Entertainment Law Archives – Southern California Law Review

Defining the Relationship: California’s Noncompete Laws and Exclusivity in the Acting Industry Leading Up to the 2023 SAG-AFTRA Strike

August 2024August 2024Katarina Ulich*

California is firm in its stance against post-term noncompete clauses. This Note examines early Hollywood and the historical and economic context in which talent contracts arose. It analyzes the shift in talent contracts from the harsher terms of the 1930s studio system to the modern terms which give more control to actors.

Exclusivity exists in both the film and television industry. However, the in-term and post-term treatment of exclusivity provisions and noncompetes has received conflicting treatment by California and Ninth Circuit Courts, suggesting that perhaps the California Supreme Court should weigh in on the matter as they did in 2008 with Edwards v. Arthur Andersen and articulate whether Section 16600 can apply to in-term noncompete and exclusivity provisions. While it is widely held that Section 16600 does not apply to in-term noncompetes, the holding in ITN Flix, LLC v. Hinojosa suggests that certain situations in the acting industry may trigger its application and deem an in-term noncompete invalid if unduly harsh.

Regardless, the ability of actors and unions to negotiate with studios for mutually beneficial terms has allowed common practices in entertainment contracts to shift over time without much recent legislation. This suggests that, while the applicable law will provide one side with bargaining power, negotiations and collective-bargaining agreements will largely continue to set the standards for common entertainment contract practices.

INTRODUCTION

From 2005 to 2010, American actress Katherine Heigl appeared in the hit ABC television medical drama, Grey’s Anatomy, as the supporting role of Dr. Izzie Stevens.¹ Simultaneous to her work on the television series, Heigl starred in films that would soon become classics of the 2000s, such as Knocked Up (2007), 27 Dresses (2008), and The Ugly Truth (2009).² By 2008, Heigl had been deemed the new “It Girl” of Hollywood by Vanity Fair as a result of her acting endeavors.³ Knocked Up had been a box office hit, and Heigl had taken home the 2007 Primetime Emmy Award for Outstanding Supporting Actress in a Drama Series for her television work on Grey’s Anatomy.⁴ Heigl had pursued a career in film while still appearing as a series regular on Grey’s Anatomy, rendering her a household name across the United States. Meanwhile, the lead of Grey’s Anatomy—Ellen Pompeo—had not appeared in a role outside of Dr. Meredith Grey since the series inception in 2005.⁵ While this could be attributed to personal choices, it may instead be the result of contractual differences between a series’s lead actress and a supporting actress, stemming from varying exclusivity terms. It is possible that Ellen Pompeo, as the lead role of Meredith Grey, was “contractually forbidden from acting elsewhere.”⁶ In 2018, Pompeo told The Hollywood Reporter, “I don’t get to do anything else, and that’s frustrating for me creatively. I make 24 episodes of TV a year, and as part of this deal, I cannot appear anywhere else.”⁷ While exclusivity terms can be frustrating to an actor,⁸ as demonstrated by Pompeo’s statement to The Hollywood Reporter, many studios view exclusivity as vital to production. Studios use exclusivity to coordinate production schedules and ensure talent’s availability as they invest time and money in the creation of a particular character.

In 2022, exclusivity terms could be freely negotiated in the entertainment industry when union actors were paid above an “exclusivity money break.”⁹ The exclusivity money break is a minimum salary bargained for by SAG-AFTRA,¹⁰ above which producers and talent can negotiate exclusivity freely. This would often result in producers paying substantial salaries for the exclusivity of top talent.¹¹ Meanwhile, union actors paid below the exclusivity money break (non-star talent) were restricted in their ability to grant exclusivity.¹² While these restrictions are discussed later in detail, actors in this latter non-star category who worked on a streaming show were often able to appear in feature films, as guests on other shows, and in commercials, yet they sometimes had to receive permission from studios in order to do so.¹³ Practical difficulties sometimes arose in the process of coordinating outside roles, as the actor’s main show would take scheduling precedence and restrict the actor’s ability to alter their appearance.¹⁴ This tension between actors, who often want the freedom to appear in additional roles, and studios, who face the challenges of coordinating production schedules and may have invested in an actor’s image, has led to debate in Hollywood surrounding the use of exclusivity provisions in talent contracts. Exclusivity, along with other issues concerning residuals and the use of Artificial Intelligence, contributed to SAG-AFTRA’s 2023 strike against Hollywood’s major studios, lasting 118 days from July to November of 2024 while new contract boundaries were negotiated.¹⁵ This Note will examine the contractual exclusivity terms leading up to the 2023 strike. The rise of online streaming has increased the demands placed on actors, as shorter series seasons contribute to more idle time for actors. The landscape is changing rapidly, resulting in the frequent renegotiation of terms and resulting standstills, exemplified by the 2023 SAG-AFTRA strike.

Exclusivity provisions are contractual terms that prevent an employee from working elsewhere during the term of their employment, resulting in the employee giving their undivided effort to the employer. Noncompete clauses are another set of contractual terms that also appear in talent contracts and typically restrict an employee from working for certain third-parties. Noncompetes may last for only the term of the employment, and thus be in-term restrictions, or they may last after the employee no longer works for the current employer, which is a post-term restriction.¹⁶

Arguments exist on both sides of the general debate around exclusivity provisions and noncompetes in the talent industry. Opponents argue that they hinder competition by restricting the free movement of talent and ideas.¹⁷ In the talent industry specifically, SAG-AFTRA has argued that exclusivity terms in actors’ personal service agreements are often used to “hold series regulars off the market and unable to work for unreasonably long periods of time”¹⁸ while a show is in an off period.¹⁹ SAG-AFTRA has noted that these exclusivity provisions were less burdensome when talent worked three quarters of the year on twenty episode seasons, but that the rise of online streaming platforms, year-round production cycles, and short seasons of thirteen episodes (or sometimes fewer) have left lower and mid-level actors short of work.²⁰ Some actors are “not being paid while on hold between seasons, but they’re also not allowed to accept other paying jobs. These contracts mean that actors often find themselves collecting unemployment, struggling to pay their bills and unable to build a career.”²¹ The arguments against exclusivity and noncompetes have received national attention.²² In 2021, President Biden issued an executive order attempting to limit the effect of noncompetes, authorizing the Federal Trade Commission (“FTC”) to “interpret noncompetition agreements as an unfair method of competition, and thereby declare them unlawful.”²³ SAG-AFTRA was “ ‘thrilled to see President Biden take steps to curtail the use of unfair non-compete clauses, which are a major problem for . . . actors . . . .’ ”²⁴

Conversely, proponents of exclusivity provisions and noncompetes argue that without them, employers have little incentive to invest in the development of their employees.²⁵ In the acting industry specifically, production studios have concerns regarding the coordination of “complex production schedules involving hundreds—or at times even thousands—of people [with the] talent’s availability.”²⁶ The California Chamber of Commerce argues that without exclusivity, talent contracts are far “less valuable, which will lead to a reduction in wages paid to actors.”²⁷ Charles Rivkin, Chairman and CEO of the Motion Picture Association, views exclusive employment agreements as the backbone of scheduling for film, television, and streaming productions: they “provide the certainty necessary for producers to finance, insure, plan for and complete major feature film, television and streaming projects, particularly those involving long-term story arcs. They assure writers and showrunners that characters developed in one season can be brought back for subsequent storylines.”²⁸ Further, studios note an interest in preserving the investment of “millions [of dollars] in developing and promoting a show [and its actors, and] don’t want to see the lead actor show up in another series on a rival network.”²⁹ A studio may seek to control the image of a particular actor to protect its franchise from actions which could negatively impact the performance of the franchise, and thus, the studio itself.

Section 16600 of the California Business & Professions Code (“Code”) acts as a per se ban on noncompete agreements in California, as it “does not permit non-compete clauses, even if they are reasonable in scope and purpose.”³⁰ While many states operate under reasonableness standards, enforcing noncompetes when they are reasonable in scope and duration,³¹ the California Supreme Court case Edwards v. Arthur Andersen is strong in both its language and policy rationale against the enforcement of post-term employment restrictions. Following the 2008 decision in Edwards, discussed later in this Note, any post-term employment restriction is likely to fail. Discussion around the Code has focused on Silicon Valley, where the ban on noncompetes has often allowed technology companies and start-ups to innovate rapidly as employees move from company to company. However, little attention has been paid to the application of Section 16600 in Hollywood, particularly to its recent extension by the Ninth Circuit to reach in-term agreements in the acting industry in ITN Flix, LLC v. Hinojosa.³²

This Note investigates noncompete agreements and exclusivity in the entertainment industry through the lens of Section 16600 and critically analyzes recent decisions involving the extension of Edwards to in-term noncompetes and exclusivity agreements in talent contracts. Historically, case law involving Section 16600’s ban on noncompetes has been limited to post-term employment restrictions. In the acting context, post-term noncompetes are those which restrict an actor’s employment options after they no longer work with a particular studio. However, a recent Ninth Circuit case (ITN) broadens the scope of Section 16600 to potentially invalidate in-term noncompete contracts that restrict an actor’s work, even if only for the duration of the employment contract. This Note discusses the Ninth Circuit’s decision, weighing the tension between exclusivity proponents and opponents to explore the extension of Section 16600 to in-term noncompetes and exclusivity clauses in the talent context.

Part I examines early Hollywood and the historical and economic context in which talent contracts arose. It analyzes the shift in talent contracts from the harsher terms of the 1930s studio system to the modern terms which give more control to actors. It provides a summary of common industry practices prior to the 2023 SAG-AFTRA strike. The agreements between SAG-AFTRA and major studios that led up to the strike are also explored, highlighting the prevalence of exclusivity while weighing the tension between its proponents and opponents.

Part II discusses Section 16600 and the significant 2008 California Supreme Court decision, Edwards v. Arthur Andersen, after which any post-term restriction on employment in California will likely fail.

Part III analyzes the possible extension of Edwards to in-term noncompete agreements and the changes that this extension may bring to exclusivity in the acting industry. To do so, it touches again on common exclusivity practices as well as in-term and post-term noncompete practices in the acting industry, while critically analyzing case law to explore how Section 16600’s extension to in-term noncompete and exclusivity provisions may bring unintended results. It concludes with a suggested theoretical legal standard that would consider an actor’s fame when analyzing exclusivity and noncompetes.

Part IV summarizes the case law findings and asks the California Supreme Court to weigh in on the conflicting lower court precedent, and the conclusion summarizes the findings from this Note.

I. HISTORY OF THE ENTERTAINMENT INDUSTRY

[T]he legal framework . . . in which all entertainment and media businesses operate is constantly challenged and in need of regular review and adjustment.

—Harold L. Vogel³³

A. The Economics of the 1930s Studio System

Shortly after film was introduced to the United States in the early 1900s, the major film studios realized there was immense potential for vertical integration and cost minimization in the film industry.³⁴ They quickly began to operate almost every stage of film production, from “production [and] distribution [to] exhibition.”³⁵ The West Coast (and Southern California in particular) emerged as the heart of this new and emerging studio system, as Hollywood was “far for the Trust enforcers to reach [and] . . . provide[d] low-cost nonunion labor and an advantageous climate and geography for filming.”³⁶ After the Great Depression, it was only “the companies with the most vertical integration . . . that survived,” further concentrating the control over the movie industry.³⁷ An incredibly “productive [and] efficient” synergy emerged as the major companies cooperated in “a ‘mature oligopoly’ ” with a significant share of the Hollywood market.³⁸

Vertical integration characterized this era of film production, with the major companies exerting control over large parts of the industry.³⁹ By the 1930s, this studio system led to stars signing “long-term contracts.”⁴⁰ While accompanied by cost minimization and efficiency, these contracts were often harsh and demanding, leaving little autonomy to actors.⁴¹ This early coordination of “studio operations [with] marketing strategies” brought “substantial [cost] savings [to] the studio [system.]”⁴² Exclusive contracts between stars and studios could last up to seven years, and in practice, even longer. ⁴³ Actors such as “Bette Davis and James Cagney were constantly suspended without pay by Warner Bros. for refusing roles.”⁴⁴ Actors who were suspended, such as Davis and Cagney, due to their “refus[al] to be loaned out to another studio or declin[ing of] a role . . . could be suspended without pay[, with the] length of the suspension . . . added to that of the contract,” extending contracts beyond seven years.⁴⁵

Early challenges to these contractual practices were unsuccessful, as demonstrated by Bette Davis’s 1937 lawsuit against Warner Brothers.⁴⁶ The same year as Davis’s unsuccessful lawsuit, California (home of Hollywood and longtime proponent of employee rights) enacted Section 2855 of the Code to limit the indefinite employment contracts often abused by studios.⁴⁷ Commonly referred to as the “Seven Year Rule,” Section 2855 “limits the term of personal service employment to seven years,” rendering any personal-service contract unenforceable past the seven-year mark.⁴⁸ This Section was tested in 1943, when Olivia de Havilland sued Warner Brothers.⁴⁹ The studio had refused to release De Havilland from her seven-year contract (despite the seven years lapsing) and claimed that her refusal to accept certain roles over the years had resulted in the addition of six months to her contract.⁵⁰ This practice of adding time to contracts was common in Hollywood, and these “suspension/extension” provisions (previously upheld in Bette Davis’s case) “could double the term of an actor’s contract.”⁵¹ De Havilland successfully argued that Warner Brothers was breaching its contract—as the contract was for seven years regardless of her refusal of certain roles—and violating labor law in doing so, as California had a statutory limit of seven calendar years on the enforcement of employment contracts.⁵² This marked the beginning of a new era of bargaining power for employees. This monumental decision applied “to more than just Hollywood[, as it] applied to every employee in California.”⁵³ While the extension provisions of De Havilland’s contract were deemed illegal in 1943, her concern around being held off the market is still shared by many series regulars today in the debate around exclusivity. An actor’s desire to pursue additional roles may conflict with a studio’s desire to coordinate production schedules.

Until the late 1940s, the major studios had maintained almost complete vertical integration of the film production process, evading various antitrust charges through government deals.⁵⁴ But in 1948, Paramount was found guilty of price-fixing by the Supreme Court in an antitrust lawsuit.⁵⁵ This case, widely known as the beginning of the end of Hollywood’s Golden Age, forced film studios to break up their vertically integrated practices.⁵⁶ A decree was signed by the major studios which “separated production and distribution from exhibition.”⁵⁷

This separation of exhibition from other links in the production chain played a transformative role in fundamentally shifting entertainment industry practices, replacing the long-term contracts of the 1930s with the disintegrated model of the 1950s.⁵⁸ With the collapse of the vertically integrated studio system, long-term contracts and standard seven-year exclusivity provisions were phased out and replaced by the freelance model that is still in place today.⁵⁹

Later, the emergence of television caused movie theater attendance to decline, leading studios to limit film production.⁶⁰ “[C]ontracted stars . . . became a hugely expensive overhead,” moving the industry into a freelance model as studios looked to cut costs.⁶¹ The relationship between studios and talent shifted as stars were given more freedom to choose their roles. Still, studios often incorporated exclusivity terms into deals as “series regular actors were busy working almost the entire year, with long production periods and short hiatuses that made their employment similar to other full-time jobs.”⁶² As film and series productions have grown in size and scale, studios argue that the exclusivity of actors involved in a production is essential to the coordination of various schedules and logistics. The ability to contract for the exclusivity of certain well-known actors may offer large incentives for a studio to invest in a production.⁶³

B. Modern Talent Contracts

Currently, Hollywood does not operate by the onerous long-term contracts that once existed, as modern talent contracts are no longer set at seven-year terms of exclusive work as they were in the 1930s. Instead, talent is cast specifically from project to project, often incorporating exclusivity clauses in both the film and television industry. Special contract terms, such as option contracts and pay or play contracts, raise similar issues to in-term exclusivity surrounding an actor’s ability to pursue other roles. The following paragraphs state the entertainment industry terms as they existed prior to the 2023 SAG-AFTRA strike.

1. Film

Film production begins and ends on (more or less) defined dates.⁶⁴ As a result, exclusivity terms in movie deals are common and are rarely a source of extreme debate. An actor’s film contract will often explicitly include the dates for “consecutive exclusive preproduction services, a specified number of weeks for shooting, and a maximum number of days for postproduction services.”⁶⁵ In-term exclusivity provisions tend to accompany the preproduction and production period,⁶⁶ as exclusivity is often used to coordinate scheduling among large casts and crews, and actors are left with little idle time during film rehearsals and shooting. Conversely, postproduction requests⁶⁷ are generally subject to an actor’s availability, as an actor’s work will typically be completed and any post-term restriction preventing the actor from accepting other jobs would likely be invalidated by Section 16600.⁶⁸

It may be possible, however, for talent contracts to include postproduction restrictions preventing actors from working on certain projects for a certain amount of time even after a movie has completed filming. One can imagine this being the case for actors in the Marvel Universe.⁶⁹ For example, Chris Hemsworth—popular for his role as superhero Thor in the Marvel Comics (“Marvel”) film Thor as well as The Avengers—could theoretically be unable to appear in films by Marvel’s direct competitor, DC Comics (“DC”).⁷⁰ Marvel and DC are both immensely popular comic-book publishers that have transformed their comic-book characters into big-screen franchises. If these contractual provisions exist, they may be legally vulnerable, as Section 16600 invalidates post-term restrictions on an employee’s work.

It is also possible that these terms, which (on face value) appear to be post-term, are actually in-term restrictions, and thus valid under Section 16600. The acting industry has a unique gray area between in-term and post-term restrictions when an actor is no longer actively filming but may be called back for a reshoot, or–for example–when an actor is no longer filming the first Thor movie but is still under an exclusive contract for the second movie. While this may be in-term contractually, it has post-term implications as an actor’s work is restricted while they wait for the next production cycle to begin. This area of talent contracts seems to be the most legally vulnerable, especially under the Ninth Circuit’s extension of Section 16600 in ITN to invalidate in-term noncompete provisions.

2. Series and Short Form (Television)

While not heavily debated in film contracts, exclusivity terms are a highly contentious subject of debate in television and series contracts. Television seasons may be short, and actors may find themselves wanting to solicit intermittent work, leading them to seek additional roles while still under contract with another show. Unlike films, there is not a set beginning and end date in television series production, as shows are in “a relatively constant state of production and postproduction during which there will be stretches of time when an actor’s services are not needed.”⁷¹ Exclusivity terms can vary greatly depending on the contractual terms negotiated: a series actor who wants to render outside services may either be free to do so, may need special permission from the studio, or may be prohibited from doing so.⁷²

When a television talent contract does allow an actor to pursue additional roles, there are practical limits to an actor’s ability to do so, as studios prefer their talent to be somewhat exclusive to their shows.⁷³ For example, scheduling work on a feature film is difficult, as television series production is demanding and leaves only a few days off at a time (apart from true offseasons).⁷⁴ Further, many deals preclude an actor from appearing on another television series, apart from “a limited number of guest spots, appearance in foreign commercials and services in nonidentified voice-over commercials.”⁷⁵ Standard series agreement deals (as of December 2021) allowed networks and streaming services to enter into exclusivity deals with talent for “anywhere from nine months to more than a year in some cases,” making the process of rendering outside services difficult during this period.⁷⁶

Noncompete and exclusivity terms for a series contract generally fall in the category of in-term restrictions, as they apply to the actor while they are still in a contract for their current series. They are therefore not legally vulnerable under the historical interpretation of Section 16600, which has traditionally applied only to post-term restrictions. If, however, the Ninth Circuit’s extension of Section 16600 in ITN to invalidate in-term employment restrictions is valid, then these common industry practices may be legally vulnerable.⁷⁷

3. Option Contracts

When a film or television series is part of a larger, ongoing story and multiple production periods are likely (such as classic blockbuster films like Wonder Woman and Spider-Man for which sequels can be anticipated), option contracts are often used. An option clause in a talent contract “gives the producer or studio the sole right, or ‘option,’ to extend a contract for an additional period of time [and] commits the actor to working on the subsequent television or new media season.”⁷⁸ The option period can last anywhere from months to years.⁷⁹ While option clauses ensure that characters an audience has come to know and love will be returning in the same role, they have the potential to prevent an actor from accepting additional work when paired with exclusivity terms, as options can be exercised even if no start date has been set for the next project.⁸⁰ This raises similar issues to exclusivity and noncompetes, as actors may be kept off the market for unreasonably long periods of time, yet studios have an interest in ensuring well-known characters such as Wonder Woman and Spider-Man are able to return for a sequel.

4. Pay or Play

A pay or play term in a contract guarantees that an actor will be paid for their role in a production, regardless of whether they are used or whether the production gets made.⁸¹ These terms can typically only be negotiated by top talent, as they require the studio to pay the actors their full salaries “even if they are terminated before rendering all of their services.”⁸² This compensates the talent for rejecting other “lucrative” roles with similar time lines due to the expectation of exclusivity surrounding their involvement in the pay or play production.⁸³ Pay or play terms therefore symbolize the acknowledgement by studios that exclusivity is highly valuable, and as such, studios are willing to compensate top talent highly for the opportunity cost of rejecting other roles. Since these terms are often accompanied by exclusivity terms, they may be subject to challenges if Section 16600 is extended to invalidate in-term exclusivity.

C. Industry Practices

The Screen Actors Guild (“SAG”) was founded in 1933 as a union representing actors in “film, television, and digital media.”⁸⁴ In 2012, the Screen Actors Guild merged with the American Federation of Television and Radio Artists (“AFTRA”) to form SAG-AFTRA, a powerful union representing “approximately 160,000 actors, announcers, broadcast journalists, dancers, DJs, news writers, news editors, program hosts, puppeteers, recording artists, singers, stunt performers, voiceover artists and other media professionals.”⁸⁵ The union is frequently in talks with major production studios to exercise its collective-bargaining power and achieve favorable deals for its members, going on strike in 2023 to do so.

In-term exclusivity is highly contested in the acting industry as a constant battle between studios, who view the terms as essential to production, and actors and unions, who generally oppose them. In August of 2022, SAG-AFTRA⁸⁶ reached an agreement with Netflix (“Agreement”) limiting the use of exclusivity provisions for series regulars.⁸⁷ A similar agreement was reached between SAG-AFTRA and the Alliance of Motion Picture and Television Producers (“AMPTP”)⁸⁸ limiting exclusivity in series actors’ employment agreements.⁸⁹ SAG-AFTRA’s 2023 strike ended in November of 2023 (the Writers Guild of America also went on strike on May 2, 2023 and ultimately reached a deal with AMPTP on September 27, 2023).⁹⁰ This Note will focus on the terms impacting SAG-AFTRA as they existed prior to the 2023 strike.

An important distinction exists between stars and other talent in the entertainment industry when considering the practical relevance of the prior Agreement’s minimum terms. For those paid above a minimum salary, known as the “exclusivity money break,” the minimum terms of the collective-bargaining agreement do not apply.⁹¹ This means that stars and top-tier talent paid above this amount are not bound by the terms, limiting the effect of the Agreement to non-star talent. The 2022 SAG-AFTRA and Netflix Agreement increased this exclusivity money break (above which exclusivity can be freely negotiated) from $40,000 per episode or per week in 2019 to “$65,000 for a half-hour program and $70,000 for an hour program.”⁹²

For non-star talent paid less than the exclusivity money break, “the minimum terms of the collective bargaining agreement . . . require that a series regular retain the right to do certain other work in addition to working on the series on which they are a regular.”⁹³ The Agreement grants them the ability to take on a second position as a series regular or miniseries lead and removes the condition that a guest appearance⁹⁴ may not be on a competing platform.⁹⁵ Netflix still “must approve the [guest] [a]ppearance and the series regular must confirm availability and scheduling with Netflix before accepting it.”⁹⁶ Netflix retains the ability to deny a guest appearance if the guest role is too similar to the actor’s Netflix role, and actors cannot make irreversible changes to their appearance (such as haircuts).⁹⁷ A minimum three-month “conflict free window” after each season, “during which the series regular may accept a [guest] [a]ppearance without first having to confirm availability or schedule with Netflix” has been established.⁹⁸ This conflict free window means that a series regular will not be held off the market during offseasons, even in an in-term exclusive talent contract. The guest appearance, however, must be completed during the conflict free window or all remaining work will be second to Netflix’s scheduling, reflecting the concern of studios regarding the coordination of many crew and cast member schedules.⁹⁹ Failure on Netflix’s end to provide this window would result in Netflix paying the series regular their episodic fee for the prior season during the window the actor is not able to compete.¹⁰⁰

Concessions on behalf of Netflix in the above Agreement were made in exchange for SAG-AGTRA’s withdrawal of a California bill that it had supported, AB-437, known as the Let Actors Work (LAW) Act.¹⁰¹ AB-437 would have sharply limited exclusivity in television deals in favor of allowing actors to work on competing networks “as long as ‘there is no material conflict of interest with their original employer,’ [and] . . . it [did] not conflict with the original show’s schedule.”¹⁰² At the time AB-437 was drafted, exclusivity terms in contracts often prohibited stars from appearing on competing networks, even during production breaks.¹⁰³ While “AB-437 passed the [California] Senate Judiciary Committee in a 9-1 vote,”¹⁰⁴ it was withdrawn prior to the close of the August 2022 Legislative session as a result of the SAG-AFTRA agreements with Netflix and AMPTP.¹⁰⁵

The 2022 Agreement between Netflix and SAG-AFTRA exemplifies the arguments both for and against exclusivity and the resulting tension, as concessions were made on each side of the bargaining table. As a result of the Agreement, the demands of an actor’s “exclusivity” during an offseason were reduced. If exclusivity terms for actors paid below the exclusivity money break must now allow a conflict free window during which an actor can accept other roles, these terms may—in practice—act more like noncompete agreements than exclusivity agreements, since even “exclusive” actors are able to work on other shows. This blurs the lines between exclusivity and in-term noncompete agreements. Simultaneously, the importance of ensuring talent’s availability has been acknowledged and protected with provisions granting Netflix first position rights for scheduling.

II. SECTION 16600 AND EDWARDS

A. Section 16600

Some states allow contractual noncompete agreements, provided they satisfy a certain reasonableness standard. California, however, takes a strong stance against the enforcement of noncompetes in favor of employee mobility. Section 16600 of the Code states, “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”¹⁰⁶ Section 16600 carves out an exception for noncompetes in the sale or dissolution of corporations, partnerships, and LLCs, allowing covenants not to compete “where a person sells the goodwill of a business and where a partner agrees not to compete in anticipation of the dissolution of a partnership.”¹⁰⁷ This exception ensures that those who purchase a business do not immediately face competition from the seller.

B. Edwards v. Arthur Andersen

Prior to 2008, a small number of cases (mainly federal) allowed narrow restraints on competition in California if they passed a “reasonableness” standard.¹⁰⁸ In 2008, the California Supreme Court rejected the Ninth Circuit’s narrow restraint approach to Section 16600 and articulated a single standard for noncompetes in Edwards v. Arthur Andersen LLP.¹⁰⁹

In 1997, Raymond Edwards II was hired as an accountant by the Los Angeles office of Arthur Andersen LLP, contingent on his signing a noncompete agreement that all managers were required to sign.¹¹⁰ The noncompete prohibited Edwards from performing similar services to any clients he had worked with in the eighteen months prior to his departure for another eighteen months after his release or resignation.¹¹¹ While Edwards was subject to a non-solicitation provision, he was not prohibited from accepting employment with clients.¹¹²

In 2003, shortly after Edwards’s employment at the firm was terminated, Edwards filed a complaint alleging that Andersen’s noncompete agreement violated Section 16600 and was thus unlawful.¹¹³ The trial court held that, since the noncompete was “narrowly tailored” and “did not deprive Edwards of his right to pursue his profession,” it did not violate Section 16600.¹¹⁴

The California Court of Appeals reversed, finding that the noncompete was invalid under Section 16600.¹¹⁵ The California Supreme Court agreed and explicitly rejected the “narrow-restraint” exception to Section 16600 used by the Ninth Circuit, stating that “California courts have not embraced the Ninth Circuit’s narrow-restraint exception.”¹¹⁶ The court discussed its policy rationale in favor of protecting Californians and ensuring that “every citizen shall retain the right to pursue any lawful employment and enterprise of their choice.”¹¹⁷ This means that even a narrow restriction on employment in a specific industry will be invalid under California law.¹¹⁸ As noted in Edwards, the California Legislature did not include language to narrow the application of Section 16600 to only overbroad or unreasonable restraints on competition, thus the court will not add those limitations unless expressly indicated by the legislature.¹¹⁹

While the text and notes of the Code do not specify whether Section 16600 should apply to current as well as former employees, there are nearly a hundred years of case law interpreting the Code in the context of post-term employment restrictions—during which no California state cases have applied the Code to in-term restraints on employment such as exclusivity provisions.¹²⁰ Accordingly, exclusivity provisions are used often in the talent industry to coordinate schedules among individuals involved in production.¹²¹ However, a recent Ninth Circuit case, ITN, may extend application of Section 16600 (California’s ban on noncompetes) to exclusivity in the acting industry.

III. CASE ANALYSIS

A. Exclusivity Analyzed Through the Lens of Section 16600

Since Edwards, Section 16600 “often operates as a per se rule against noncompete clauses in contracts,” prohibiting noncompete agreements in California regardless of whether they are narrowly tailored in favor of promoting open competition and employee mobility.¹²² As noted earlier, the vast majority of cases applying Section 16600 have been restricted to the post-term noncompete context. Therefore, in-term exclusivity agreements and noncompetes will typically be allowed if narrowly and fairly drafted, as parties often use in-term exclusivity to ensure loyalty and investment in employee development. In the acting industry, in-term exclusivity may be used to coordinate production schedules, make talent contracts more valuable, and prevent actors from simultaneously appearing in rival network platforms (assuming they are paid above the exclusivity money break). For films, these exclusivity provisions include services such as “preproduction (rehearsal, costume fittings, etc.), production (i.e. principal photography), postproduction (which may include special effects work, dubbing, and reshoots), and publicity for the film.”¹²³

Nevertheless, at least one recent Ninth Circuit decision (ITN) applying California law has extended Section 16600 to invalidate in-term noncompete agreements as well. This extension impacts not only in-term noncompetes, which limit an employee from working in a certain area, but also exclusivity provisions, which restrict an actor’s ability to work in other productions entirely. As in-term noncompetes are less restrictive than exclusivity provisions, the policy reasons in support of the Code’s extension to capture in-term noncompetes may capture exclusivity as well.

B. Section 16600 Application to In-Term Provisions

Following years of consistent judicial application by California courts, Section 16600 prohibits most post-term noncompete agreements. The more difficult inquiry is whether Section 16600 does or should apply to in-term exclusivity and noncompete agreements for actors. In 2021, the court for the Southern District of California summarized the precedent set by California courts that Section 16600 applies only to bars on post-employment, not in-term employment, competition in Youngevity Int’l, Corp. v. Smith: “Section ‘16600 does not apply to restrictions on a person’s ability to engage in a lawful business while that person is employed by the company to which he or she promised loyalty. . . . Rather, § 16600 targets restrictions on post-employment activity.’ ”¹²⁴ In-term prohibitions on competition have allowed employers to rely on an employee’s loyalty and commitment while employed.¹²⁵ Further, in Techno Lite, Inc. v Emcod, LLC (2020), the California Court of Appeals notes that “[a]ppellants do not cite—and we have not found—a single case in which Section 16600 was held to invalidate an agreement not to compete with one’s current employer while employed by that employer,” rejecting an argument that Section 16600 could apply to restrictions on employees while currently employed.¹²⁶

However, in 2017, the Ninth Circuit Court of Appeals applied California state law in ITN Flix, LLC v. Hinojosa to hold that Section 16600 does in fact apply to invalidate “in-term” noncompete clauses lasting only for the term of employment set by the contract.¹²⁷ If Section 16600 is extended to prohibit in-term noncompete and exclusivity terms (as is suggested by ITN), many existing practices in the entertainment industry could be legally vulnerable. In ITN, an actor’s Master License Agreement (“MLA”) and Acting Agreement (“AA”) were found to be void as unlawful restraints on trade since they limited the actor’s right to pursue lawful employment.¹²⁸ The actor had entered into the MLA and AA contracts after starring in a film franchise built around his “vigilante character” role.¹²⁹ The contracts limited the actor’s ability to play “vigilante characters” in other films, as well as his ability to appear in similar films from 2006 to 2013 (a term of seven years brushing against the outer limit of California’s “Seven Year Rule” for personal-service contracts).¹³⁰ The film was a box office flop.¹³¹ The actor then starred in a later film as a “vigilante character,” which was a commercial success.¹³² The producer of the original film, Medina, sued for the actor’s breach of contract and argued that the MLA and AA were valid contracts not to compete, as Section 16600 “does not apply to ‘in-term’ non-compete clauses that last only for the term of employment set by the contract.”¹³³

The court disagreed and said that “[u]nder Cal. Bus. & Prof. Code [Section] 16600, both the MLA and AA are void as unlawful restraints on trade because they limit the right of [the actor] to pursue lawful employment.”¹³⁴ In rejecting Medina’s argument that Section 16600 applies only to post-term noncompetes, the court stated—in no soft terms—that “[b]oth California courts and the Ninth Circuit have rejected [that] argument,” citing two cases in support of their bold statement that Section 16600 applies to invalidate in-term noncompetes: (1) Kelton v. Stravinski (a 2006 California Court of Appeals case) and (2) Comedy Club Inc. v Improv West Associates (a 2009 Ninth Circuit case).¹³⁵ Both of these cases, however, discuss noncompete agreements in contexts outside of the employment context—first the franchise context and later in partnerships—raising the question as to whether the court in ITN was stretching to find support for its policy stance.¹³⁶ California courts have explicitly stated that the “reasoning [in certain cases] is tied to the franchise context,” meaning a case involving a franchisor and franchisee is not directly analogous to a case involving an actor and their employer.¹³⁷ Thus, the extension of Section 16600 to in-term noncompetes does not seem to be supported by existing laws or cases.

First, Kelton involved two partners who developed industrial warehouses and thus had a partnership relationship as opposed to that of an employee and employer.¹³⁸ The partners had agreed to a covenant not to compete which prohibited them from building warehouses independently.¹³⁹ After one partner allegedly breached the covenant, the California Fifth District Court of Appeals held that the covenant was invalid under Section 16600, as it did not fall under any exceptions to the Code and “[i]n the partnership context, an ongoing business relationship [between the parties] does not validate the covenant [not to compete],” or create a Section 16600 exception.¹⁴⁰ Further, the partners in Kelton limited the fiduciary duties owed to one another to only those rising out of the Partnership’s property, explicitly stating that they had no “obligation to refer to the Partnership or to the other Partner any business opportunity,” and that “each partner could ‘engage in other real estate activities, . . . competitive with the Partnership or otherwise.’ ”¹⁴¹ This is significant, as a large policy reason for enforcing in-term noncompete covenants is the expectation of loyalty that accompanies them. Here, the partners expressly limited both their fiduciary duties and any expectations of loyalty regarding real-estate developments.¹⁴² This makes the facts in Kelton distinguishable from those in ITN, and, while cited as a supporting case for the application of Section 16600 to in-term noncompetes, support for ITN from Kelton is not strong due to the factual differences between a business partner and an employee.

The second case cited in ITN supporting the ban on in-term noncompetes in the employment context is Comedy Club Inc. v. Improv West Associates.¹⁴³ Comedy Club involved two businesses that agreed to an exclusive Trademark License Agreement, which was later breached.¹⁴⁴ The Ninth Circuit Court of Appeals stated that “an in-term covenant not to compete in a franchise-like agreement will be void if it ‘foreclose[s] competition in a substantial share’ of a business, trade, or market.”¹⁴⁵ However, the MLA and AA in ITN did not resemble a franchise agreement. While Comedy Club held the franchise’s in-term noncompete was invalid, Comedy Club involved two businesses in a franchise agreement—not an employee and an employer like in ITN.¹⁴⁶ Further, the Ninth Circuit in Comedy Club refused to void the entire in-term covenant.¹⁴⁷ Instead, it weighed the interests of the plaintiff in operating its business against those of the defendant seeking to protect its trade name and goodwill, creating a compromise which allowed the plaintiff to operate in certain areas in which the defendant did not already operate.¹⁴⁸

The Comedy Club court does note that “California courts are less willing to approve in-term covenants not to compete outside a franchise context because there is not a need ‘to protect and maintain [the franchisor’s] trademark, trade name and goodwill.’ ”¹⁴⁹ This suggests that in-term exclusivity provisions may be subject to some challenges if they are not drafted with appropriate terms.

Lastly, Medina argued that Section 16600 should not be applied to the entertainment industry, as it “would be unworkable because personal services contracts are so often needed to ensure the availability of celebrities.”¹⁵⁰ While the court was not persuaded by this argument, maintaining its stance that this noncompete was illegal regardless of scheduling implications, Medina’s argument touches on some of the most important issues that would stem from an extension of Section 16600 to in-term noncompetes.¹⁵¹ Scheduling work on large productions would be more difficult, potentially raising costs and slowing the pace of production. Further, studios have an interest in ensuring their stars do not accept similar roles in the same time frame during which their films are being released, as it could lower viewership and performance. It is also important to note that exclusive personal-service contracts today are the product of a freelance entertainment industry in which actors are cast for specific roles, as well as extensive collective-bargaining negotiations in which both actors and studios are represented. Actors need protection from exploitation, and unions (such as SAG-AFTRA) will go on strike to ensure actors’ interests are adequately represented in collective-bargaining negotiations. The resulting contracts are far less demanding than those that existed in the 1930s, and interference by the courts with the established system and the agreements that have resulted from it may raise more problems than solutions. It may be best to allow unions and studios to reach their desired outcomes without judicially imposed boundaries on in-term noncompete agreements.

One way to reconcile the outcome of ITN with the overwhelming enforcement of in-term noncompetes is by treating the MLA and AA as post-term noncompete agreements. While the court said the actor’s contract was an in-term prohibition, it is possible that it actually categorized the MLA and AA as post-term noncompete contracts and treated them as such, since both restricted the actor’s work after the film was released. Thus, the contracts may have been post-term prohibitions on competition and invalid for that reason, despite the courts “in-term” language. This would allow the result in ITN to be accurate while maintaining the concept of exclusivity. Further, the importance of this distinction highlights the nuances and gray areas that exist in an actor’s contract. A contract may be “in-term” if it applies for a set number of years or seasons of a show, while also operating as “post-term” if it continues to limit the actor after filming has wrapped and an actor’s services are no longer actively needed.

Another possibility is that the Ninth Circuit in ITN simply incorrectly overapplied Section 16600 in an effort to show its recognition of California case law as distinguished from the more lenient noncompete laws of other states in the Ninth Circuit. In the past, the Ninth Circuit has issued certified questions to the California Supreme Court regarding noncompetes, as it did in Ixchel Pharma v. Biogen, asking how broad Section 16600 is in its reach.¹⁵² Further, in 2008, the California Supreme Court had explicitly rejected the “narrow-restraint” exception previously used by the Ninth Circuit.¹⁵³ The Ninth Circuit therefore may have improperly applied Section 16600 due to confusion regarding the scope of the Section or in an effort to show its recognition of California law as distinguished from other states in the Ninth Circuit.

ITN may also suggest that certain situations in the acting industry can trigger the application of Section 16600 to hold an in-term noncompete invalid if it is unduly harsh. The actor’s contracts, while technically within the seven years allowed for a personal-service contract in California, were at the outer limits as they lasted for a full seven years. Perhaps a shorter period, such as three or four years, would have led the court to reach a different conclusion.

Despite the plausible explanations above reconciling ITN with existing California case law, ITN is likely an outlier on the treatment of in-term noncompetes in California. In Edwards, the Supreme Court of California invalidated a noncompete agreement that forbade a former employee from working with certain clients and soliciting other employees for periods of twelve to eighteen months after his employment terminated.¹⁵⁴ The Supreme Court “did not address—much less invalidate—agreements by employees not to undermine their employer’s business by surreptitiously competing with it while being paid by the employer.”¹⁵⁵ This suggests that if an employee is still being paid, in-term noncompetes are entirely valid. As the California Supreme Court has not weighed in on the treatment of in-term noncompete agreements, its deferential stance in Edwards to legislative intent signals that it may be waiting for clarification from the lawmaking branches of the California government before extending Section 16600 to in-term covenants. Further, the transition away from the studio system of the 1930s (in which actors were held off the market for long periods of time) to the freelance model of talent contracts today, accompanied with the introduction of the “Seven Year Rule” in California, has put in place protections for actors that seem to absolve the need for any total ban on exclusivity or in-term noncompete agreements.

C. Section 16600 Application to Post-Term Noncompete Provisions

It is generally accepted that Section 16600 prohibits post-term noncompete provisions in California.¹⁵⁶ Post-term noncompetes prevent former employees from working for a competitor or soliciting clients for a certain amount of time.¹⁵⁷ Most cases interpreting Section 16600 under California law fall in this post-employment context, as the statute has consistently invalidated covenants not to compete that interfere with an employee’s ability to compete after they cut ties with a former employer.¹⁵⁸

Post-term noncompete clauses in the entertainment industry are not common but might include provisions forbidding an actor from working in a production associated with a rival television network or film studio, even after all work has been completed for the current role. Terms with similar effects, however, may be included in the contracts of megastars preventing them from accepting roles with competing studios.¹⁵⁹ This represents the unique gray area in talent contracts, in which it appears an actor has completed a term of their contract (as filming for the movie is done), yet the actor may have a three-picture contract bringing these terms within the scope of in-term exclusivity.

Interestingly, the LA County Superior Court seems to take the stance that post-term noncompete agreements are valid in the narrow fixed-term employment context where an employee leaves in the 2020 case Viacom v. Netflix.¹⁶⁰ This is particularly relevant in the acting industry, in which talent contracts are generally for a set term as opposed to at will. The holding of Viacom, applied to talent contracts, suggests that noncompete agreements restricting an actor’s ability to accept roles after a contract has ended could actually be valid where the actor is the party that breaches the contract. In Viacom, an executive employed by Viacom (an entertainment company) with a fixed-term employment contract left her job nineteen months prior to the end of her contract to work for Netflix.¹⁶¹ Viacom sued Netflix, seeking a permanent injunction enjoining Netflix from taking its employees in this manner, as well as damages.¹⁶² The disputed noncompete provisions from the executive’s employment agreement read

Your employment with the Company is on an exclusive and full-time basis, and while you are employed by the Company, you shall not engage in any other business activity which is in conflict with your duties and obligations (including your commitment of time) to the Company . . . .
The “Non-Competition Period” begins on the Effective Date and ends on the last day of the Contract Period, provided that:
1. If the Company terminates your employment without Cause before the end of the Contract Period, then the Non-Competition Period shall end on the earlier of (i) the end of the period in which you are receiving payments pursuant to paragraph 11(b)(i) or (ii) the effective date of your waiver in writing of any right to receive or continue to receive compensation and benefits under paragraph 11. You shall be deemed to have irrevocably provided such waiver if you accept competing employment.
2. If the Company terminates your employment for Cause or you resign, the Non-Competition Period shall end on the earlier of (i) the last day of the Contract Period or (ii) eighteen (18) months after such termination or resignation.¹⁶³

While Netflix argued that the covenant was an unlawful prohibition preventing the employee from working in similar positions for eighteen months post-employment, the court disagreed.¹⁶⁴ The court stated that there is no case law supporting the argument that fixed-term contracts not to compete are invalid given that the employee voluntarily left Viacom under assurance from Netflix that she would be indemnified and would not have to pay legal fees.¹⁶⁵ While Section 16600 would invalidate the noncompete if the employee had been terminated by Viacom, this case suggests that a noncompete provision for a set amount of time will be upheld where the employee voluntarily leaves their position.¹⁶⁶ Applied to talent contracts, actors who sign fixed-term exclusivity and noncompete contracts for the filming of their television shows or films may have agreed to valid noncompete provisions in the case that an actor quits in order to pursue a different role, regardless of whether the noncompete becomes post-term.

In Viacom, the noncompete was valid because the employee was not terminated but chose to leave to work for a competitor, thus forsaking her position and its salary voluntarily.¹⁶⁷ Had the employee instead been terminated, Section 16600 would undoubtedly be implicated.¹⁶⁸ Additionally, the court notes that at will employment contracts (as opposed to fixed term) with identical language would prove to be unlawful.¹⁶⁹ This raises an interesting question regarding option contracts.¹⁷⁰ Further, it seems as though the court wanted to hold for Netflix from a policy perspective.¹⁷¹ The court expressly stated that it believes Viacom’s fixed-term employment contracts may violate Section 16600, but that it is unable to find binding case law in support of this position.¹⁷² This is an interesting narrowing of Section 16600 in finding post-term noncompete terms legal in the situation in which an employee leaves, with particular application to the acting industry where the actor will typically be the one breaching an exclusivity provision in order to render outside work. While helpful in noting that California case law does not suggest that exclusivity in a fixed-term contract is unlawful, this is a Superior Court case and is thus not binding.¹⁷³ The court itself seems to struggle with the outcome and is perhaps expressing its struggle with existing precedent in an effort to open the door for the California Supreme Court to weigh in on the matter.

Steinberg Moorad & Dunn, Inc. v. Dunn, an unpublished 2005 Ninth Circuit case referenced in Viacom, takes the view that a post-term noncompete is invalid regardless of whether the employee left or was fired: “[w]hen an employee leaves, be it before the term of employment has ended or not, [S]ection 16600 prohibits the employer from preventing that employee from pursuing his trade.”¹⁷⁴ The Viacom court states that, while it would like to rely on Steinberg as persuasive, it is unable to do so because, as an unpublished case, it lacks the specific facts needed to analyze Viacom’s noncompete clause.¹⁷⁵ This further suggests that some direction is needed from the higher state courts in California or the legislative branch on the application of Section 16600 when an employee is the one to cut ties with the employer in a fixed-term exclusivity contract.

While Viacom represents a narrow application of Section 16600 to allow post-term noncompetes, the application is important in certain contexts such as Silicon Valley where technology companies are constantly poaching employees with key information regarding data breakthroughs such as self-driving car technology.¹⁷⁶ However, the nuanced application of the Code to the general prohibition on post-term noncompetes (allowing them where the employee leaves a fixed-term contract) may have unintended consequences by restricting the movement of talent in the acting industry.

D. Factors Unique to the Entertainment Industry

In determining whether Section 16600 should apply to noncompetes in talent contracts, perhaps talent contracts should be evaluated under a unique standard that considers the nuanced aspects of acting, such as fame. Are actors distinct from other employees whose in-term noncompetes in California are valid? As touched on in the discussion of ITN above, a gray area exists within noncompetes in which a contract may be ongoing, but an actor is no longer actively working on a project. A theoretical argument can be made that fame should play a role in the analysis. While most employees merely provide labor, actors are involved in a finished product, the value of which may turn on an actor’s reputation. This is particularly relevant when an actor is a widely recognized celebrity, known for their portrayal of certain characters or for a certain genre. For example, horror films or children’s films. Perhaps an actor is different from a typical employee in that the subsequent work of a “famous” actor could impact their image, and in turn, the value of the character created in a series or film owned by the studio. If this is the case, fame could be an important factor in the analysis of exclusivity provisions. While the actions of a little-known actor after a film or series airs will likely be inconsequential, the press surrounding a major celebrity may have a large impact on the success of a program.

This can be exemplified by the controversy surrounding Daniel Radcliffe’s involvement in Equus, a play in which Radcliffe appeared “full-frontally nude in a prolonged scene.”¹⁷⁷ Following Radcliffe’s nude appearance in the play, press speculated whether the star of the Harry Potter film franchise would be denied the role in the last two films, as the franchise was widely popular with children. One comment on a Harry Potter fan site following news of Radcliffe’s role in Equus with mature scenes read, “We as parents feel Daniel should not appear nude. Our nine-year-old son looks up to him as a role model. We are very disappointed and will avoid the future movies he makes.”¹⁷⁸

On the other hand, Daniel Radcliffe’s role in Equus did not seem to hinder the success of the final two Harry Potter movies, as “[t]he eighth and final Harry Potter movie was . . . the third-biggest movie of all time behind only Titanic . . . and Avatar,” bringing in $1.342 billion in the global box office.¹⁷⁹ If viewers do not place substantial weight on an actor and instead focus on the character portrayed, the argument that fame should be factored into the legality of post-term exclusivity terms is substantially weaker.

IV. SUMMARY OF CASE ANALYSIS

Analyzed through the lens of Section 16600, in-term noncompetes and exclusivity provisions in the acting industry seem to fall outside the scope of the Code’s prohibition of post-term noncompetes and are thus, at least in the general sense, legal. This does not mean, however, that the line is clear-cut or that all in-term noncompete and exclusivity clauses are watertight in their legality. Some in-term noncompete provisions may be prohibited if they are too broad in their restrictions or if they are not well-drafted. The Ninth Circuit’s application of California law in ITN exemplifies a court’s refusal to enforce an actor’s exclusive MLA and AA agreements even for in-term contracts, as the studio’s ban on the actor playing other “vigilante characters” for seven years was an illegal prohibition on the actor’s right to work. While this case is an outlier in an otherwise mostly unified interpretation of Section 16600’s application to post-term noncompete provisions, it indicates that in some instances, reasonableness and length of a contract may still be used to judge the legality of an in-term noncompete agreement.

Conversely, post-term exclusivity provisions are exactly what the California Code was designed to prevent and are generally illegal, except (as Viacom suggests) perhaps in the narrow situation where the employee voluntarily leaves the employer. In California, an employer cannot prohibit a former employee from working after they have left. Viacom interprets the Code, however, as allowing noncompetes in fixed-term employment contracts where the employee voluntarily leaves but prohibiting them when it comes to at will contracts with no end date. It is notable that the court in Viacom, however, believes that these contracts are perhaps illegal but is unable to hold that they are due to the lack of precedential case law on the matter. This may be a signal that it is time for the California Supreme Court to weigh in on the distinction between post-term and in-term exclusivity provisions under Section 16600 and explain that—as currently written and interpreted—it does not extend to invalidate in-term exclusivity and noncompete agreements. The California Supreme Court may also need to articulate whether post-term noncompetes are allowed in the narrow situation where an employee voluntarily leaves.

Another interesting distinction can be made between actors and nonactor employees; while actors are classified as employees, they are distinct due to their fame and their reputational value that has the potential to impact a final work product. This may support the theoretical argument that fame should be considered in analyzing exclusivity and noncompetes. However, if viewers can separate an actor from the roles they play, this may not be an issue.

The table below summarizes the standard from the majority of California cases interpreting Section 16600.

Figure 1.

Section 16600

In-Term Exclusivity

Post-Term Exclusivity

Exclusivity terms are heavily negotiated in television talent contracts, yet not heavily negotiated film talent contracts.

Typically legal if narrow in scope and well-drafted.

Often illegal if at will.

Potentially illegal if Section 16600 is extended to invalidate restrictive in-term exclusivity.

(ITN)

Potentially legal if fixed-term and the employee voluntarily leaves.

(Viacom)

CONCLUSION

California is firm in its stance against post-term noncompetes, yet an acting industry specific analysis suggests that the unique attributes of talent contracts may require a more nuanced approach. The rise of online streaming has changed the demands placed on actors, with shorter series seasons contributing to an increase in idle time. The landscape is changing rapidly, resulting in the frequent renegotiation of terms and resulting standstills, exemplified by the 2023 SAG-AFTRA strike.

The in-term and post-term treatment of exclusivity provisions and noncompetes has received conflicting treatment by California and Ninth Circuit Courts, suggesting that perhaps the California Supreme Court should weigh in on the matter as they did in 2008 with Edwards and articulate whether Section 16600 can apply to in-term noncompete and exclusivity provisions.¹⁸⁰ While it is widely held that Section 16600 does not apply to in-term noncompetes, the holding in ITN suggests that certain situations in the acting industry may trigger its application and deem an in-term noncompete invalid if unduly harsh.¹⁸¹

Viacom suggests that in certain instances where an employee breaches a fixed-term exclusivity provision, post-term noncompetes may be upheld. Regardless, the ability of actors and unions to negotiate with studios for mutually beneficial terms has allowed common practices in entertainment contracts to shift over time without much recent legislation. This suggests that, while the applicable law will provide one side with bargaining power, negotiations and collective-bargaining agreements will largely continue to set the standards for common entertainment contract practices.

97 S. Cal. L. Rev. 1087

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Katarina Ulich*

* J.D. Candidate 2024, University of Southern California Gould School of Law. To my parents, thank you for being my best friends and biggest supporters.

Does Fair Use Matter? An Empirical Study of Music Cases by Edward Lee and Andrew Moshirnia

September 2021March 2022Southern California Law Review Admin

Article | Intellectual Property Law
Does Fair Use Matter? An Empirical Study of Music Cases
by Edward Lee* and Andrew Moshirnia†

From Vol. 94, No. 3
94 S. Cal. L. Rev. 471 (2021)

Keywords: Intellectual Property Law, Music Law, Entertainment Law

Copyright law recognizes fair use as a general limitation. It is assumed that fair use provides breathing room above and beyond the determination of infringement to facilitate the creation of new works of expression. This conventional account presupposes that fair use matters—that is, fair use provides greater leeway to a defendant than the test of infringement. Despite its commonsense appeal, this assumption has not been empirically tested. Except for fair uses involving exact copies (for which infringement would otherwise exist), it has not been proven that fair use makes much, if any, difference in results. Indeed, in one sector, the music industry, defendants have avoided pursuing fair use as a defense in most infringement cases (except parodies) decided under the 1976 Copyright Act. This fair use avoidance is surprising given that musicians now face a spate of lawsuits due to a predicament we call copyright clutter, which occurs when copyrights protect numerous subelements of many works in a field of creation, thereby making it difficult for people to create a new work in that field without facing exposure to copyright liability simply based on a similar subelement. If fair use provides breathing room, why do musicians avoid it?
This Article provides the first empirical testing of the significance of fair use as a defense. In an experimental study involving approximately 500 subjects, we found that fair use does make a difference: subjects found no liability more frequently under fair use than the test of infringement when examining the same case. And greater knowledge of music or law resulted in higher findings of no liability under fair use. These findings provide a better conceptual understanding of how fair use operates and practical information for litigants that call into question the predominant strategy of musicians avoiding fair use as a defense. Such a strategy may result in greater findings of liability where fair use would have otherwise been found.

*. Professor of Law and Co-Director, Program in Intellectual Property Law, Illinois Tech Chicago-Kent College of Law. In the interest of full disclosure, I joined an amicus brief submitted to the Ninth Circuit in support of the jury verdict against Pharrell Williams in Williams v. Gaye, 895 F.3d 1106 (9th Cir. 2018). See Brief Amicus Curiae of the Institute for Intellectual Property and Social Justice Musician and Composers and Law, Music, and Business Professors in Support of Appellees, Williams, 895 F.3d 1106 (No. 15-56880) 2016 U.S. 9th Cir. Briefs LEXIS 2423. I also joined an amicus brief submitted to the Second Circuit in support of the lower court’s finding of fair use by Drake in Estate of Smith v. Cash Money Records, Inc., 253 F. Supp. 3d 737 (S.D.N.Y. 2017), aff’d sub nom. Estate of Smith v. Graham, 799 F. App’x 36 (2d Cir. 2020). Brief for Amicus Curiae Intellectual Property Professors Supporting Defendants-Appellees, Estate of Smith, 799 F. App’x 36 (No. 19-0028). In both appeals, the courts sided with the result supported by the amicus briefs. See Williams, 895 F.3d at 1120–27; Estate of Smith, 253 F. Supp. 3d at 742–43. We are grateful for the comments we received from colleagues during a presentation of a draft of this Article at the 2019 Intellectual Property Law Scholars Conference. Many thanks to our research assistants Sarah Anderson, Elizabeth Campbell, Elizabeth Jedrasek, Brittany Kaplan, and Annika Morin. This research was funded by a grant from the Chicago-Kent Center for Empirical Studies of IP and was approved for human subjects testing by the Institutional Review Board of Illinois Institute of Technology.

†. Associate Professor, and Director of Education, Business Law & Taxation, Monash University.

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The NCAA and the IRS: Life at the Intersection of College Sports and the Federal Income Tax – Article by Richard Schmalbeck & Lawrence Zelenak

September 2019November 2019Southern California Law Review Admin

Article | Tax Law
The NCAA and the IRS: Life at the Intersection of
College Sports and the Federal Income Tax
by Richard Schmalbeck* & Lawrence Zelenak†

From Vol. 92, No. 5 (July 2019)
92 S. Cal. L. Rev. 1087 (2019)

Keywords: Tax, NCAA, IRS, College Sports

Introduction

Few organizational acronyms are more familiar to Americans than those of the National Collegiate Athletic Association (“NCAA”) and the Internal Revenue Service (“IRS”). Although neither organization is particularly popular,1 both loom large in American life and popular culture. Because there is a tax aspect to just about everything, it should come as no surprise that the domains of the NCAA and the IRS overlap in a number of ways. For many decades, college athletics have enjoyed unreasonably generous tax treatment—sometimes because of the failure of the IRS to enforce the tax laws enacted by Congress, and sometimes because Congress itself has conferred dubious tax benefits on college sports. Very recently, however, there have been signs of what may be a major attitudinal shift on the part of Congress—although, so far, there have been no signs of a corresponding change at the IRS.

This Article offers an in-depth look at the history and current status of four areas of intersection between the federal tax laws and college sports. Part I considers the possible application of the tax on unrelated business income to big-time college sports. It concludes that, even in the absence of any change in the unrelated business income statute, there is a strong argument that revenues from the televising of college sports should be subject to the unrelated business income tax. Part II examines the tax status of athletic scholarships. It explains that athletic scholarships, as currently structured, are taxable under the terms of the Internal Revenue Code but that the IRS seems to have made a conscious decision not to enforce the law.

While the first two Parts of this Article address areas in which the traditional sweetheart arrangement between the IRS and the NCAA remains in effect, the final two Parts of this Article consider areas in which Congress has—very recently—intervened to increase the tax burden on college athletics. Part III describes how Congress, three decades ago, explicitly permitted taxpayers to claim charitable deductions for most of the cost of season tickets to college football and basketball games and how Congress in 2017—to the surprise of many observers, including the authors of this article—repealed this special tax benefit. Finally, Part IV addresses issues of both statutory interpretation and policy raised by Congress’s creation, in 2017, of a twenty-one percent excise tax on at least some universities that were paying seven-figure salaries to their football and basketball coaches. This Article’s conclusion suggests the IRS should follow the lead of Congress and reconsider the administrative favoritism toward college sports described in Parts I and II.

*. Simpson, Thacher, and Bartlett Professor of Law, Duke University School of Law.

†. Pamela B. Gann Professor of Law, Duke University School of Law. The authors are grateful to Katherine Pratt, Paul Haagen, Steven Willborn, Leandra Lederman, David Gamage and the participants in conferences and workshops at the law schools of New York University (the National Center for Law and Philanthropy), Northwestern University, Duke University, Indiana University, and Loyola (L.A.) University, and for the research assistance of Kevin Platt.

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Crushing Creativity: The Blurred Lines Case and Its Aftermath

February 2019February 2024Edwin F. McPherson

From Volume 92, Postscript (February 2018)
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CRUSHING CREATIVITY: THE BLURRED LINES CASE AND ITS AFTERMATH [*]

EDWIN F. MCPHERSON [†]

On March 10, 2015, the music world was stunned when a jury in Federal District Court in Los Angeles rendered a verdict in favor of the heirs of Marvin Gaye against Pharrell Williams and Robin Thicke, who, along with rapper Clifford Harris, Jr., professionally known as “T.I.,” wrote the 2013 mega-hit song entitled “Blurred Lines.” The eight-member jury unanimously found that Williams and Thicke had infringed the copyright to Marvin Gaye’s “Got To Give It Up.”[1] On appeal, the Ninth Circuit Court of Appeals affirmed the verdict and recently rejected Williams and Thicke’s Petition for Rehearing en banc.

The case is significant for a number of reasons. In typical music copyright cases—at least successful ones—the two works share the same (or at least a similar) sequence of pitches, with the same (or at least similar) rhythms, set to the same chords. The Blurred Lines Case [DB1]was unique, in that the two works at issue did not have similar melodies; the two songs did not even share a single melodic phrase. In fact, the two works did not have a sequence of even two chords played in the same order, for the same duration. They had entirely different song structures (meaning how and where the verse, chorus, etc. are placed in the song) and did not share any lyrics whatsoever.

The verdict in this case—assuming (perhaps naively) that it was based upon the music at all,[2] and not, for example, the jury’s dislike for Robin Thicke and his admitted drug use—was no doubt based upon a perception that the overall “feel” or “groove” of the two works is similar, as songs of a particular genre often are. In essence, Williams and Thicke have been found liable for the infringement of an idea, or a series of ideas, and not for the tangible expression of those ideas, which is antithetical to Section 102(b) of the Copyright Act.[3] Such a result is very dangerous to the music community and is certain to stifle future creativity.

All music shares inspiration from prior musical works, especially within a particular musical genre. The import of the Blurred Lines Case is, therefore, that songwriters can now be punished for creating new music that is merely inspired by prior works. By eliminating any meaningful standard for drawing the line between permissible inspiration and unlawful copying, the verdict is certain not only to impede the creative process and stifle future creativity, it ultimately does a disservice to past songwriters as well and adversely affects the entire music industry. The law, and specifically the intent behind the Copyright Act, would be much better served if the courts could provide clearer rules so that songwriters could know when the line is crossed, or at least where the line is.

I. District Court’s Denial of Summary Judgment

Just prior to trial, the district court denied Williams and Thicke’s motion for summary judgment based upon the declarations of two musicologists submitted by the Gayes, which were filled with abstract theories, identifying certain remote, seemingly unrelated, factors of alleged similarity.[4] The court dismissed—simply as “issues of fact”—the multitude of dissimilarities in the two works that were identified by Williams and Thicke’s musicologist—including distinct, material differences in the actual melodies of the two songs.

Because “Got to Give it Up” was a pre-1978 composition and was recorded prior to 1972, the Court properly limited the Gayes’ proof to include only the deposit copy of the sheet music that was presented to the U.S. Copyright Office upon registration by Marvin Gaye’s publisher and did not allow the jury to hear the entire sound recording. However, immediately following this ruling, the court systematically and completely emasculated the ruling in the following significant ways:

After the court had ruled on summary judgment that “Theme X” (a four-note melody) was not on the deposit copy, the court allowed the Gayes’ musicologist to testify that her “Theme X” was different from the court’s “Theme X,” and that her “Theme X” was implied [5] in the deposit copy (as was much of the music that was contained in the sound recording).
The court allowed the Gayes’ musicologist to further testify that although the keyboard part in “Got to Give it Up” similarly was not in the deposit copy, “professional musicians would understand [6]” to play the keyboard part as she transcribed it—and that keyboard part was the “heartbeat” of “Got to Give it Up.”
The court allowed the Gayes’ musicologist to use a transcription of the bass part from the sound recording that was different than the bass part on the deposit copy.
The court allowed the Gayes’ musicologist to use sound bites from both works to show a “total concept and feel,” while in actuality compounding the issue with an instruction to the jury to disregard the actual clips and only to consider the musicologist’s “opinions.”
The court allowed the Gayes’ musicologist to present a “mashup” of the two works, which was prepared after the close of expert discovery, and which included the bass and keyboard elements (that were not in the deposit copy)—while excluding mashups that were prepared by Williams and Thicke’s musicologist between “Got to Give it Up” and numerous old soul songs and many pop songs that could be played over the same four chords.
The court allowed a lay witness who was in charge of the Marvin Gaye catalogue at Marvin Gaye’s record label (which also happened to be Robin Thicke’s record label), who does not even know how to read music, to testify that he listened to “Blurred Lines,” and thought that it was similar to the “Got to Give it Up” sound recording.

At the same time, the district court excluded evidence that Marvin Gaye’s own publisher strongly believed that there was no infringement. One of the functions of a music publisher is to police the copyrights of the songs in its catalogue, to assess whether or not its songwriters’ music has been infringed, and to commence litigation against the infringers.

In this case, according to Marvin Gaye’s publisher, EMI/Jobete, as stated in the Joint Rule 16(b) Report, EMI/Jobete

first internally analyzed whether ‘Blurred Lines’ was an infringement of ‘Got To Give It Up’ and determined that there was no infringement. Thereafter, Jobete secured the opinion of an expert musicologist who similarly concluded that there was no basis for a claim of infringement. Jobete duly reported its determinations to Frankie and Nona Gaye’s representatives . . . . Further Jobete advised that it could not, in good faith, bring infringement claims (either for ‘Got To Give It Up’ or for ‘After The Dance’ [another song that the Gayes claimed was infringed by Williams and Thicke] because its analysis, including expert analysis confirmed that neither work had ben infringed by Blurred Lines . . . . Jobete advised that, consistent with Rule 11 of the Federal Rules of Civil Procedure, it therefore could not and would not either defend Frankie and Nona Gaye [in Williams and Thicke’s declaratory relief action] or pursue the infringement claim they demanded.[7]

Ultimately, the Gayes actually sued EMI/Jobete for not pursuing the infringement claim against Williams and Thicke.[8]

II. Infringement of An Idea, Which Is Not Copyrightable

It appears that the jury in this case was persuaded by a number of factors, including the foregoing similarities that were extraneous to the sheet music, interviews given by Robin Thicke, the number of musicologists that each side had (Gayes: two; Williams and Thicke: one), and the biased lay witness opinion. Not one of these factors had anything to do with any perceived similarity in pitch, rhythm, or chords, and not one of these factors constituted a proper basis for a finding of copyright infringement.

A result such as this, in which the melodies are not even close to being similar, is very dangerous, in that it does not distinguish between an idea and the expression of that idea, nor does it distinguish between the influence of a predecessor’s music and the unlawful copying of that music. The inherent danger of such a result is that, without drawing a proper line between what is an idea and what is an expression or between what is an influence and what is an infringement, future songwriters do not know whether their “influence” is going to land them with the next hit record or land them in court—or both, as demonstrated in this case.

Much has been said about Williams’s and Thicke’s apparent ability to afford to fund a case like this. Whether or not Williams and Thicke are able to afford to defend this case and pay a judgment, most of the musicians in the world are not in a position to do so. Clearly then, when a budding songwriter is contemplating the composition of a song, it is axiomatic that he or she is going to think twice before he or she writes a song that “feels” like a Marvin Gaye song or any other artist’s song, always with one foot in the recording studio and one foot in the courtroom. This is an untenable situation that most certainly will not foster uninhibited creativity.

III. The Ninth Circuit Decision

Devastated by the effect that the verdict would have on future songwriters and the music industry in general, Williams and Thicke appealed the case to the Ninth Circuit Court of Appeals. The Ninth Circuit—in a 2-1, very lengthy decision,[9] written by Judge Milan D. Smith Jr.—affirmed the bulk of the district court’s decision and ignored the cries of the 212 Amicus songwriters (and dissenting judge Jacqueline H. Nguyen). The majority asserted that its entire decision was about narrow procedural matters and concluded its decision by stating that: “[f]ar from heralding the end of musical creativity as we know it, our decision, even construed broadly, reads more accurately as a cautionary tale for future trial counsel wishing to maximize their odds of success.”[10]

At the heart of the appeal was the issue of whether the copyright protection enjoyed by the Gayes was limited to the sheet music of “Got to Give it Up” that was deposited with the U.S. Copyright Office, or whether the jury could hear the sound recording as well. Williams and Thicke had successfully argued to the district court that because the Gaye song was created under the Copyright Act of 1909, the jury should not get to hear the sound recording. The Gayes’ attorney argued at the district court and at the Ninth Circuit that their proof should not be so limited. On appeal, Williams and Thicke’s attorney argued that Judge Kronstadt erred by initially restricting the Gayes’ proof to the deposit copy but then allowing in bits and pieces of the sound recording through the testimony of the handsomely paid musicologist, Judith Finell.

The majority noted that Williams and Thicke’s position that the scope of the Gayes’ copyright was limited to the deposit copy did not appear to be specifically supported by any case law until the district court’s ruling. However, the court decided to avoid the issue altogether: “Nevertheless, because we do not remand the case for a new trial, we need not, and decline to, resolve this issue in this opinion.”[11]

The Court did affirm that the district court had discretion to allow testimony from both of the Gayes’ music experts, which Williams and Thicke’s lawyers claimed to have improperly incorporated opinions about the similarity of the sound recordings, notwithstanding its earlier limitation of proof to sheet music.

In response to Williams and Thicke’s assertion that Judge Kronstadt erroneously denied their motion for summary judgment, the appellate court determined that the denial of summary judgment, after a complete trial on the merits, is not reviewable unless the issue is one of pure law. The court determined that this was not such a case: “The district court’s application of the extrinsic test of similarity was a factbound inquiry far afield from decisions resolving ‘disputes about the substance and clarity of pre-existing law.’ The district court’s ruling bears little resemblance to legal issues we have reviewed pursuant to our exception.”[12]

With respect to Williams and Thicke’s claim that the district court should not have allowed certain portions of the testimony of the Gayes’ musicologists, the court pointed out that Finell “was impeached with her deposition testimony, in which she admitted that the rhythm of the keyboard parts in the sound recording of ‘Got To Give It Up’ is not notated in the deposit copy.”[13] The court further noted that Williams and Thicke’s expert disputed her testimony and that the whole thing “boiled down to a question of whose testimony to believe,” which was the purview of the jury.[14] Ultimately, the court ruled that the verdict was not against the clear weight of the evidence.

The Blurred Lines decision was indeed a procedural one and is on very narrow grounds. The court held that the jury’s verdict was not against the clear weight of evidence and refused to disturb or “second guess” the jury’s fact-finding at trial. The court concluded that the district court did not abuse its discretion in denying Williams and Thicke’s motion for a new trial.[15]

Even Williams and Thicke’s contention that the damages were excessive was met with a purely procedural response. The jury had awarded the Gayes 50% of the publishing revenue from “Blurred Lines” as actual damages, which amounted to approximately $3.2 million. The court ruled that the Gayes’ expert testimony in that regard was not speculative and, therefore, affirmed the amount. Similarly, the court determined that the jury’s verdict awarding profits to the Gayes of $1.8 Million against Robin Thicke and $375,000 against Williams was “not clearly erroneous,” nor was the continuing 50% royalty rate.[16]

The court did take exception to the district court’s treatment of T.I. and the Interscope parties, but that was on procedural grounds as well. The jury had rendered a general verdict in favor of T.I. and the Interscope parties, finding (albeit inconsistently) that neither had violated the Gayes’ copyright. The district court disregarded the jury’s verdict in that regard and brought them back into the case.

The Ninth Circuit ruled that the Gayes waived their challenge to the consistency of the jury’s verdict in this regard by not asserting their position at trial before the jury was discharged. The court went on, however, to rule that, even if the Gayes had properly preserved their challenge, “neither Federal Rule of Civil Procedure 50(b) nor our decisions in Westinghouse and El-Hakem v. BJY Inc. conferred authority on the district court to upset the jury’s verdicts in this case.”[17] The court further noted that “no evidence showed Harris was vicariously liable.”[18]

The majority, by focusing on the procedural aspects of the case, minimized the precedential value of the appeal itself, ignoring the potentially catastrophic ramifications of the case as a whole. This cavalier dismissal by the majority precipitated a blistering dissent by Judge Jacqueline Nguyen and an actual rebuttal to the dissent by the majority.

Judge Nguyen writes: “The majority allows the Gayes to accomplish what no one has before: copyright a musical style.”[19] She states further that: “‘Blurred Lines’ and ‘Got to Give It Up’ are not objectively similar. They differ in melody, harmony, and rhythm. Yet by refusing to compare the two works, the majority establishes a dangerous precedent that strikes a devastating blow to future musicians and composers everywhere.”[20]

With respect to the expert musicologists, the dissent goes on:

While juries are entitled to rely on properly supported expert opinion in determining substantial similarity, experts must be able to articulate facts upon which their conclusions—and thus the jury’s findings—logically rely. Here, the Gayes’ expert, musicologist Judith Finell, cherry-picked brief snippets to opine that a “constellation” of individually unprotectable elements in both pieces of music made them substantially similar. That might be reasonable if the two constellations bore any resemblance. But Big and Little Dipper they are not. The only similarity between these “constellations” is that they’re both compositions of stars.[21]

Judge Nguyen then picks up on a theme that was forefront in the 212 Songwriters, etc. Amicus Brief, and that was that it is axiomatic that copyright laws do not protect ideas, but only the expression of ideas. In the Blurred Lines Case, the only similarities that exist between the two compositions is the “idea” of, for example, clapping hands, yells, different instruments, etc.

Judge Nguyen goes on to challenge the majority to explain which elements of “Got to Give It Up” were protectable. She also does not believe in the “sliding scale” of access vs. similarity, in other words, the more access can be proved, the less substantial the similarity that is required. The majority adopted the inverse ratio rule, which was designed for cases with limited access—essentially, the less likely the access, the more similarity that is necessary to prove “copying.”[22] Judge Nguyen does not believe that, with undisputed access, the extent of similarity necessary to fulfill a plaintiff’s burden of proof essentially dwindles down to nothing.[23]

In response, the majority strikes back, stating:

[T]he dissent prophesies that our decision will shake the foundations of copyright law, imperil the music industry, and stifle creativity. It even suggests that the Gayes’ victory will come back to haunt them, as the Gayes’ musical compositions may now be found to infringe any number of famous songs preceding them. Respectfully, these conjectures are unfounded hyperbole. Our decision does not grant license to copyright a musical style or “groove.” Nor does it upset the balance Congress struck between the freedom of artistic expression, on the one hand, and copyright protection of the fruits of that expression, on the other hand. Rather, our decision hinges on settled procedural principles and the limited nature of our appellate review, dictated by the particular posture of this case and controlling copyright law. Far from heralding the end of musical creativity as we know it, our decision, even construed broadly, reads more accurately as a cautionary tale for future trial counsel wishing to maximize their odds of success.[24]

A. The Denial of Rehearing En Banc

After their appeal to the Ninth Circuit failed, Williams and Thicke filed a petition for an en banc rehearing of the case. Judge Nguyen was the sole judicial proponent of en banc review, which was therefore denied.

IV. All Music Is InSpired By Other Music

From time immemorial, every songwriter, composer, and musician has been inspired by music that came before him or her. Even one of the musicologists for the Gayes admitted that, with respect to music: “All composers share devices and building.” This is especially so within a particular musical genre. Virtually no music can be said to be 100% new and original.

David Bowie was influenced by John Coltrane, Velvet Underground, and Shirley Bassey, among others.[25] Lady Gaga was influenced by David Bowie, Elton John, and Queen, among others.[26] Elton John was influenced by The Beatles, Bob Dylan, The Kinks, and Elvis Presley, among others.[27] The Beatles were influenced by Chuck Berry, Cliff Richard, The Beach Boys, and Elvis Presley.[28] Elvis Presley’s musical influences were “the pop and country music of the time, the gospel music he heard in church and at the all-night gospel sings he frequently attended, and the black R&B he absorbed on historic Beale Street as a Memphis teenager.”[29]

Marvin Gaye, himself, was reportedly influenced by Frank Sinatra, Smokey Robinson, Nat “King” Cole, Sam Cooke, Ray Charles, Bo Didley, and James Brown.[30] In fact, “Got To Give It Up” was apparently inspired by Johnnie Taylor’s song “Disco Lady.”[31]

One can only imagine what our music would have sounded like if David Bowie would have been afraid to draw from Shirley Bassie, or if the Beatles would have been afraid to draw from Chuck Berry, or if Elton John would have been afraid to draw from the Beatles, or if Elvis Presley would have been afraid to draw from his many influences. Presumably, it would also be difficult for the Gayes to imagine if their father had been afraid to draw from Ray Charles or Bo Didley. Quite simply, if an artist is not allowed to display his or her musical influences, for fear of legal reprisal, there is very little new music that is going to be created, particularly with the limitations that already naturally exist in songwriting.

V. Music Copyright Cases Need A Bright Line Test

In the world of film, television, and books, the universe of choices is unlimited. One can write about the past, the present, or the future; one can write about things that actually happened, things that one wished had happened, or things that could never happen—there is absolutely no limit beyond the author’s imagination.

Yet, notwithstanding those unlimited options, there is somewhat of a bright line test for infringement (and for obtaining summary judgment) in the film/television/book world that does not exist in the music world. With a film, an expert conducts the extrinsic test by comparing the plots, sequence of events, characters, theme, mood, and pace of the two works. The expert also filters out all of the scènes à faire, such as a car chase in an action movie or a magician pulling a rabbit out of a hat.

A motion for summary judgment in such cases will weed out the protectable elements from the unprotectable elements. It will then demonstrate how the works are different with respect to protectable elements, and how any perceived similarities are based upon commonplace, unprotectable elements. The “language” spoken by the experts is typically one that the judge understands and can articulate freely.

In music, unlike film, etc., however, there is a “limited number of notes and chords available to composers,” and composers are therefore much more restricted in their options.[32] There are literally twelve notes per octave, and not all of those notes can be used in the same song. As Judge Learned Hand once wrote: “It must be remembered that, while there are an enormous number of possible permutations of the musical notes of the scale, only a few are pleasing; and much fewer still suit the infantile demands of the popular ear. Recurrence is not therefore an inevitable badge of plagiarism.”[33]

Yet, notwithstanding the severe actual and practical limitation of choices in music cases, the line drawing that exists in film copyright cases does not appear to exist in music cases. Musicologists speak a language that is often foreign to judges (and juries), and therefore confuse judges into denying summary judgment motions whenever two musicologists disagree.[34] There appears to be no easy way, no bright line, to determine in music cases—and it was certainly not done in this case—the difference between creating the same “feel” or “style,”[35] and infringing a copyright.[36]

This is particularly so when a plaintiff can hire three, four, or five musicologists, conflict out three of them that find no similarities between any protectable elements, and know that, even if he only has one musicologist that can argue a case for infringement, he will avoid summary judgment. This is exactly what happened in the Blurred Lines Case. There were two or three musicologists that were initially consulted, rendered strong opinions of non-infringement, and ultimately were conflicted out of the case.[37]

VI. Copyright Law Should Stimulate, Not Stifle, Creativity

The “ultimate aim” of the Copyright Act is “to stimulate artistic creativity for the general public good,” and most musicians applaud and appreciate that endeavor.[38] However, they also understand that, like the music that was created before them, their own music will serve as building blocks for future songwriters, who will create their own music. As discussed in Fogerty v. Fantasy, Inc., “copyright assures authors the right to their original expression, but encourages others to build freely upon the ideas and information conveyed by a work.”[39]

As written by Peter Alhadeff and Shereen Cheong in the Berklee College of Music Music Business Journal, “The Lesson of Blurred Lines,” quoting an interview with Berklee College of Music professor, Dr. E. Michael Harrington: “If you’re not influenced by Marvin Gaye, there must be something wrong with you.”[40] The authors go on to write: “[h]e could just as well be talking about James Brown, Chuck Berry, the Beatles, or Michael Jackson—all of them a product of their own influences. Copyright law should make musical creativity flourish, not stifle.”[41]

Parker Higgins, director of copyright activism at the Electronic Frontier Foundation writes that

[w]hen we say a song “sounds like” a certain era, it’s because artists in that era were doing a lot of the same things—or, yes, copying each other. If copyright were to extend out past things like the melody to really cover the other parts that make up the “feel” of a song, there’s no way an era, or a city, or a movement could have a certain sound. Without that, we lose the next disco, the next Motown, the next batch of protest songs.[42]

Finally, as written by composer Ron Mendelsohn, owner of production music company Megatrax:

All musical works, indeed all creative works, are born from a spark of inspiration. It is essential for musicians and composers to be able to find this spark anywhere and everywhere without having to constantly look over their shoulders and worry about being sued. To extinguish this spark, to replace it with fear, is to stifle creativity and deprive society of the next generation of great artists and new music. And yes, artists should be able to talk freely about their sources of inspiration without having to worry about their exuberant proclamations being played back as damning evidence in a court of law.[43]

VII. The Celebration Of Influences Should Be Encouraged

Mendelsohn’s last point is an especially important one. In addition to the potential adverse impact that this case is certain to have on future songwriters, this case will have a lasting effect on past songwriters and musicians as well. Many interviews were played during the trial in which Pharrell Williams and Robin Thicke both expressed that they loved Marvin Gaye, and wanted, as an homage to him, to create a song that had the feel of “Got To Give It Up.” One might ask if there could possibly be a better legacy for a songwriter than to inspire other songwriters to write music and expressly pay homage to him or her for inspiring that music—publicly, on national television and elsewhere, keeping his name and his music alive for generations to come.

Yet there can be no doubt in this case that the jury was swayed, at least in part (arguably in large part), by hearing such interviews. Ultimately, the jury held Williams and Thicke liable for copyright infringement and rendered an award of several million dollars against them. It is difficult to imagine a songwriter that comes along after this case publicly affording any credit to any influence that he or she receives from any songwriter.

Conclusion

It is apparent that the denial of summary judgment and the ultimate verdict in this case were based upon an undeniable musical inspiration, the overall look and feel of the two works, and a series of random, coincidental, and unimportant alleged similarities between unprotectable elements in the sound recording of “Got To Give It Up” (random elements that were not in the “Got To Give It Up” deposit copy) and “Blurred Lines.”

Many important popular songs in the modern era would not exist today if they were subjected to the same scrutiny as “Blurred Lines” was in this case. This case, which was based upon such factors—with no similarities in melody, with virtually no similarities with the music notation on the actual deposit copy, and simply based on a “groove”—will clearly stifle future creativity, will undoubtedly diminish the legacies of past songwriters, and, without a doubt, is antithetical to the principals of the Copyright Act.

[*] *. This article was adapted from an amicus curiae brief that was filed by the author on behalf of 212 songwriters, composers, musicians, and producers, in connection with the appeal of the Blurred Lines Case to the Ninth Circuit Court of Appeals. See generally Williams v. Gaye, 885 F.3d 1150 (9th Cir. 2018) [hereinafter the Blurred Lines Case].

[†] †. Edwin F. McPherson is a partner at McPherson Rane LLP in Century City, California, specializing in entertainment litigation, intellectual property litigation, and crisis management. He attended much of the trial in the Blurred Lines Case, has given numerous lectures on the case, and submitted an amicus curiae brief to the Ninth Circuit on behalf of 212 songwriters, composers, musicians, and composers.

[1]. Though Williams and Thicke were both found liable for copyright infringement, T.I. was exonerated by the jury. Although the district court purported to overrule the jury and brought back in T.I. and the Interscope-related entities as defendants, the Ninth Circuit reversed that portion of the District Court’s judgment. The Blurred Lines Case, 885 F.3d at 1182–83.

[2]. In the two days in which the jury deliberated, they did not once listen to any of the music.

[3]. 17 U.S.C. § 102(b) (2018).

[4]. Those theories were difficult enough (if not impossible) for trained musicians to understand; it is difficult to imagine how the Court could possibly fully grasp their import.

[5]. Even to a person with no musical training, the concept of certain music being implied by certain other music sounds a bit suspect; however, to anyone with a modicum of musical training, this concept is absurd.

[6]. Similarly, this concept makes no musical sense whatsoever.

[7]. Joint Rule 16(b) Report at 5–6, Williams v. Bridgeport Music, Inc., LA CV13-06004 JAK (AGRx), 2016 U.S. Dist. LEXIS 193633.

[8]. This illustrates an important (perhaps rhetorical) question for the courts and the music world in general. If the executives at EMI/Jobete, whose job it is to assess copyright claims involving their songwriters, did not believe that “Blurred Lines” infringed “Got To Give It Up,” and if the expert musicologist that EMI/Jobete hired to assist it in that determination did not believe that “Blurred Lines” infringed “Got To Give It Up,” and if the lawyer that was hired by EMI/Jobete believed so strongly that there was no infringement that he advised EMI/Jobete that suing Williams and Thicke might very well be a violation of Rule 11, how in the world could a songwriter, with no experience policing copyrights, no experience as an expert musicologist, and no legal training, determine that his or her own song might be an infringement?

[9]. The Blurred Lines Case, 885 F.3d at 1183.

[10]. Id. at 1182.

[11]. Id. at 1165–66.

[12]. Id. at 1166–67 (citations omitted).

[13]. Id. at 1170.

[14]. Id.

[15]. Id. at 1172.

[16]. Id. at 1174.

[17]. Id. at 1175 (citing Westinghouse Elec. Corp. v. Gen. Circuit Breaker & Elec. Supply, Inc., 106 F.3d 894 (9th Cir. 1997) and El-Hakem v. BJY, Inc., 415 F.3d 1068 (9th Cir. 2005)).

[18]. Id.

[19]. Id. at 1183 (Nguyen, J., dissenting).

[20]. Id.

[21]. Id.

[22]. Although this rule makes sense in the context of proving “copying” (access plus substantial similarity), when there is limited or a low likelihood of access, it is absurd to suggest that, if access is 100% proved, no similarity whatsoever is necessary. Moreover, this “test” also ignores the requirement, independent of proof of copying, that protectable elements of the two works must be substantially similar in order to prove actual infringement through the extrinsic test. In other words, copying alone does not constitute infringement if the elements copied are not protectable. There must be substantial similarity in copyrightable expression. The inverse ratio rule is so controversial that, in an amended decision, the Ninth Circuit deleted the paragraph from its original opinion discussing the rule and its application. Compare The Blurred Lines Case, 885 F.3d at 1163, with Williams v. Gaye, 895 F.3d 1106, 1119 (9th Cir. 2018).

[23]. The inverse ratio analysis has been criticized and rejected in other jurisdictions. For instance, in Arc Music Corp. v. Lee, 296 F.2d 186, 188 (2d Cir. 1961), the Second Circuit ruled that access will not make up for a lack of similarity, “and an undue stress upon that one feature can only confuse and even conceal this basic requirement.”

[24]. The Blurred Lines Case, 885 F.3d at 1182 (majority opinion).

[25]. Commencement 1999, Berklee, https://www.berklee.edu/commencement/past (last visited Dec. 1, 2018).

[26]. Sam Stryker, Lady Gaga and the Glam Rock Men Who Inspire Her, Mic (Nov. 14, 2013), https://mic.com/articles/73263/lady-gaga-and-the-glam-rock-men-who-inspire-her#.YIo314rrY.

[27]. Neil McCormick, Leon Russell Interview for the Union with Elton John, Telegraph (Oct. 13, 2013), https://www.telegraph.co.uk/culture/music/rockandpopfeatures/8062253/Leon-Russell-interview-for-The-Union-with-Elton-John.html.

[28]. Ten Artists and Bands that Inspired the Beatles, Reader’s Digest U.K.,

https://www.readersdigest.co.uk/culture/music/ten-artists-and-bands-that-inspired-the-beatles
(last visited Jan. 16, 2019).

[29]. Elvis Presley Biography, Graceland, https://www.graceland.com/elvis/biography.aspx (last visited Dec. 1, 2018) .

[30]. Marvin Gaye Influences, Shmoop, https://www.shmoop.com/whats-going-on/influences
.html (last visited Jan. 16, 2019).

[31]. See generally Graham Betts, Motown Encyclopedia (2014).

[32]. Gaste v. Kaiserman, 863 F.2d 1061, 1068 (2nd Cir. 1988).

[33]. Darrell v. Joe Morris Music Co., 113 F.2d 80, 80 (2nd Cir. 1940) (per curiam).

[34]. What the Gayes’ musicologists did in this case to avoid summary judgment (and ultimately at trial) is the equivalent of an expert in a film case testifying that the word “destruction” was used four times in the first scene of one film and two times in the second scene of the second film. They might go on to say that the word “destruction” was followed by the words “of a house” in the first film, and “of a truck” in the second film, along with an explanation that “house” and “truck” both have five letters, and many trucks are parked at houses. Such testimony would be readily dismissed, if not laughed at, in a film case, and the motion for summary judgment granted. Unfortunately, the musical equivalent—which is essentially what occurred in this case—is not as easy to understand and dismiss.

[35]. Music law is further hampered by the Ninth Circuit’s intrinsic test, in which a lay jury is asked to determine the “total concept and feel” of the works in question. Such a test simply does not work in a music context. One might argue that virtually every disco song has the same “total concept and feel.” One could argue that every blues song or every rap song has the same “total concept and feel.” This notion is antithetical to the reality of musicians’ inspirations and borrowing and is entirely preventative of creativity.

[36]. Duke Law School music copyright law professor Jennifer Jenkins, after noting that “Got to Give It Up” was inspired by Johnnie Taylor’s song “Disco Lady,” writes that “Gaye cannot claim copyright over material that he himself borrowed.” As professor Jenkins further discusses: “Copyright only covers ‘original, creative expression.’ Anything Marvin Gaye copied directly from his Motown, funk, or disco predecessors is not ‘original’ and should be off the table.” She writes further: “In addition, copyright’s “scènes à faire” doctrine allows anyone to use the defining elements of a genre or style without infringing copyright, because these building blocks are ‘indispensible’ to creating within that genre . . . . Many of the musical elements common to ‘Blurred Lines’ and ‘Got To Give It Up’ fall into these unprotectable categories.” Jennifer Jenkins, The “Blurred Lines” of the Law, Ctr. for the Study of the Pub. Domain, https://law.duke.edu/cspd/blurredlines (last visited Nov. 1, 2018).

[37]. This is another practice that should be discontinued. Expert witnesses, if they are to maintain any credibility of non-bias whatsoever, should be allowed to testify for whatever side they agree with, and not be immediately conflicted out from testifying in favor of the second party/attorney that calls them just because they were second. The Court could also retain its own expert(s) pursuant to Rule 706 of the Federal Rules of Evidence.

[38]. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975).

[39]. Fogerty v. Fantasy, Inc., 510 U.S. 517, 527 (1994) (emphasis added).

[40]. Dr. Harrington has analyzed more than 230 of Marvin Gaye’s songs and uses his music in classes that he has taught. He agrees that the “groove” and “bounce” of the two works are similar, but is adamant that “[o]bjectively, there is NO protectable expression (melody, harmony, etc.) that has been copied by Thicke” and that “[t]here is no copying of copyrightable expression involving harmonies of the two songs. What is extremely close between the songs is the tempo . . . but tempo is not copyrightable.” Peter Alhadeff & Shereen Cheong, The Lesson of Blurred Lines, Music Bus. J. (Feb. 2016), http://www.thembj.org/2016/01/the-lesson-of-blurred-lines; see also Dr. E Michael Harrington, Good News for Robin, Katy & One Direction: Music Copyright Expert Says Nobody’s Ripping Off Anybody, E Michael Music (Aug. 19, 2013), http://www.emichaelmusic.com/good-news-for-robin-katy-one-direction-music-copyright-expert-says-nobodys-ripping-off-anybody.

[41]. Alhadeff & Cheong, supra note 40.

[42]. Adam Pasick, A Copyright Victory for Marvin Gaye’s Family Is Terrible for the Future of Music, Quartz (Mar. 10, 2015), https://qz.com/360126/a-copyright-victory-for-marvin-gayes-family-is-terrible-for-the-future-of-music.

[43]. Ron Mendelsohn, Will the “Blurred Lines” Decision “Stifle Creativity”?, Megatrax (Apr. 1, 2015), http://blogtrans.megatrax.com/will-the-blurred-lines-decision-stifle-creativity.

Just Another Brown-Eyed Girl: Toward a Limited Federal Right of Publicity Under the Lanham Act in a Digital Age of Celebrity Dominance – Note by Susannah M. Rooney

May 2013February 2018Colleen Bazak

From Volume 86, Number 4 (May 2013)
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Imagine this: Elle, an attractive blonde, brown-eyed female in Boston becomes an overnight celebrity for her YouTube video series, “Chasing Rings,” in which she bemoans the modern dating world in the form of her self-produced rap songs. In each video, Elle wears a different pink shirt. As her video blog continues to gain popularity, a New York clothing company develops an online advertising campaign supporting the legalization of gay marriage. The campaign is displayed on online news and social networking sites. One of the men featured in the ad wears a long blonde wig, has large brown eyes, and wears a pink tank top; the other is dressed in traditional male garb. The ad states, “He liked it, but he couldn’t put a ring on it.” The phrase, closely paralleling a well-known pop lyric, is used with pop celebrity Beyoncé’s permission. Elle, a law student, decides that this ad appears to reference her and decides to sue under her state-law right of publicity. Since the ads were displayed nationally, she hires an attorney to sue under Indiana law because she thinks she has the best chance of winning her case in that state. After initial discovery, the gay rights campaign agrees to settle the case for five million dollars because it thinks that Elle is likely to prevail. The ad campaign is shut down and the company is forced to downsize.

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Copyright Backlash – Article by Ben Depoorter, Alain Van Hiel, & Sven Vanneste

September 2011February 2018Rachel Feldman

From Volume 84, Number 6 (September 2011)
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In the past decade, the entertainment industry has waged a very successful legal campaign against online copyright infringements. In a series of high-profile decisions, content industries have persuaded courts to accept expansive interpretations of contributory enforcement, to create novel doctrines of copyright infringement, and to apply broad interpretations of statutory damage provisions. Many private file sharers, technology companies, university administrators, and Internet service providers have felt the reach of this litigation effort. Yet a significant empirical anomaly exists: even as the copyright industry has ramped up the level of deterrence, online copyright infringements continue unabated.

Why has the legal battle against file sharers been so ineffective? The most straightforward explanation is that infringers are not deterred, either because the probability of getting caught remains remote or because the sanctions are not sufficiently salient. If that is the case, the expansive statutory damage award remedies in decisions such as Capitol Records v. Thomas-Rasset and Sony BMG v. Tenenbaum carry renewed promise for the entertainment industry.

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Taming the Paparazzi in the “Wild West”: A Look at California’s 2009 Amendment to the Anti-Paparazzi Act and a Call for Increased Privacy Protections for Celebrity Children – Note by Lauren N. Follett

November 2010February 2018Rachel Feldman

From Volume 84, Number 1 (November 2010)
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With our culture’s celebrity obsession intensifying each year, it is not surprising that recent media attention has concentrated on the children of these famous faces. Unfortunately, there are currently no adequate federal or state laws in place to protect these children from being hounded by paparazzi and exploited by entertainment magazines and Web sites worldwide. This Note examines the evolution of antipaparazzi legislation and analyzes the inadequacies of current and proposed legal protections. Further, it recommends strengthening existing safeguards by creating paparazzi-free buffer zones around family-oriented areas and following international approaches to maintaining an adequate level of privacy, and consequently safety, for celebrity children.

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Format War, Antitrust Casualties: The Sherman Act and the Blu-Ray–HD DVD Format War – Note by Kevin L. Spark

November 2009February 2018Kathryn Neubauer

From Volume 83, Number 1 (November 2009)
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For several years, HD DVD and Blu-ray competed to replace DVD and become the next-generation movie disc format. The battle was not fought with technological superiority but instead with exclusivity contracts. This Note analyzes whether these contracts violated the Sherman Antitrust Act (“Sherman Act”).

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