When I read in the Globe and Mail that Pirate Bay was being purchased for $9-million, I figured this could be a good example of how innovators, who often are branded as outsiders or scofflaws, eventually find their niche. Well, that still may be a path to success on the Internet, but apparently not in the case of Pirate Bay, where the new owners are attempting to set up a business that would sell the metrics of illegal file sharing back to the victims (i.e. to sell information back to movie, record and software companies about content uploads and downloads by the site’s estimated 20 million users). So far there has been a particularly frosty reception from the owners of those rights.

Started by a group of pro-piracy Swedes in 2003, Pirate Bay soon became one of the largest bit torrent trackers in the world.  From then until now the site has been involved in a number of lawsuits, which eventually led to the 2009 arrest and sentencing of the four main operators of the site. In June 2009 Global Gaming Factory GGF (a Swedish advertising company) announced they would buy Pirate Bay for approximately $9-million, a deal that was set for August 2009.  The time has arrived and as one might have expected GGF is facing criticism. Seems the only value to be extracted from this business model is notoriety.

The outcomes of domain name disputes, and trademark oppositions involving marks used on the Internet, increasingly depend on a lot more than having a similar or even an identical mark.

Jeff Behrendt has recently published an article called “Canadian Domain Laws” which contains an interview with lawyer Zak Muscovitch (http://www.domainbits.com/canadian-domain-laws). The upshot is that in domain name disputes, simply because a domain name is identical or similar to a trademark name should not result in the transfer of the domain name to the trademark owner. Unless there is some evidence that the use of the domain name infringes on the use of the trademark name, a person other than the owner of the trademark should be able to continue to use the domain name.

Similarly, in a trademark opposition I successfully defended last year, between the marks VALCOM versus VELCOM, the Canadian Trade-Marks Opposition Board said in its written decision that in today’s computer-focused society, the fact that promotion of wares includes by means of the Internet is not enough to make confusion likely.

Thought I would post the Copyright and Trademark FAQ I will be handing out when I speak on “Intellectual Property Rights and Remedies” at the Canadian Special Events and Meetings Expo on April 1, 2008, at the Metro Toronto Convention Centre:

“This session, which is taught at Ryerson University is a veritable guide to copyrights & trademarks in the digital age when you have no idea who is being forwarded or who is cutting and pasting your idea. You will learn about the protection of rights vs. fair dealings; what you need to know to when you create or use intellectual property; practical methods of protecting proposals and ideas and remedies when your rights are violated.”

The music industry has become of late, unabashedly about selling products. Formerly, 10 or 15 years ago, there used to be more pretense to artistry. Many if not most bands would eschew “selling out.” It was not only seen as bad for the creative muse, it was bad for business as fans tended to shun artists who took that route. In those bygone days, “artistic integrity” meant that commercial tie-ins were tightly controlled in recording artist agreements. The artist was able, and almost encouraged, to prevent commercial tie-ins. This was an anomaly in most deals because few other commercial terms were negotiable as far as the labels were concerned. When it came to preventing labels from creating tie-ins with commercial products, bands often had the last say.

So much has changed, in so little time. Most everyone has decided it’s OK, after all, to scramble for the almighty bucks being waved by advertisers and sponsors. In part, this is because there is less and less reliable revenue from CD sales. In part, this is because record companies have done a good job of scaring artists into believing that the industry is depressed due to peer-to-peer file sharing. In part, this is because the lifestyle of music has become woven into so much of what we do. For many reasons, bands are now operating as brands, with emphasis placed not just on the copyrights in the compositions and recordings themselves, but more and more, on the trademarks and goodwill being exploited.

And like all valuable brands, those rights need to be managed. From a trademark point of view, this means going after other confusing trademarks or knock-offs. From a marketing point of view, this means keeping brand awareness front and center. It makes one wonder, as the role of distribution of physical product dwindles for record companies, whether they are really just advertising agencies for their artists’ brands. And if that’s the case, does a 360 deal make sense?

The 360 deal is the record industry’s answer to declining sales of physical products. But really, this has been happening for a long time. Traditionally, record companies made records (CD’s, vinyl, i.e. physical products). So it was natural that artist royalties would be based on sales of those products, and that all other revenue belonged to the artist. Then, it became more usual to find record companies demanding a rate on mechanicals (i.e. payments to the music publishers representing the composers whose songs were being recorded) for so-called controlled compositions (i.e. songs composed by the artist or band under the recording contract). Then it became common for the record company to demand an ownership interest in those compositions. And on and on. And please, as far as A&R is concerned, labels are great at jumping on bandwagons and telling artists how they should make their art, but with some exceptions, they rarely create successful acts from scratch. So here we are with the 360 deal, where the label takes a cut of the artist’s entire career.

The quid pro quo is supposed to be, that with the 360 deal, the label can get behind the artist, bankrolling and pursuing alternative revenue sources. But what are those revenue sources, really? Touring? That’s always been sacrosanct, because without the meager profits from grinding it out on the road, many bands would not survive to record another album. Is a label really going to commit resources, for the long haul, to a band that’s playing to 50 people a night, in the hope that someday they’ll be huge? Dream on. Sure there is room in a 360 deal for a better slice of the pie to be cut for the artist. 15% can become 30%, if you’re talking about giving the label a piece of everything. But will the label dare to spend money it might not recoup? The same risk aversion and risk taking principles apply, whether it’s a conventional deal or a 360 deal. Everyone prefers a sure thing. Risk is, well, risky. When big money is being spent, who do you think has the last say in how it’s spent? When revenue might come in through commercial tie-ins these days, to recoup that big money, who do you think is going to have the last say in how the rights are exploited? Except for mega-stars perhaps, not the artist.

Meanwhile, where are all the managers? Well, managers tend to not invest their own money into a project. They might be better suited for the focus that’s needed to place artists into lucrative product endorsement deals. But they tend to not have the resources to launch an artist. Face it, recording an album, making a few videos, then promoting the singles to radio, does not come cheap.

In my opinion, as the clout of the record labels continues to decline, their 360-deal-death-grip on artists will loosen, and it’s not going to be the artists themselves or their managers who end up controlling the music we hear, it’s going to be the advertisers and the sponsors themselves.