Content creators are both a business owner and a service provider, that service being entertainment. However, many creators do not utilize business entities, like LLCs, when providing their entertainment services. This leaves creators open to personal liability. If someone were to sue the creator for any reason related to their content, their personal assets (house, car, etc.) would be reachable through the lawsuit. Avoiding this liability is simple and can be achieved by properly utilizing a loan-out company.
What is a loan-out company and how do they work?
A loan-out company is the term for a business entity that the individual utilizes to provide their services. Loan-out companies can be either LLCs or Corporations, though the choice of which can have significant tax consequences. Third-parties, like sponsors or streaming platforms, would engage the creator’s loan-out company through a written agreement for the company to provide the creator’s services to the third party. While this may seem silly, a loan-out company serves as a liability barrier for any legal issues that are related to the stream. This means that if sued, the creator’s loan-out company would be liable, and only company assets (business bank accounts, PCs and other assets, etc.) would be reachable through the lawsuit. This means that the creator’s house, cars or personal bank accounts are much less likely to be reached through a lawsuit. Best of all, loan-out companies are easy to operate and inexpensive to create.
Importantly, once a loan-out company structure is utilized, the business’ assets must be treated as separate and apart from the creator’s personal assets. If not, creators can lose the limited liability protection that they sought from the business entity in the first place. That means creators will need to pay themselves from the business and only utilize the business accounts for business purchases. If creators treat the business appropriately and separate their personal and business expenses, then it is very difficult to lose the limited liability protection.
Should you use a loan-out company?
If you are streaming full time, yes. If you are streaming part-time and obtaining sponsorships, yes. Loan out companies are inexpensive to create and simple to operate, so the added protection against liability is worth it. If you would like assistance with creating your loan-out company, we are happy to help.
(This post was created by Mark Hamilton, a rising 3L at Marquette University Law School and intern at Quiles Law)
Recently, several FaZe Clan members have come under scrutiny as they were found to be promoting a fake crypto token charity named “Save The Kids.” Specifically, their paid promotion was allegedly tied to an unlawful pump and dump scheme. This matter raises multiple legal concerns, including how the streamers will be affected for their endorsement. At the worst case, if the streamers were aware of the fake nature of their promotion, then they would be liable for fraud. At the very least, false claims were made by the streamers during their promotion, which means that the streamers may be subject to discipline from the Federal Trade Commission under its advertising rules. However, this matter further bemoans a single fact:
Streamers must vet their sponsors
Streamers need to be especially mindful of certain sponsorship areas. Sponsorships from industries such as gambling or cryptocurrency should immediately cause a streamer to pause and think twice. This is due to the fact that these industries are regulated (or in crypto’s case, that similar industries, namely securities, are regulated) and historically tied to laws imparting criminality or criminal activities for certain kinds of interactions within those industries. That isn’t to say that all gambling or crypto sponsorships are unlawful, but that there are bad actors in both industries who operate unlawful enterprises which could result in civil or criminal liability for the streamer. Just because a company is willing to hand a streamer a contract for a sponsorship does not mean that the enterprise is legal. In order to potentially avoid the legal fallout from a bad actor sponsor, a streamer must research and do their own due diligence into understanding the sponsor and what exactly the sponsor wants them to do.
Below are a couple of tips on how to vet a sponsor :
The notion that all sponsors are beneficial is false. From a legal perspective, it is up to the streamer to understand what they are getting themselves into. Legal liability aside, streamers do not want the brand damage of being associated with unlawful or shady enterprises. Utilizing the above tips and questions will help guide you into determining whether the sponsor is legitimate, legal and appropriate. Ultimately, knowledge is key.
If you need any assistance in vetting sponsors, and reviewing sponsorship agreements, our attorneys are here to help.
(This post was contributed by Mark Hamilton, intern at Quiles Law and rising 3L at Marquette University School of Law)
Recently, Twitch streamers have been hit with a wave of DMCA takedowns for allegedly playing copyrighted content on their streams which they did not have a license to. While the recent DMCA takedowns appear to focus on playing copyrighted music on stream, importantly, showing copyrighted video content (like a movie or a TV show) could also result in a DMCA takedown if the rights-holder was aware of its usage. For more info on what the DMCA is, see our post here.
Unfortunately, the DMCA is not perfect, and the takedown process can be weaponized resulting in overreach. While there’s no bulletproof way to stream content without the potential for a DMCA takedown, here are some best practices for streamers to help avoid potential DMCA issues:
If our firm can assist you with your DMCA-related matters, please contact us at firstname.lastname@example.org
On November 5, 2019, the U.S. Federal Trade Commission (“FTC”) released an updated guide and video for online influencers and streamers about complying with mandatory sponsorship disclosures. Some of the important points discussed are as follows:
Trademarks are the foundation of branding, as they protect the rights holder from third parties using any protected words or logos for their own pecuniary gain. Fnatic, Fatal1ty, and Overwatch League, are a few of the many examples of trademarks utilized in the esports and streaming industries. Trademarks are extremely valuable assets to those who own them because they provide heightened protections and rights to owners. These benefits are not only available to companies, like when a streamer or influencer creates a company to provide their services through, but also to individuals who can prove that their name, or pseudonym, has acquired “secondary meaning”. Secondary Meaning is a legal term used to mean that the mark owner can show that the individual’s name or pseudonym is indicative of the producer of the services and not the services themselves. Popularity certainly plays a role in whether Secondary Meaning can be proven. Athletes like LeBron James and Cristiano Ronaldo have trademarked their names, nicknames and even their commonly-used phrases to provide themselves with exclusive use of these words and phrases for their own pecuniary gain. Streamers and influencers should follow in these athletes’ footsteps with respect to their intellectual property.
What are trademarks?
Trademarks are words, symbols, or phrases, used to identify and distinguish the specific source of goods or services. A trademark provides its registrant with the exclusive right to use a registered word, symbol, or phrase in connection with the goods or services specified in its registration. This means that the use of confusingly similar words, symbols or phrases in the same or similar industries could be unlawful. Trademark registration provides owners with a number of other benefits as well.
Once a trademark is federally registered, the registration serves as notice to the rest of the United States that the word, mark or phrase is being utilized in commerce by the mark’s owner. This means that if someone tries to utilize that mark, or a confusingly similar mark, for the same service or product, even if they were unaware of the registered mark, the prior registration precludes that mark from being utilized in commerce.
The federal registration also allows the mark holders to use the ® symbol. This symbol appears after the registered mark, in the upper right hand corner, when the mark is being used in connection with the goods and services listed in its registration. It gives constructive notice to potential infringers that the mark has been registered with the United State Patent and Trademark Office (“USPTO”) and that the mark holder has the exclusive right to use and license the trademark.
Oftentimes, the registration and use of the ® symbol alone will prevent users from creating marks that are confusingly similar. However, if a third party infringer utilized a mark that is confusingly similar, a mark owner can demonstrate their ownership by directing any infringers to their registered trademark, which is publicly viewable on the internet. Federal registration also allows a mark owner to obtain statutory damages up to $200,000 (in counterfeit cases), treble damages (for willful infringement), and attorneys fees, should the mark owner need to pursue any infringement of its trademarks through litigation. For these reasons, trademarks can act as both a sword and a shield for the registrant.
Why Trademarks are Important for Streamers
A trademarked alias will provide you with complete control over the use of your name in connection with the goods and services in which your trademark is registered. For instance, if your alias is “CKNdinner”, and you file a trademark registration for that phrase in connection with Class 25 (clothing, footwear, headgear, etc.), you will be the only person or business that is able to sell t-shirts, hats, etc. with that name on it once the mark is registered. These goods will also show the ® symbol after the mark, which will help deter potential infringers before they even think about utilizing the registered mark, or a confusingly similar one, on their own goods. Further, if someone were to infringe on their registered marks, they would have a strengthened position to pursue a claim through court due to the potentially increased damages and ability to be awarded attorney’s fees.
Without the trademark on your alias, it is much more difficult to protect against a third party trying to profit off of your established brand. It sounds uncommon, but this happens more frequently than you may think. A few years ago, professional athlete Johnny Manziel was forced to take legal action against a man who sold t-shirts using his popular moniker, "Johnny Football". Although Manziel did not have formal trademark protection for the nickname, he still had common law rights to use the phrase and the opportunity to plead his case in court. Plaintiffs in these types of actions may still be successful without a registered trademark, but in order to receive a monetary award, they would have to demonstrate actual damages, which can be in difficult in many cases. Nonetheless, the federally registered trademark would grant streamers and influencers the right to sue in federal court, and due to the statutes which govern trademarks, the bar to recover monetary damages would be much lower.
As online streaming viewership continues to grow, individual brands are becoming increasingly more valuable by the week. Subscribers and companies alike are willing to pay a great deal of money to streamers and influencers in the hopes reaching their audience and showcasing its brand. In order to make sure that their brand is adequately protected, streamers and influencers should consider the benefits a trademark can provide to them. In addition to the benefits described in this blog post, trademark registration in the US may also serve as the basis for a foreign trademark registration, which is especially helpful given the increasingly global esports and streaming industries. Sophisticated streamers and influencers should follow in the footsteps of the entertainers before them, and their massive brands, in order to shield themselves from any potential infringers while they grow their brand.
If you are a streamer or influencer and you would like to discuss how our attorneys can help you with this process, please contact us.
Whether it’s apparent or not, streamers and influencers are each a business. However, many of these individuals have not considered that their current business entity structure may not be the best option for them, given the risks at stake and the protections that could otherwise be available to them. Let’s explore the different types of entities and how they relate to streamers and influencers.
Sole proprietorships are one of the most commonly used business structures by streamers and influencers in the videogame and esports industries, as they are the simplest to create. In order to ”create” this structure, no formal action is necessary. The sole proprietorship is created once the individual begins performing business activities. As a result, streamers and influencers often operate under this designation without being aware of it.
Sole proprietors can operate under their own names, or a trade name. If an owner does decide to use a trade name, states generally require the owner to register the fictitious business name with the state. Any trade name should always be unique.
In addition to its uncomplicated setup, the taxation of sole proprietorships is relatively easy since there are no distinctions between owners and their businesses. Any income earned by the sole proprietorship will be reported as income by its owner on his or her personal income taxes. The owner will also have to report any losses to the business on their personal taxes.
Though a sole proprietorship is the easiest kind of business to establish, it’s also the most risky.
Limited Liability Company
LLCs are a popular entity selection for business owners because they provide their members with the benefits of limited personal liability and tax flexibility, while still being relatively simple to create and operate. LLCs are created by filing the requisite certificate of organization with the state where the LLC will be located.
The most substantial benefit to an LLC is that its owners are not subject to personal liability for debts/liabilities incurred on behalf of the business. Since LLCs are designed to separate business assets of the company from personal assets of its owners, the owners’ personal assets remain protected while the business’ creditors are only able to reach the business’ assets. For streamers, this protection from liability means that if, for example, you are sued for failure to perform your sponsorship obligations, the only assets that the sponsor could sue you for are the business’ assets (your computer, the business bank account, etc.) and NOT your personal assets and income that your business has paid you to perform your services. Accordingly, this is an easy way to protect your life from the activities of the business.
With respect to taxes, profits and losses from an LLC pass through to the owners’ tax return and losses can be used to offset other the owners’ income, but only up to the amount invested. As with sole proprietorships, this is helpful as the business itself is not subject to its own taxes.
LLCs are a good option for streamers and influencers because it shields liability while still allowing the streamers or influencers to profit off of their business as they would have if there were no business entity in place. However, it is important to note that the liability protection is not perfect, as certain actions can limit and/or destroy that liability shield if the LLC is not managed properly.
Corporations are the most rigid business structure. Corporations are created by filing an articles of incorporation with the State. Once the company is incorporated, it issues stock to its shareholders in exchange for cash or other assets. The amount of stock each shareholder receives determines the shareholder’s ownership percentage in the corporation. There is no limit to the amount of stock that can be issued.
Choosing to set up an organization as a corporation will provide its shareholders with several benefits. Similar to that of an LLC, corporations provide its owners with protection from personal liability. Additionally, this type of structure is generally more attractive to investors than an LLC. Furthermore, companies using this type of structure may also use stock as a business incentive to their employees. This has become a popular option for start-up companies who, in their beginning stages, do not have the amount of capital required to pay talented employees. However, corporations are taxed separately to its owners, meaning that any profits that the business earns are taxed at the corporate level, and then any profits paid to the owners are taxed as income.
Corporations are not ideal business entities for individual streamers and influencers due to the rigid nature of the structure and double taxation. However, it is plausible that a corporation could be a good fit for a group of streamers or influencers who wish to come together and create a business bigger than any of them individually.
Streamers and influencers should be aware of the various business entities that they could utilize to perform their services while possibly offering themselves a shield from liability. Though it may seem odd, any streamer or influencer is a business unto themselves. Though the choice of business entity will always vary based on the business owner’s circumstances, exploring the possibility of creating an LLC to perform their services is a sound business decision. If you’d like to discuss how our attorneys can help you establish your business, please contact us.
(Our intern, Mark Hamilton, Jr., assisted in the creation of this blog post. Mark is a rising 3L at Marquette University Law School)
With Twitch experiencing yet another wave of DMCA takedowns from the music industry, IRL streamers are particularly vulnerable if they are not careful. As an IRL streamer, it is easy to forget that the sounds around you, including music and other broadcasts, are not only being heard but also recorded and saved by your stream. This issue is not necessarily a new one, as Twitch has experienced multiple waves of DMCA claims in the past few years, though it is a topic worth reminding about.
IRL streamers must be aware of and understand their surroundings, even more so than a streamer playing a simple First-Person Shooter game. As most IRL streams are in an environment in which is not controlled by the streamer, whether it be grocery shopping, retail shopping, or in a restaurant, IRL streamers need to be aware of copyrighted content around them so as to help avoid DMCA claims. This blog post discusses some ways that IRL streamers can help to avoid a DMCA takedown and ultimately ease some concern about IRL streamers being helpless to DMCA takedowns due to their environment.
What is a DMCA takedown?
A DMCA takedown is a notice sent to an internet service provider because a copyright owner believes someone has infringed upon their content and wants the infringement removed. Essentially, the copyright owner would submit a DMCA takedown notice with Twitch stating that a specific streamer is utilizing their content without permission and that they want the stream and VOD removed. Twitch would then, following its procedures, take down the content that was referenced to by the copyright owner. At this point, the streamer would be told by Twitch why their stream was banned or VODs removed. The streamer could then file a counter-notice, which basically states that the stream and content did not violate any copyright law and that the material should not have been removed, effectively forcing the alleged copyright owner to pursue them in court.
However, if a copyright owner files a DMCA takedown and gets the streamer’s content removed without actually checking and making sure that there was a violation, there are consequences. Knowingly submitting a false DMCA takedown makes the alleged rights-holder liable for damages, which the aggrieved party would be entitled to.
How are IRL streams subject to DMCA takedowns?
IRL streams face two primary issues in avoiding DMCA takedowns. First, as IRL streams are predominantly in public settings, there is concern that the streamer cannot determine what kind of content is and is not being played in their environment. This in and of itself is the key DMCA takedown risk factor that typical streamers do not have. Second, as common with all streamers, there is the issue of broadcasted copyright content, like background music in a store, being recorded on the streamer’s VODs. Because a VOD is an archived stream, it not only contains all of the audio that was recorded and live-streamed but also is available for any investigating parties/technologies to review and potentially flag for DMCA violations.
Not All DMCA Takedowns are Appropriate
Recently, some IRL streamers have been using their streams as a talk show to discuss ongoing sporting events. Such was the case with CDNThe3rd (“Ceez”) when his stream was recently banned. During the Logan Paul and Floyd Mayweather fight, Ceez was using his stream as a platform to discuss the fight in what he refers to as “#ViewageFightNights.” At no point did Ceez show the PPV event or play any of the sounds from the broadcast. Instead, Ceez used his own graphics and placed a round counter and timer at the bottom with information about how to legally purchase the fight. Ceez, who has hosted these IRL fight talk shows many times, was then banned by Twitch after only three hours. Showtime, the broadcaster and rights holder of the Paul fight, issued a DMCA strike against Ceez and his stream. However, Showtime did not adequately assess the situation as their content was never shown or played by Ceez. As of now, Ceez has gained his channel back and is no longer banned. But, the mere fact that Ceez had his banned lifted does not make the DMCA takedown by Showtime proper. If Ceez chose to, he may be able to pursue Showtime for damages as a result of the false DMCA takedown.
How to Avoid DMCA Takedowns as an IRL Streamer
Admittedly, the best advice to avoid any sort of DMCA takedown as an IRL streamer is to avoid copyrighted material overall. While this is not easy, it is the only surefire way to ensure that your content will not be flagged or taken down. IRL streaming presents a unique set of circumstances, and often it might feel as if you are more limited than you might be while streaming a game. Unfortunately, because most environments in IRL streams are not established by the streamer themselves, the streamer may be more exposed to potential DMCA takedowns.
Legally speaking, IRL streamers should be aware of what they are walking into. In order to help avoid DMCA takedowns, IRL streamers need to be able to recognize potential copyrighted content issues that the setting of their stream and its background may present. Making legally appropriate decisions will determine whether or not the stream or its VOD gets flagged or taken down. Unfortunately, these are not easy assessments to make and may require further planning in advance of IRL streams. While this removes some of the randomness to the content, which is otherwise appreciated in IRL streams, this will also give you the time to think through the risks of copyrighted content at each planned location or give you the opportunity to speak with your attorney to evaluate potential issues.
IRL streaming has never been easy, and the discussed copyright issues compound that difficulty. If you require any assistance with assessing the legal risks of your planned IRL streams, we’re happy to help.
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