a suspicion that the lawyer may simply have been new and didn’t know what he was doing.  Regardless, after the EVO 2013 incident, Nintendo started to reach out to tournament organizers and sponsored them.  In 2014 and 2015, Nintendo not only licensed broadcasting rights to MLG (Major League Gaming), EVO, APEX 2015 (the premier Smash tournament where all versions of the game are played) and many other leagues, but also sponsored the events, providing money, equipment, and promotion on their Twitter and Facebook pages.

 

complete sponsor list for EVO 2014 - e-sports

       (complete sponsor list for EVO 2014)

 

Leasing and sponsoring the tournament also had other benefits for Nintendo.  A fan-made modification to Super Smash Brothers Brawl, referred to as Project M, was very popular and featured in many tournaments.  However, because Project M was not a Nintendo product, not only did they not receive money from it (it was a free download, but the makers received donations) but it also created a product that could potentially compete with their products. Many users online noted that when they played Smash 4 for the first time that the game felt similar to Project M.  When Nintendo began to sponsor these tournaments, Project M disappeared from the event listings in its entirety, although this cannot be definitely linked to Nintendo, it is very likely that Project M’s omission was a stipulation by Nintendo for sponsorship.  In 2015, the makers of Project M would cease their development of the mod in its entirety, the reason they claim was not because they were targeted by any legal action by Nintendo but rather because they saw it as a potential hurdle in the future and wished to avoid it.

 

Third party leagues are becoming more valuable as well, as their production companies, industry knowledge, and connections make them very valuable to both investors and gaming companies.  It also allows for the company to have more control over their e-sports presence.  In 2015, ESL (Electronics Sports League) was acquired by a Swedish Media company for $87 million USD, because the company saw the worth in the future.  In 2016, MLG, (Major League Gaming) was purchased by Activision-Blizzard for a rumored $46 million USD in order to better promote their esports titles (which include Starcraft, Warcraft, Call of Duty, Heroes of the Storm, Hearthstone, etc.).  By absorbing the league, it is able to better control the tournament.  Another example would be in how Nintendo sponsors tournaments.  At these tournaments, the traditional commercial break, where an ad would be run on the streaming website (usually Twitch.tv) was instead replaced with Nintendo commercials and promotions. For example, Nintendo brought a setup of the then-unreleased game Splatoon for attendees to play a demo of at Apex 2015.  Greater company involvement and control allows for greater control of the message.

 

A potentially interesting issue that could have a large impact on the e-sports scene is the idea of copyrighting concepts and game mechanics.  It is well established in copyright law that you cannot copyright archetypes and settings, for example while you can copyright Spiderman, you cannot copyright the idea of a superhero who has spider-based powers in New York City. Although untested in the realm of video games however, it seems that this principle also applies to game mechanics.

 

e-sports

    (comparison of Dota 2 versus League of Legends) 

 

The U.S. Copyright Office statement on this matter seems pretty succinct. The Office states that the “methods of playing a game” are unprotected according to the statement and “similar methods” may be used. (https://www.copyright.gov/fls/fl108.pdf)   This is consistent with the history of several e-sports titles.  An example that highlights this is the history of DotA, League of Legends, Heroes of Newerth, Heroes of the Storm, and SMITE.  The original DotA was a fan modification for Warcraft III, developed by several enthusiasts.  Over time, the developer split up to pursue their own projects.  Guinsoo, one of the original developers, would end up creating League of Legends and Icefrog, another original developer, would be hired by Valve to create DotA 2.  Heroes of Newerth was a game that had similar game mechanics as the other two and also was derived from the original DotA.  With the popularity of what was then called DotA-style games arising, other companies jumped into the mix, Blizzard created a game known as Blizzard DotA, and Hi-Rez studios created SMITE.  All of these games retained elements from DotA, for example leveling, three lanes, items, 5 versus 5 games, etc.  However, even though these games all derived heavily from the same source and were very mechanically similar, there were very few legal problems between all of these companies.

 

In fact, the only lawsuit filed within the realm of DotA-style games was filed for trademark reasons, not copyright.  Blizzard, the owner of Warcraft III which is the game the original DotA was derived from, claimed that Valve could not commercialize the name because it belonged to the Blizzard community and would create confusion as to if DotA 2 was a Blizzard product.  The end result was that Blizzard conceded the rights to commercially use DotA to Valve while Valve conceded that non-commercial work (the original DotA for instance) could use the DotA name freely.  To that end, Blizzard changed the name of their game from Blizzard Dota to Blizzard All Stars, and the final name for the game was Heroes of the Storm.

 

As the newest medium to express creative ideas, video games have a long ways to go before significant legal findings are made about it.  And as far as e-sport goes, there will be a long time before the legal issue present within the field get any significant attention by legal scholars…certainly when more money is involved.  While it is true that the entirety of e-sports revenue generated worldwide is larger than that of the NBA, the field still needs more time to expand its audience beyond those who play video games and attract those who also do not.  In the meantime however, familiarizing oneself with the history and potential legal issues of e-sports will help any lawyer who wishes to get into video games related litigation in the future.  Video games are the next big frontier.

 

Although many legal issues, especially with e-sports, will be familiar to lawyers who are otherwise unfamiliar with video games (for example, players contracts or trademark law) there are many more potential issues that are unexplored and have potentially large ramifications.  Intellectual property (IP) lawyers will be at the forefront of this effort, as they are best suited for interpreting older statutes that never had video games in mind when they were written to be applied towards video games.  Already there is a growing number of lawyers involved in video games, whether it is the popular Video Games Attorney who gained notoriety by helping smaller studios sue larger companies or the legal divisions of Activision-Blizzard and other large companies.  Navigating this unknown frontier of IP law requires the guidance of an experienced IP attorney. 

 

For more information please visit our site: https://sewellnylaw.com/intellectual-property