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A Binding Agreement: 2

A Binding Agreement: 2

September 8, 2006
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" Contracts can evince a contracting party's state of mind with respect to the subject matter of the contract. "

In part one, we examined some of the basic issues that contracts are designed to address. In this conclusion, we'll look at copyright issues and beyond:

On Copyrights
Under the copyright laws of the U.S., the photographer and the performers, not you, are the joint owners of the copyrights in the works. The same concept applies to web design, advertising copy creation, video editing, film music composition and performance and virtually any other creative contribution to any work by independent contractors.

But the prudence of papering your business relationships isn't only for the purpose of deterring litigation, saving money or acquiring intellectual property rights. Proper documentation of relationships also can help keep you out of jail.

Contracts can evince a contracting party's state of mind with respect to the subject matter of the contract. This is because for a contract to be valid and enforceable, there must be a "meeting of the minds" by the parties to the contract with respect to definite terms embodied in the agreement.

Now, with the foregoing in mind, consider the fact that a conviction for violation of a serious criminal law, such as the distribution of obscene material or child pornography, requires that the prosecution prove beyond a reasonable doubt that the defendant's acts were committed in association with wrongful intent — what the law calls the required mens rea, or a "guilty mind." To obtain a conviction, a prosecutor must prove beyond a reasonable doubt that the accused possessed the proper mens rea, wrongful intent, at the time of the alleged crime.

To see how an appropriately drafted contract can play an important role in a criminal defense, consider the following. Suppose a person, who we will call Theodore Ulysses Friendly, aka "TU Friendly," licensed 200 explicit images to you for use on your website. Later it is discovered that one of the models who posed for a number of the photographs you purchased was only 17 at the time of the creation of the photos in which she is depicted. You also learn that the person who sold them to you has been indicted for creating and distributing more than 1,000 images of child pornography. Mr. Friendly, finding himself facing what could effectively be a life sentence, decides to cut a deal with the prosecutor in which he agrees to implicate all the webmasters to whom he licensed the images in question, including you.

At this point, a written contract with the scumbag containing a clear and unequivocal warranty that all the persons in the photos were over age 18 at the time of creation of the works certainly could have been helpful because the written agreement would be at least some proof that you did not actually intend to distribute child pornography and therefore did not possess the requisite mens rea to be convicted of intentional distribution of child pornography.

But unfortunately, continuing our example, that's not the case because you do not have any such agreement, and instead you find yourself explaining to your criminal defense attorney. "No, we didn't have any written agreement," which to even the most empathetic of our industry's legal eagles still translates into "cha-ching." Meanwhile, it's doubtful that you're thinking about your attorney's good fortunes. Instead, the legal concept that is much more likely to be occupying your brain is "I'm screwed."

Appropriately drafted agreements are not only a means to minimize the likelihood of litigation and a means to help prove innocence, they also can function to make some of life's uncertainties a bit more predictable and manageable.

For example:

  • An arbitration provision in a contract can provide you with the knowledge and peace of mind that if there is a dispute arising from the agreement, you won't have to litigate the matter in court or pay the huge costs of court litigation.

  • A proper choice-of-venue provision can ensure that you will not have to travel to some far-flung place to enforce your rights.

  • In agreements that contain a revenue-sharing component, proper accounting and reporting provisions can help deter wrongful actions and prevent you from getting ripped off.

  • In shareholder and other agreements setting forth equity ownership interests in the company, an appropriate equity buyout provision can keep a partner's or co-owner's wife (or husband) out of your business in the event of the dissolution of his (or her) marriage.

An effectively written "website use" agreement also can help your company become less of a prosecution target. For example, a properly drafted terms of use agreement on your website can make the unauthorized access of your computers and databases by minors or even in some circumstances by law enforcement, a crime, thereby making evidence collected as a result of such unlawful intrusion potentially unusable against you in a criminal prosecution.

Contracts also can enable you to more effectively exploit your assets. For example, a properly drafted rights-acquisition document that envisions future technologies can allow you to fully exploit your intellectual property rights in your content in every medium and with every technology, now known or invented in the future.

For more than 10 years, we have provided our production clients with such future-rights acquisition clauses. As we move into the era of digital avatars and other digital actor or "synthespian" content created from pre-existing content, for video games, holographic works, etc., producers who do not have such rights assigned to them may not be able to exploit their content libraries nearly to the same extent as those who do.

In sum, the legal and economic benefits of well-negotiated and well-drafted agreements are as numerous as the benefits a good business deal or a good business relationship can bestow. Correspondingly, the amount of grief that can come to a business or a person as a result of the failure to effectively negotiate and execute an appropriately written agreement can be just as limitless.

Consequently, I strongly suggest that you have an appropriately drafted agreement governing each and every business relationship you have.

Gregory A. Piccionelli is one of the world's most experienced Internet and adult entertainment attorneys. He can be reached at Piccionelli & Sarno at (310) 553-3375 or www.piccionellisarno.com.


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