What NYC Businesses Can Learn From The Blue Man Group Royalties Dispute

There are lessons to be learned by fledgling NYC businesses from the recent legal battle over royalties between Blue Man Group and a collaborator. If you are a New Yorker, or a tourist visiting New York City, then you probably know of Blue Man Group, a troupe of street artists that have grown into a global brand.  The group has entertained millions annually.  Recently, a collaborator and songwriter has sued them for breach of a royalty agreement.   Ian Pai’s lawsuit contends that the parties agreed he was entitled to a fixed percentage of box office revenue from performances allocated into a “pool” for composer royalties for 20 songs used in the original Blue Man Group show. Pai alleges that, over time, he noticed a significant decrease in the percentage allocated to the royalty pool and that he is entitled to more money for his songs. Royalties are paid to legal

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NY’s Daily Fantasy Sports Law Contains Major Flaw

In following up on an earlier post we wrote about the waiting game set up by the New York State government for daily fantasy sports, we are happy to report that DFS businesses like FanDuel and DraftKings are back open for business in New York. NY Gov. Andrew Cuomo signed a bill into law allowing fantasy sports operators to apply for a license in New York state. The new New York Gambling Law also makes provisions for operators to serve the market almost immediately via a temporary permit. And this is where a controversy may still be brewing. According to DFS advocates, the NY State Gaming Commission erred in implementing the law because DraftKings and FanDuel agreed to cease operating  in order to ensure that they would be eligible for a license.  According to Legal Sports Report, the application itself states that a DFS operator is eligible if it makes available an interactive

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Breach of the Duty of Care in New York -Say Out of the Strip Clubs if you are using Corporate Funds

A recent lawsuit makes allegations that, if true, shows what not to do if your New York startup business obtains investment funding. According to Business Insider, Marcus and Mitch Weller, the brothers who founded Skully, a company that designs next-generation “augmented reality” motorcycle helmets who raised millions in crowd-sourced funds, allegedly used those company funds for personal purposes The allegations include: Rent for a personal apartment in the Marina district of San Francisco, then the subsequent moving and painting expenses when they moved to the Dogpatch Restaurant meals and personal groceries charged to the company AMEX card A payout of $80,000 to an unnamed cofounder, which was recorded as a trip to China A $13,000 Mai Tai and Extreme Tech Challenge in Las Vegas A Lamborghini rental during a personal vacation A “world tour” trip that included $2,000 for limos in Florida, $2,000 for a strip club, and $2,345 worth of

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FDA Cracking Down on Underage Sale of Electronic Smoking Devices

NY Small businesses that sell electronic smoking devices like vape pens and e-cigarettes will now have to treat them as “tobacco products” thanks to new FDA regulations intended to crack down on underage sales of these items. This week, a earlier ruling from the U.S. Food and Drug Administration (FDA) goes into effect which prohibits the sale of vape pens, e-cigarettes and other electronic smoking devices to consumers under 18 years of age. For small business retailers, this means the sale of e-cigarettes is no different from the sale of cigars and other traditional cigarettes, meaning they must verify a consumer’s age using a valid photo ID.  Adults under the age of 26 must show a photo identification to buy them. The FDA will also require manufacturers to register with it and place warning labels on all product packaging. The regulation is intended to immediately impact the use of these

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New NLRB Labor Rules Negatively Impact U.S. Franchises

Revised federal rules from the National Labor Relations Board that give employees more leverage in settling workplace disputes are negatively impacting franchisors and franchisees, leaving them with higher costs and forcing them to scale back plans for future expansion. The new policy adopted by the National Labor Relations Board (NLRB) broadens the circumstances in which two businesses can be deemed as employers of the same pool of workers. This means trouble for fast-food, construction and other industries reliant on contract workers and employees of franchisees, who will now be exposed to increased labor disputes before the NLRB, which adjudicates workplace disputes and oversees union-organizing. The intention behind the NLRB’s revision is to ensure workers can unionize and collectively bargain with businesses that help control their fates.  As things stand now, the NLRB will review “test cases” in the franchising industry to further define what critics have called a vague and

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Business Groups Sue Over U.S. Government Crackdown on Corporate Inversions

Two business groups have sued the Obama administration over the government’s crackdown on U.S. companies moving abroad to reduce their tax burden.  The process is known as a corporate inversion. Also called a tax inversion, a corporate inversion is the practice of a corporation relocating its legal domicile to a nation with lower taxes like Ireland, Britain and Canada, while retaining its material operations in its higher-tax country of origin. Such a process is legal, but has drawn criticism from some politicians who say U.S. companies engaged in corporate inversions are avoiding their tax obligations. Inverting U.S. companies usually leave their core U.S. operations intact domestically, but transfer their legal tax domiciles abroad to the country of the acquired company. In April, the U.S. Treasury Department unveiled a package of rules intended to discourage inversions, and were specifically aimed at transactions involving non-U.S. companies. In creating these new rules, the

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Recent Intellectual Property Law News: From iPhones and Flight Simulators To Cheerleader Uniforms

Intellectual property rights remain a significant issue throughout the world, as outlined in the variety of claims brought around the world over a wide variety of IP issues. In June, the Beijing Intellectual Property Bureau ordered Apple to stop sale of the iPhone 6 and iPhone 6 Plus for violating a Chinese company’s patent on exterior design.Chinese regulators claimed that Apple violated a patent held by a Chinese company, Shenzhen Baili, for the exterior design of the 100C smartphone. According to Jurist, Apple plans on ending production of the restricted models while planning to appeal the decision. This ruling could create a harmful precedent for Apple throughout the entire country, which has seen its business negatively affected by obstacles of a growing Chinese technology field. In May, a US jury concluded that Google had not violated copyright laws where it used Oracle’s Java programming language to develop its own operating system,

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Emails Held Overseas Are Not Subject To U.S. Warrant

The Second Circuit in New York recently handed down a ruling that emails held in servers overseas are not subject to a warrant issued in the United States. Judge Susan Carney ruled that the government cannot use a domestic search warrant to compel disclosure of email data stored with a U.S. company outside the United States. Many are calling a victory for privacy rights for individuals and businesses. The New York-based 2nd U.S. Circuit Court of Appeals interpreted the Stored Communications Act of 1986 in a matter where the U.S. government had sought emails in connection with a drug trafficking investigation from Microsoft. Microsoft objected to the warrant, citing privacy rights provided under the law because the customer’s emails were stored exclusively on a server in Ireland. Federal prosecutors argued that exempting the emails would create a loophole that would keep criminals’ information out of reach of the the U.S. government.

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Consumer Safety Alert: 500K “Hoverboard” Scooters Recalled For Fire Hazard

If you purchased a “hoverboard” self-balancing scooter in the past year, be aware that ten major companies and retail stores that produced over 500,000 of them have issued a recall of the devices.  I bought one for my child and, thus, this news was interesting for me. The recall is due to a design defect where the lithium ion battery packs overheat, posing a risk of the hoverboard smoking, catching fire and even exploding. Most of the defective “hoverboards” were purchased from June of 2015 to May of 2016 for between $350 and $900. According to the Wall Street Journal, self-balancing scooters that don’t meet a new safety standard that governs the electrical drive train system, including the battery and charger system have been recalled. The U.S. Consumer Product Safety Commission endorsed the standard, called UL 2272, in February. To date, defective “hoverboards” have caused over $11 million in property damage,

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Settlement In VW Emissions Litigation

New York is set to accept a partial settlement in the Volkswagen emissions case pending in a U.S. Federal District Court. Currently, 44 states have signed off on a settlement whereby VW would pay $14.7 billion to settle claims that it deceives states and customers by fraudulently misrepresenting its vehicles’ emission numbers, in clear violation of state environmental laws and regulations. Last September, the Environmental Protection Agency (EPA) issued VW a notice of violation of the Clean Air Act after it was found that Volkswagen had intentionally programmed turbocharged direct injection (TDI) diesel engines to activate certain emissions controls only during laboratory emissions testing. That caused the vehicles’ emissions to meet US standards during regulatory testing but emit up to 40 times higher emissions on the road for 500,000 cars on the road in the U.S. from 2009 to 2015. The scandal extends across the world to 11 million vehicles

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New York’s Fireworks Laws

With Independence Day upon us, this would be a good time to review whether consumers can purchase fireworks legally in New York.  Only three states – New Jersey, Massachusetts and Delaware – completely ban consumer fireworks. Since 2011, seven states — including New York — have lifted restrictions on the sale of most types of consumer fireworks. The reason for this is to allow New York to collect the additional tax revenue that the sales raise. Not all fireworks are for sale to the public in New York. New York only allows consumers to purchase and use ground-based or handheld sparkling devices, including cylindrical fountains, cone fountains, and wood sparklers/dipped sticks, as well as party poppers and snappers. Metal wire sparklers are not legal because they stay hot for a long time after burning out and retain heat long after use. But, this is where it gets complicated.  County governments

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New York City May Require High Salt Warnings in Franchised/Chain Restaurants

A New York appeals court ruling has cleared the way for New York City to begin enforcement of its rules requiring restaurants to warn of high-salt content. Recently, the First Department of the New York Appellate Court held that New York City can require chain restaurants to post warnings on items high in salt content. In doing so, the Court also lifted a stay on enforcement of the rule that was granted after the National Restaurant Association appealed a trial court ruling. The National Restaurant Association challenged the requirement, claiming that it was an unlawful and unprecedented burden on restaurant owners, resulting in confusion for customers.  It also claimed that the rule was arbitrary and capricious. New York City is the first to require restaurants with 15 or more locations nationwide to post a warning next to menu items with more than 2,300 milligrams of sodium.  Violators are subject to

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Mixed Signals On New York Online Poker Bill

New York took one step forward – and possibly two steps back – as the New York State Senate overwhelmingly passed an online gambling and poker bill, but a key lawmaker in the New York State Assembly declared the effort to pass the bill “dead.” The New York State Senate passed a bill that would legalize online poker in New York, which would make New York the 4th state to allow its residences to gamble online. Under the proposed legislation, online poker revenue would be taxed at a 15% rate and the state would get $10 million per online poker license. Advocates for the bill call it a safe, regulated option that would generate millions in revenue for state education and other initiatives. However, the New York State Assembly has not passed their version of the online poker legislation, with the chair of the Assembly’s racing and wagering committee, calling

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Vimeo Prevails in New York Copyright Infringement Appeal

Vimeo, an internet service provider that allows users to upload audio and video content, is not liable for copyright infringement  in New York after the Second Circuit Court of Appeals reversed a Manhattan Federal Court decision. By reversing and remanding the decision of a Manhattan Federal Court, the Second Circuit Court of Appeals has affirmed that the Digital Millennium Copyright Act (DMCA) grants an internet service provider a “safe harbor” from infringement claims, regardless of the publish date of recordings. In the matter of Capitol Records v. Vimeo, Capitol Records sued in Manhattan Federal Court for copyright infringement, claiming that Vimeo should be held liable for users publishing copyrighted materials, including music recorded before 1972. The Second Circuit disagreed, holding that construing DMCA as leaving service providers like Vimeo subject to liability for the acts of users posting materials that may infringe copyright “defeats the very purpose Congress sought to

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New York Legislature Debate: Can Uber And Lyft Expand Throughout New York State?

New York state lawmakers are debating legislation that would give motorists insurance coverage to transport passengers booking trips on ridesharing companies around New York state. Uber and Lyft, both of whom have seen great success in New York City, have been lobbying Albany to expand their services into upstate New York.  However, New York lawmakers remain divided over how much these app-based ridesharing services should be required to pay in insurance costs.  Uber has opposed a bill emanating from the legislature, claiming that insurance costs would be too high. Uber wants to operate state-wide to allow it to purchase insurance so that communities who want it can start welcoming its services.  However, some lawmakers believes that the ridesharing companies need to work out rules of operations with cities and towns around the state. Unless a new agreement is reached before the end of this week, it would seem that these ridesharing

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New York May Make Airbnb Short-Term Rentals Illegal: New York Rental Law Updates

New York may pass legislation by the end of the week making it illegal for New Yorkers to list short-term rentals on Airbnb. In a rare show of bipartisan support, a bill to ban Airbnb-style posts for short-term sublets could get floor votes on the floors of the New York State Assembly and New York State Senate this week.  If the Anti-AirBnB Law is signed into law, advertising short-term sublets or any use other than permanent residency of these sublets shall be illegal in New York. The legislation seems focused on commercial users of Airbnb who turn their residences into illegal and unregulated hotels. Under these new New York laws, the liability for advertising short-term rentals would shift from building owners to the renters and those who place the advertisements on sites like Airbnb, with penalties ranging from $1,000 for a first offense to $7,500 for third and subsequent violations.

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Definition of a Franchise in New York State: New York Franchise Law Basics

New York has a broad definition of a franchise, thus, leading to a broad range of mere “licensing” and “agent/distributor” relationships as franchises.  Any business organization that is deemed or may be deemed a franchise by the State of New York should, immediately, retain a New York-based franchise attorney with significant experience in the business and legal side of franchising in NY.  A designation of a business relationship as a franchise, immediately, requires obligations of the franchisor including disclosure and registration requirements.  Our New York franchise lawyers shall be writing followup articles on franchise obligations under New York law over the next few weeks. Definition of a Franchise in New York Section 608 of the New York code defines a franchise in New York as: 3. “Franchise” means a contract or agreement, either expressed or implied, whether oral or written, between two or more persons by which: (a) A franchisee

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A Chapter 11 Bankruptcy May Save Your NY Business: New York Bankruptcy Law

With news that Gawker is filing for Chapter 11 bankruptcy protection after losing a $140 million dollar judgment to Hulk Hogan for defamation, now is a good time to introduce New York businesses to what a Chapter 11 bankruptcy is, and how it may save your NY business. Chapter 11 of the U.S. Bankruptcy Code is titled “Reorganization,” because it created legal tools for businesses to remain in possession of their assets and restructure so it may continue operating.  This is available for all sizes of businesses. The goal is to obtain permission to reorganize your business based upon a court-approved plan that sets out the terms and duration for debt to be repaid. Plans can include discounted payment amounts, modification of debt, reductions in principal or interest. Filing a Chapter 11 Petition in U.S. Bankruptcy Court is not a simple matter. Your business shall need an NY Bankruptcy attorney

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Will New Yorkers Be Playing Fantasy Sports This Summer? New York Gambling Law Update

When two of the largest commercial fantasy sports gaming companies, FanDuel and DraftKings, were sued by the State of New York and subsequently agreed to voluntarily stop taking money from New York participants, the companies did so with the understanding that lawmakers in Albany would pass legislation on the issue of how to regulate this new industry.  It appears that legislation is finally taking shape. As the legislative term comes to a close, committees in both houses of the New York state legislature have advanced bills proposing legislation requiring registration fees for commercial operators and a prohibition against players under 18 years of age.  Legislation would also bar contests based on amateur sports at the collegiate level and horse racing. Last year, New York cracked down on companies providing daily fantasy sports gaming after a disgruntled player, leading to the NY Office of Attorney General to step in to file

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Are NYC Rent-Controlled Tenants Using AirBnB Breaching Their Leases?

AirBnB may be an answer to homeowners and property owners looking to supplement income, but if you are a New York City landlord of a rent-controlled property – beware!  Your tenants may be breaking the law!  For the uninitiated, AirBnB is an online marketplace where prospective guests look for a bed to stay in from hosts listing spare rooms and properties for short term rentals.  They operate very much like a hotel where guests stay in the host’s property for a fee. In New York City, landlords and property managers have been cracking down on tenants seeking to get in on the AirBnB action by subletting out their space for amounts exceeding their subsidized rent, in clear violation of the New York Landlord-Tenant Law.  Recent decisions shed some light on why AirBnB, though seeing a growth in popularity, are facing many legal issues when the hosts is not the property owner.

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