Downloadable Content, and Other Low-Cost Con-Themed Items Provide Similar Experiences

Nova Southeastern University

From the SelectedWorks of Jon M. Garon

2017

Pop Culture Business Handbook for Cons and Festivals: Introduction and Introduction and Table of Contents Jon M. Garon

Available at: https://works.bepress.com/

jon_garon/49/ FILM FESTIVALS, COMIC CONVENTIONS, MUSIC FESTIVALS AND CULTURAL EVENTS DOMINATE THE MODERN CULTURAL LANDSCAPE. EVERY ATTENDEE, VENDOR, EXHIBITOR, PANELIST, AND ORGANIZER NEEDS A PLAYERS HANDBOOK TO NAVIGATE THE RAPIDLY CHANGING WORLDS OF CONS AND FESTIVALS.

Pop Culture Business Handbook for Cons and Fes vals provides a real-world guide and reference for these exhilara ng experiences, providing rules, strategies, and insights for the people who a end, work, and develop these fantas cal worlds.

With discussions on cosplay, selling autographs, ﬁlm fes val submissions, organizing panels, policing bootlegs as well as insurance, crowdfunding, budge ng, pyrotechnics, safety and Con planning, the Handbook provides the deﬁni ve guide to “Con Law.” It is an essen al planning tool for any road trip for a conven on and a must for anyone launching or managing a Con or fes val.

Advance praise for Pop Culture Business Handbook for Cons and Fes vals

“DO NOT HOST NERDS WITHOUT READING THIS BOOK! Anyone who cares about fandom, conven ons, gamiﬁca on, making money and following the law must read this book cover to cover.” - Theodore F. Claypoole, Partner at Womble Carlyle Sandridge & Rice, LLP

"Cons are no longer just events; they are full-ﬂedged businesses requiring professional

planning, management and legal compliance. … The book includes extremely useful G guidelines for successfully organizing Cons, mi ga ng risks, and achieving planned outcomes." a - Dr. Kalyan C. Kankanala, Chief IP A orney, BIP Counsels and Founder of Invenomics r

o Film Festivals n JON M. GARON is a law dean and professor at Nova Southeastern University Shepard Broad Comic Book Conventions College of Law who specializes in entertainment law, technology law, business law, and intellectual property. Science Fiction Conventions Music Festivals Jon M. GarBoonok Fairs jongaron.com Pop Culture Business Handbook for Cons and Festivals

The business, strategy, and legal reference guide for fan conventions, film festivals, musical festivals, and cultural events Jon M. Garon

The science fiction convention, comic convention, film festival, and music festival worlds reflect labyrinths without rules or manuals. The Pop Culture Business Handbook for Cons and Festivals provides a real-world guide and reference for these exhilarating experiences, providing rules, strategies, and insights for the people who attend, work, and develop these fantastical worlds.

Manegiare Publications Fort Lauderdale, Florida

This publication is designed to provide accurate and authoritative information regarding the subject matter of the book. The author and publisher are not providing legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent person should be employed.

Library of Congress Cataloging-in-Publication Data Garon, Jon M. (Legal and business consultation), author. Pop Culture Business Handbook for Cons and Festivals, The business, strategy, and legal reference guide for fan conventions, musical festivals, film festivals, and cultural events / Jon M. Garon.

Includes bibliographical references.

1. Entertainment industry—United States—Finance. 2. Entertainment— United States. 3. Entertainment industry—Finance—Law and legislation—United States. 4. Conventions and Festivals—Staging—Law and legislation—United States. 5. Entertainment industry—Law and legislation—United States. 6. Pop Culture Business Handbook for Cons and Festivals. I. Title.

Cover and interior design: Jon M. Garon and Noah Jordan Garon

Printed in the United States of America 5 4 3 2 1

Preface This book highlights a strategic approach to the science fiction convention, comic convention, film festival, book fair, and music festival worlds, providing a player’s manual, map, rulebook, and strategy guide to the user experience and promoter toolbox. Many of the strategies should also extend well past the Con itself into entrepreneurial business practices and social engagement for members of the Con community. With few exceptions, the book chapters apply equally to all public events whether they are film festivals, gaming conventions, art shows, or music festivals. For convenience, therefore, the term “Con” includes the entire range of interactive, open public programs. The applicable laws and regulations are largely the same for all of these programs. The strategies for attending, promoting, and booking do vary, however, depending on the audience and genre, so those distinctions are highlighted where appropriate. Permanent theme parks share much in common with Cons, as do professional conventions and trade shows. This book, however, focuses on pop culture and the temporary events that bring professional creators together with their fans for a unique and shared experience. This book provides more than a description of a Con. Each section of the book serves to provide a strategy guide to the Con community, including the promoters, panelists, artists, vendors, fans, and general public. This guidebook lays out the common management strategies taken to properly structure and execute these types of events. In each chapter, the book illustrates the context of common issues and identifies key business decisions and legal parameters involved in forming and managing a successful Con. While no single chapter can provide everything one needs to know about a topic, these will serve as a key reference guide for participants. Even for the experienced attendee, Con attendance at the largest panels can be overwhelming. Events involving crowds in excess of one hundred thousand people make access to hotels, event tickets, transportation, and even food something of a battle. Regular attendees know the hidden tricks to make the event memorable, while first-time attendees often find themselves hot, tired, confused, and outside the major events. By providing a guidebook, first-time attendees can better

iii iv understand the rules of the game and improve their experience at these massive and sometimes overwhelming festivities. For entrepreneurs and artists seeking to use a Con as a business promotion strategy, understanding the theory and structure driving the Con experience is essential to success. Increasingly, businesses of all sizes have started to see the attention given to Cons and festivals as a way to promote their brands, creating a sometimes uneasy alliance between commerce, culture, and art. Municipalities seize on these events as financial engines but often fail to understand the management that must accompany the introduction of these events into a local economy. At their heart, all Cons must provide an entertainment experience to the audience that is engaging, unique, fun, and safe. Like the role-playing worlds these Cons sometimes emulate and the fan communities they support, the operational rules must be understandable, transparent, and supportive of an effective “in-world” economy so that participants and organizers both succeed. This guide will help all organizers and participants navigate in this world.

Table of Contents Preface ______iii Table of Contents ______v Introduction ______1 A. Why This Book ______1 B. The Role of the Book ______2 C. Acknowledgements ______3 Part 1 – Cons and Festivals ______5 1. The Theories Underlying the Con Environment ______5 A. Origins and Culture ______5 B. Physical Environment ______9 C. Con Management as Game Strategy ______12 2. Con Revenues ______17 A. Sources of Revenue ______17 B. Pricing Strategies ______20 C. Resale of TicketsBrokers and Scalpers ______23 D. Food Sales ______25 E. Exclusives, Giveaways, and Artist Experiences ______27 3. Con Expenses and Budgeting ______31 A. Fixed Costs, Stepped Costs, and General Overhead ______31 B. Fixed Cost of Staffing ______32 C. Variable Costs and Scalability ______35 D. Cash Flow and Credit Lines ______35 E. Financial Responsibility – Protecting the Funds ______37 F. Sample of a Simple Expense Budget ______38 4. Contracts and Agreements to Operate a Con ______41 A. Transaction Management – Contract Basics ______41 B. Venue Agreement ______46 C. Ticket Terms and Agreements ______47 D. Talent Agreements ______49 E. Employment and Volunteers ______51 F. Special Considerations for Con Contracting ______55

v vi

5. From Celebrities to Stall Operators – Vendors and Exhibitors ______57 A. The Vendors ______57 B. Becoming a Con Vendor ______58 C. Trademarks, Bootleg Products, and Transformative Artwork __ 59 D. Selling Autographs and Original Art ______61 E. Competitions and Special Events ______62 6. The Reel Story: Film Festivals and Markets ______65 A. Established Global Leaders ______65 B. Essential Elements for a Successful Film Festival ______67 C. Competition Rules ______71 D. Strategies for Safe Submissions when Entering Festivals ______73 E. Juries and Jurors ______76 F. Academy Award Eligibility ______77 7. Attendee BasicsSurvival Guide for Patrons, Customers, Guests, and Goers ______79 A. Planning the Trip ______79 B. Planning the Day ______81 C. Basic Necessities ______83 D. Be Respectful ______85 E. Event Strategies ______85 8. Safety, Security, and Insurance ______87 A. Tort Liability Basics ______87 B. Responsibility and Liability ______89 C. The Con’s Responsibility for the Venue ______90 D. Required Insurance ______92 E. Beyond Insurance and Code ______94 F. Security and Anti-Terrorism Considerations ______95 G. Pyrotechnics and Stage Safety ______96 H. Weapons and Physical Safety ______98 I. Americans with Disabilities Act Obligations ______100 9. Legal Structure of the Con ______101 A. Organizations to Avoid: Sole Proprietorships and General Partnerships ______101 B. Comparisons between For-Profit and Nonprofit Organizations 102 C. Comparisons among Corporations, Limited Liability Companies, and Social Purpose Corporations ______105 D. Organizational Structure of the For-Profit Business Entity ____ 108 E. Legal Structure of the Nonprofit Corporation ______110 F. Qualifying as a Nonprofit Corporation ______112

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G. Nonprofit Partnerships and Fiscal Sponsorship ______114 i. Operation as a Committee Within Another Charity ______114 ii. Fiscal Sponsorships ______115 10. Financial Structure of the Con ______117 A. Traditional Equity Financing For-Profits ______117 i. Valuation ______117 ii. Introduction to Securities Regulation – Hire a Lawyer ______118 B. Crowdfunding, Crowdsourcing, and Crowd Financing ______121 i. Crowdfunding ______121 ii. Crowdsourcing ______122 iii. Crowd Financing ______123 C. Loans ______125 i. SBA Guaranteed Loans ______125 ii. Loans from Friends and Family ______127 iv. Microloans ______130 v. Other Lenders ______131 Part 2 – Special Considerations ______133 11. Free Speech, the First Amendment, and the Comic Book Legal Defense Fund ______133 A. Basics of the First Amendment ______134 B. Defamation as an Example of the First Amendment’s Role on State Law ______136 C. Inapplicability of the First Amendment to Private Activities ___ 138 D. Application to the Con in Public Venues ______139 E. Role of Cons in Promoting Free Speech ______139 F. Comic Book Legal Defense Fund ______140 12. Copyright Protection for the Works at the Cons ______143 A Copyright Attributes – Authorship, Scope, Duration, and Formalities ______143 i. Authorship, Including Joint Authors ______143 ii. Scope of Copyright ______146 iii. Securing and Protecting the Copyright ______148 B. Copyright Ownership, Transfer, and Termination ______149 i. Ownership ______149 ii. Transfers ______149 iii. Term and Termination ______150

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C. Copyright’s Limits, Including Fair Use ______152 i. The Range of Copyright Limitations ______152 ii. Fair Use ______153 iii. Limiting Secondary Liability ______157 13. Fandom and CreativityIncluding Fan Art, Fan Fiction, and Cosplay ______161 A. Fan Culture ______161 B. Upsetting the Fans ______164 C. Media Appropriation, Fan Fiction, and Fan Art ______165 i. Fair Use for Fan Fiction ______166 ii. Defamation and Invasion of Privacy in Fan Fiction ______168 D. Fan Enthusiasm – Extending, Studying, or Marketing Works __ 170 E. Cosplay ______175 14. Gambling, Raffles, Door Prizes, and Competitions ____ 177 A. Chance or Skill ______177 B. Providing Giveaways rather than Games of Chance ______181 C. Charitable Gambling ______181 15. Cons as Social Action ______185 A. The Benefit Concert ______185 B. Educating Through the Con Format – Teach-Ins ______186 C. Fandom as Political Action Group ______188 D. Cons Addressing the Demands of the Fandom or Cultural Community ______190 16. When Things Go Wrong ______193 A. Attendance Planning ______193 B. Budget Concerns ______194 C. From Dead Batteries to Acts of God ______196 D. Crowd Management and Crowd Control ______198 E. Free Speech, Hecklers, and Censorship ______201 17. Cons and Transformation of Media Distribution ______205 A. Marketing and Promotion Strategies ______205 B. Production of Advertising ______207 C. Regulation of Advertising ______207 D. Regulation of Con Content Created at the Event ______210

Part 3Resources and References ______213 18. Crafting a Legal System in a Fictional Work ______213 A. Lessons from a Mouse ______214 B. Sources of Sovereignty ______219 C. Civil Codes, Common Law, and Regulatory Regimes ______221 D. Crime, Punishment, Restoration, and Investigation ______224 E. Economic and Finance Systems ______227 F. Primogeniture and Inheritance ______229 G. How to Write an Economic and Legal System for the Narrative 230 19. Boilerplate – Key Terms of the Standard Agreement __ 233 20. Sample Agreements ______243 A. Commercial Exhibitor Application and Agreement ______243 B. Sample Agreement: Band/Artist Participation Agreement ____ 251 C. Sample Employment Agreement ______257 21. Insurance ______265 22. Federal Employment Law Requirements ______267 A. Summary of Prohibited Employment Practices ______267 B. Summary of Practices for Employee Screening and Hiring ____ 275 23. Regulations for Crowdfunding: A Small Entity Compliance Guide for Issuers ______287 24. Sample Nonprofit Corporation Articles of Incorporation 299 25. Contact Information ______301 26. Bibliography ______303 Index ______305 About the Author ______313

Introduction

A. Why This Book

To fully understand the purpose of this book, it is helpful to put it into the context of my other writings and professional activities. I am currently Dean of Nova Southeastern University Shepard Broad College of Law. I have taught at many law schools and served for a short time as Interim Dean of the Hamline University Graduate School of Management. I am also a law professor and an attorney practicing in the areas of intellectual property and business law. As a law dean and professor, I am committed to the lawyer’s obligation to make the law more accessible to the public. My goal with this book is to demystify the legal “secrets” of starting a business and to create new opportunities for anyone with the creativity and tenacity necessary to become an entrepreneur. This helps explain why I write books for non-lawyers, but not why I chose this topic. In 2002, I published my first book, The Independent Filmmaker’s Law & Business Guide. That book has been a hit among filmmakers and has assisted them to make films, create film companies, and participate in social discourse through entertainment. My second book for non-lawyers is Own ItThe Law & Business Guide to Launching a New Business through Innovation, Exclusivity and Relevance. Own It explains the mysterious but critical relationship between intellectual property and innovation in simple, business language to provide advice on the financing, planning, legal structures, and corporate strategies used by successful start-up companies. In many ways, this was a sequel to The Independent Filmmaker’s Law & Business Guide, serving to expand the lessons to a much broader audience of business entrepreneurs. This book builds on the same themes as the others, helping entrepreneurs create high quality events in a manner that creates a compelling experience for the attendees, offers a safe experience for everyone, provides the Con organizers an economically sound business plan, and extends the authors, artists, musicians, and creators an opportunity to create and explore their passions. This book is somewhat more personal than the others. I created my first business while still in high school, dedicated to wholesaling board games, D&D publications, and fan merchandise to the local hobby shops

1 2 Introduction that had yet to understand these products. My efforts helped build awareness of these games so that players would not need to drive three hours to buy an extra set of 20-sided dice. My decades of experience with community theatre and non-union professional theatre also informed my thoughts about the chapters on fan culture. The thousands of small theatre groups throughout the United States serve to enable tens of thousands of people to sing, act, direct, build sets, create props, and run lights and sound. Many original works are shared in these communities, but more often, these groups reinterpret and reimagine the plays of Shakespeare, Off-Broadway, and the West End. Ultimately, this book is intended as a “Players Handbook,” similar to that of the Advanced D&D Players Handbook sitting on the shelf near my desk. It is a reference tool and starting point. I hope you find it useful. Enjoy your quest.

B. The Role of the Book

This book is a guide to the fascinating world of comic book conventions, music festivals, book fairs, film festivals, and similar experiences. It provides legal and business fundamentals. The entrepreneur must supply the business knowledge to make the book’s principles useful, and the business experience to know when to take risks and when to avoid them. The book provides a look behind the curtain for the fans, patrons, attendees, vendors, facility managers, and municipalities who may wonder what drives these events and the people who live for them. Some of the book chapters focus more heavily on the attendees, vendors, or organizers. The reader can move from section to section and focus on those sections of greatest interest, but whether written from the perspective of the Con organizer or the customer, many of the discussion apply equally to both. Like the Con itself, the reader should be free to roam through the pages, sections, and chapters to discover the most interesting path. THIS BOOK DOES NOT CONSTITUTE THE PRACTICE OF LAW OR PROVIDE LEGAL ADVICE THAT CAN BE RELIED UPON AS AUTHORITATIVE. THIS INFORMATION IS GENERAL IN NATURE AND SHOULD ONLY BE USED IN CONJUNCTION

WITH A LICENSED ATTORNEY, PROPERLY FAMILIAR WITH THE SPECIFIC LEGAL MATTER IN QUESTION. THIS BOOK IDENTIFIES PARTICULAR INDIVIDUALS, FIRMS, AND COMPANIES. NOTHING HEREIN CONSTITUTES AN ENDORSEMENT OF THESE ENTITIES OR OF THEIR SERVICES AND CANNOT BE RELIED UPON AS THE LEGAL BASIS FOR ENGAGING SUCH SERVICES. Although many of the companies listed are the largest or most visible in their respective fields, their names are used either for illustrative purposes or to provide a starting point for the reader’s own research. Conversely, the failure to appear in the book should not be deemed a negative assessment of any particular product, service, or organization.

C. Acknowledgements

This book was inspired by a trip to San Diego Comic-Con with my eldest son, an avid Magic: The Gathering player, and by my youngest son, who created his first board game at the age of twelve. Through them, I have learned to play Magic, watched Supernatural, and rekindled my interest in Doctor Who that began with Jon Pertwee as my favorite Doctor. This project is the result of the work supported by my colleagues at Nova Southeastern University Shepard Broad College of Law, my students, and my family. Special thanks to my Research Assistant on this project, Jordan Goldman, and Alison Rosenberg, Assistant Director and Reference Librarian from the Shepard Broad College of Law, Panza Maurer Law Library along with her fellow Reference Librarian, Michelle Murray and my executive assistant, Dr. Tracey-Ann Spencer. I appreciate the efforts of many business professionals, lawyers, and other colleagues who reviewed the manuscript for this book to assure that I never ran too far off course. In particular, I want to thank Dan Satorious, chairperson of the Minnesota Film and Television Board and noted independent film producer and lawyer for his invaluable insights. Despite my network of support, all responsibility for the information in the text is solely my own. In particular, I would like to thank members of my family who read drafts of the book and provided thoughtful guidance, including my wife, Stacy Blumberg Garon, my partner in all things, for her candid analysis and exceptional editing. I wish to thank my sons, who remain a constant source of inspiration, for their help on this project. Editorial

4 Introduction assistance came from Avery Garon and the cover artwork was developed with the help of Noah Garon. To my sons, Avery, Noah, and Alec “Sasha” (z”l): this book is for you.

Part 1 – Cons and Festivals

1. The Theories Underlying the Con Environment

A. Origins and Culture

Music and theatrical festivals likely have their origins in humanity’s earliest history and are often entwined with religious rituals. Although the Greek god Apollo was associated with music, being the conductor of the heavenly choir, his brother Dionysus was the god of wine, revelry, and theatre. The modern festival extends this tradition of revelry and finds its roots in the Dionysian side of the family. These revels were significant parts of Western culture and have remained so to this day. Community fairs and celebratory fêtes brought travelers and tradesfolk together for commerce and community throughout history. Today, modern music festivals can range from a small event in a public park to a multi-day, multi-stage live broadcast event reaching global audiences. The modern comic book convention had very humble origins, as did other fringe cultural movements. Comic book conventions date their origin to the New York gathering “Comicon ‘64” of fewer than 100 people. Those in attendance realized the gathering addressed a powerful need and the movement grew. George R.R. Martin likes to boast that he is the “first comic book fan” because he received badge number 1 at Comicon ‘64. Today, these fringe events have moved to the center of the cultural universe. Comic-Con International’s San Diego Comic-Con (the site at which I began this book) boasts over 130,000 attendees. South by Southwest (or SXSW) was directly or indirectly responsible for injecting over $325 million into the Austin economy1 in the year 2016 alone, with music, interactive, film, and education programs. Comic book conventions were preceded by science fiction conventions. Among the first of science fiction conventions was the World Science Fiction Convention, which began privately in 1936 and took on its

1 SXSW Statistics for 2016, http://greyhill.com/reports.

5 6 Cons and Festivals formal organization in 1939. A British convention held in 1937 shares bragging rights as potentially the first such public event. At the time of these origins, science fiction, fantasy, and comic books each operated within the margins of popular culture. In the ensuing decades, however, these genres have shifted center stage as economically dominant forms of entertainment. Video games, an outgrowth of science fiction, comic book content, and technological innovation, represent over $100 billion annually in the U.S. economy.2 Most modern blockbuster motion pictures owe their story lines, if not their source material, to one of these genres. Film festivals, in turn, highlight works by emerging artists and serve as a platform to market established artists to an international community. Based on the money spent by attendees, Cons and festivals are important to their local communities and to the larger national economy as a whole. They are also so much more. Content from Cons and festivals dominate U.S. pop culture. The conventions serve as launching pads for new artists, entrepreneurs, and innovators. The smaller versions of these events create space to develop fan fiction, allow new artists to expose their work to interested audiences, and provide an entry point for new creative enterprises. As a cultural event and platform for expression, these events have shifted from the margin to the center of culture and influence, while largely being left without any critical assessment. What makes the Con experience a unique cultural event that has survived the millennia? As its festival origins show, at its heart, the Con reflects a profoundly tribal experience, gathering members of the tribe to celebrate and share. This means the well-run Con presents experiences to be shared, opportunities for attendees to gather and engage with each other, and totems to retain as part of the attendees future identification. The totems may include badges, T-shirts, Con-branded paraphernalia, limited edition runs of Con-related content, or other items. Totems are much more than just a source of revenue, for they serve as a long-term identifier of the Con with its core audience. Buttons, badges, T-shirts,

2 Press Release, Gartner Says Worldwide Video Game Market to Total $93 Billion in 2013, GARTNER (Oct. 29, 2013), http://www.gartner.com/newsroom/id/2614915.

1. The Theories Underlying the Con Environment 7 albums, and merchandise are part of the cultural experience, not merely an add-on or method to defray costs. Well-run Cons are organized with the tribal associations of the attendees in mind. If a Con has multiple stages, buildings, or rooms, the venues should be organized to enable self-identified group members to congregate and to spend time together between scheduled events. Although attendees complain about long lines at Cons, the time in line is often an integral part of the experience as people interact with each other, meet new people, and share experiences. Organizers who use the time between events to make the experience more engaging will create a much stronger event than those that simply leave the attendees to their own devices. Managing the lines is as important to a good Con as managing the stages. Applying the cultural precedents to modern events, this means that the Con should have well-organized events, space and activities for attendees to interact, and physical objects to take back from the event. Each of these three positive attributes must be carefully curated by the event organizers. While it may appear that these are incidental to the activities on the stages and in the exhibit halls, these attributes dominate what will be the cultural experience of the attendees. Comic-Con attendees often talk of finding “their people” at the convention. The choice to wear costumes (known as “cosplay”) or at least wear graphics identifying the wearer’s allegiance to particular works, artists, or ideologies, all serve to enforce this tribal ethos. The phenomenon is very similar in large music festivals at which the audience can organize around particular musical genres and generations. Cons also highlight a temporal existence, creating once-in-a-year events and once-in-a-lifetime experiences. The pilgrimage to the annual event can anchor some attendees’ calendar much like key religious celebrations. Unlike most religious celebrations, however, the particular programs at the event may present unique experiences that the audience members cannot recapture. Since no one can predict which shows or programs might become culturally iconic, the chance to be at the main stage during the surprise performance highlights the attendees’ experience. Theatrical producers have long understood the power of this potential. The chance to watch two musical stars jam together during an unannounced (but rarely unrehearsed) encore keeps audiences to the end

8 Cons and Festivals of concerts and becomes the focus of most post-concert conversation. Surprise guest panelists help assure that fans will line up for programs even if they have heard all the panelists many times. At the 2015 Comic-Con, for example, Star Wars fans attending a main stage panel were treated to a surprise concert by a Star Wars orchestra in the park adjacent to the San Diego Convention Center. The mix of Con culture and music festival energy tapped into every positive audience experience in one surprise event. Theme parks share a few of these attributes, but most parks lack the temporal experience of a Con. While visits to Disney World or Opryland USA (now gone) serve to gather attendees around a common theme, these do not have the sense of shared time, that all the attendees were able to gather for this event, and that something important might happen in the moment. The opening night of a new show at a theme park or Las Vegas hotel captures some of this experience, but the audience knows that the show will run for months, with each performance appearing nearly identical to all the others. The nature of county and state fairs often share much in common with the con. Renaissance Faires have even more similarities. These last much longer in duration than the typical Con, sharing attributes of theme parks as well. Trade shows organized for professionals also have many of these attributes, but they are focused on the attributes of the attendees’ work life rather than the attendees’ self-identification. This may have been the Steve Jobs difference for launching a product. Instead of launching Apple innovations at the Consumer Electronics Show (CES), a massive product exhibit convention attended by industry professionals from around the world, Jobs used the Apple Worldwide Developers Conference (WWDC) to gather his followers at their own event and make his product launch talks the signature feature of the gatherings. Apple designed a complete tribal event for their product launches, which helped support the faithful and propel the brand. Apple understood the psychic and social aspects of its products for its users. Cons combine the most powerful psychological and emotional aspects of the attendee experience. They also provide these emotional connections for artists, creators, and genres every year. Every aspect should be planned accordingly.

1. The Theories Underlying the Con Environment 9

B. Physical Environment

Interestingly, a Con is not bound by location. Organizers place them in all manner of physical environments, including hotels, convention halls, public parks, theaters, and universities. Some events occur in a single venue while others are spread among locations throughout a city. Nonetheless, although the Con is rarely defined by its physical environment, a well-run Con must take the physical, environmental, and safety concerns of the event location into account (discussed in Chapter 8). Cons are inherently social events. They encourage interaction between artists and fans, often help blur the distinction between professional and amateur artistic creators, and promote the creative expression of the audience members. Good advice can be applied from the University of Kansas’ Community Tool Box for the organization of a festival: Social interaction is the meaningful contact people have with one another. “Meaningful” is an important word here, because it implies an exchange that includes real communication, even if only for a moment, and leaves each party feeling that he’s shared something with another human being. Good places for interaction are places where people – often from many parts of the community and/or diverse backgrounds – meet naturally and interact comfortably and often pleasurably because of the nature or attraction of the space and/or the activities associated with it. Good places for interaction are spaces that make people from different areas and backgrounds want to be there. In order for that to be the case, these spaces need four basic characteristics:  There has to be a reason for people to go there  There has to be a reason for people to want to stay once they’ve arrived  People in the space have to feel safe and comfortable  The space has to be welcoming and accessible to everyone3

3 KU Work Grp. for Cmty. Health & Dev., Univ. of Kan., Creating Good Places for Interaction, COMMUNITY TOOL BOX, http://ctb.ku.edu/en/table-of-

10 Cons and Festivals

The well-designed Con venue should have a number of key spaces which are generally separate rooms, but can be provided as demarcated spaces in an outdoor venue or in single large hall. The centerpiece of the event is the main stage which is programmed for the largest events, performances, and panels of the Con. Larger Cons will also have additional stages or rooms where other programs, panels, and performances can occur. A marketplace where vendors can sell goods has become an increasingly important aspect of the festival. Fans want to purchase items that reinforce their participation in the event. For music festivals, structural changes in the music industry have made the sale of live-event CDs and merchandise a critical part of the artists’ revenue. Artists from all genres should plan on making some of their goods incorporate the name, date, and artwork of the event to heighten the importance of the at-event purchase. Cons can also take advantage of otherwise under-utilized space. Often the physical location will include more rooms or room time-slots than can be programmed by the organizers. Efficiently utilizing these open spaces for complementary programming purposes may add to the overall event without increasing total cost. Such complementary programs may include space for artists, opening rooms for an open-mic session, utilizing tables for self-programmed table talks, adding rooms for fan-organized game play, and otherwise creating an environment where participants engage other participants. Utilizing these ancillary spaces often provides additional benefits to the event’s organizers and attendees. For the attendees, it increases the program options, making the time spent more enjoyable and productive. For the organizers, it adds low-cost growth to the scale of the event, creating a larger overall experience without demanding more of the organizers. Closely related to the physical space is the need to provide food and sanitation. Opportunities to purchase food and drink are important to keep the attendees and participants satisfied with their overall experience. If people leave in order to purchase food, they will have less time to spend at the Con, and they will incur the additional frustrations of searching out dining options in an unfamiliar location. Providing a range of food choices contents/implement/phsyical-social-environment/places-for-interaction/main (last visited Feb. 1, 2017).

1. The Theories Underlying the Con Environment 11 improves the audience experience. Unfortunately, at many convention halls, universities, and hotels, the venue usually controls what food is sold. Where opportunities exist to augment these options, the organizers should take advantage of the flexibility. If the Con organizers cannot program the food inside the venue, they may be able to influence the availability of food at nearby locations. One simple technique is to determine whether there is convenient space for local food trucks to gather. By being outside the venue, the encouragement of food trucks does not violate the rental agreement with the venue. The inclusion of food trucks adds to the diversity of the food and likely provides more options on the price of food as well. Another example can be found with Renaissance Festivals. These operate around the country featuring their food selection as a primary draw for visitors. Once limited to roasted turkey legs, these events now feature dozens of outdoor specialty foods, some rivaling the offerings at county and state fairs. Bathroom facilities and accommodations under the Americans with Disabilities Act are also both important factors to be incorporated into event planning. These are generally under the control of the venue, which helps the event organizers, but such logistics should be taken into account when designing the layout of rooms and the schedule. Outside events require additional planning. For example, the Americans with Disabilities Act requires reasonable accommodations even for temporary facilities. Con organizers will need to assure they have rented sufficient portable restroom facilities and arranged for site clean-up. Space for interaction is also important for the artists, panelists, and performers. Since a successful Con depends on strong draws to bring in the audience, making a positive experience for the professionals helps encourage their participation and may actually reduce the cost to attract talent. A backstage or greenroom area for the professionals helps improve the experience considerably. For larger events, controlled entranceways are essential. A similar space for event volunteers is also important. Like the professional headliners, the volunteers are essential to the success of the event. Having a physical area to organize the volunteers that serves as a home base throughout the event can enable the event organizers to plan, communicate, and adjust staffing much more effectively. Being part of the

12 Cons and Festivals teamcomplete with backstage accesswill help assure that volunteers will return year after year. This increases efficiency and helps establish a strong event. This modest investment in volunteer space will pay long- term dividends. Finally, the event organizers should pay attention to the non- programmed space, such as the hallways, check-in areas, gathering locations, and similar environments. Wide hallways create better flow and allow for attendees to sit down. Open areas with tables and chairs allow for participants to gather and refresh themselves throughout the event. At larger, outdoor events, first-aid tents may be important to assure that attendees affected by the weather can receive simple help. As the event grows, the non-programmed logistics will start to include parking, bussing to multiple venues, arranging blocks of reserved hotel rooms for out-of-town guests, and acquiring permits from city officials if traffic flow is affected by the event. While each of these situations has its own unique challenges, the basic need to move the attendees safely from venue to hotel, control parking, and manage the experience outside the venue follow a common pattern. City permitting offices should be contacted very early in the process if traffic control needs to be changed from the city’s usual system. Civic auditorium staff understand when police support for traffic needs to be involved. By communicating with the venue staff and the city permit offices early in the planning, most problems can be avoided and the costs can be properly incorporated into the event budget. From the attendees’ perspective, their experience begins when the subway doors open or the driver begins to look for parking. Event organizers need to anticipate each step in the attendees’ experience to maximize the satisfaction and enjoyment of their experience.

C. Con Management as Game Strategy

For both Con organizers and attendees, there is another metaphor which may help explain the Con experience: that of game strategy. The organizers create a board, the game rules, and the states of winning or successfully completing the game. The analog for the board is the physical environment, and the game rules are specified by the organizers in the form of pricing, scheduling, and content availability. Less explicit but most

1. The Theories Underlying the Con Environment 13 important for a successful Con is the definition of the winning state for the attendees. So how does an attendee “win” at Comic-Con, SXSW, or a local Con? For many, the answer to this question will define the success or failure of the event and the likelihood of long-term success. Writing about a comparison between an established Chicago Con and a successful new rival, brand blogger Mandy Kilinskis noted a number of important adjustments: Exclusive Attendees – in the form of exclusive relationships with national publishers. Wide Variety of Interests – If you were interested in comics, anime, fantasy, or mustaches, there was a booth or vendor for you to visit. All facets of nerdom were proudly represented. Better Organization – Panels, screenings, and Q & A sessions with celebrities are the highlights of a convention and lots of people will show up just to attend these break-off sessions. Simple Comforts – Anyone can attest that walking around for hours will take a toll on your legs and feet. But by adding carpet, the entire experience will be (and was) much more comfortable. It made me linger at booths. It wasn’t a pain to get up and down to look at merchandise. … The carpet! The clearly-marked signs! Oh, what luxury! Awesome Giveaways – Using tickets that are full-color badges attached to lanyards [instead of wristbands] … don’t just look cooler, but they are easier to display as a keepsake. This makes them collectable and far more memorable tickets. Second, promotional products were everywhere. From giant booths like Marvel and DC to the smallest table at the back of Artist Alley, lots of people were giving away logoed freebies like pens, buttons, and bookmarks.4 The attendees were more likely to win at the described Con because of the giveaways, the attention to comfort, the range of topics, the range of

4 Mandy Kilinskis, C2E2: How a Three-Year-Old Comic Book Convention is Disrupting the Chicago Convention Scene, BRANDING BEAT, https://www.qualitylogoproducts.com/blog/c2e2-comic-book-convention-disrupting- chicago-scene/ (last visited Feb. 1, 2017) (slightly adapted from the text).

14 Cons and Festivals experiences, and the opportunity for unique interactions with some vendors. These elements drive success for the Con attendees. The challenge for every Con organizer is to deliver on this promise. First, the goal is not to have a single winner, but to have most – if not all – attendees feel as if they have won. Consider a game tournament. The initial rounds are generally not single elimination. A participant who invests time and money to attend a tournament does not want to be out one hand after the round starts. Game tournament eliminations occur only after everyone has been able to compete multiple times to establish rankings. Similarly, this is why marathons and races do not end when the first person crosses the finish line. Everyone who completes the course is victorious over the course – just not over the first finisher. Second, in the context of “winning” at a Con, then, there must be multiple ways to win. If the Con is one that sells out, then attendance itself is a victory. For most, however, tickets are available at the door. For those who can pre-order and avoid the line, the ability to skip ahead creates a small victory. Any positive influence, whether it be a benefit or an advantage, that can be derived from a particular aspect of a Con, can create an immediate “winning” effect on the players involved. Inside the Con, there remains competition amongst attendees to gain access to popular panel events. Attendees at the hardest-to-get panels generally consider themselves to have been the winners in the competition for seats and events. Cons tend to avoid VIP sections, providing small victories to those who get into a program early and obtain better seats. At the same time, the people who barely make it into the back of a crowded venue also feel victorious in not being shut out. Third, an important aspect of being at the Con is being part of the narrative, so any positive news stories about the Con tend to cast a positive halo onto those who attended the panels and performances covered by the press, social media, or popular news outlets. In today’s social media marketplace, this engagement can be broadened significantly. Identifying the social media modalities, republishing public content posted by attendees (in whatever media are current for the event), and highlighting the attendees create positive feedback moments – or small wins – for the attendees. These shared communications can be easily thrown onto a display screen to allow attendees the immediate, positive feedback of having their

1. The Theories Underlying the Con Environment 15 comments shared. Admittedly, some attention might need to be paid to the content moderation, depending on the audience and ethos of the event. Digital photographs of the attendees, panelists, and activities can easily be shown on screens located in the venue. Each of these small steps provides a small win for the person identified. This may have a particularly strong effect on those cosplayers who invest significant time and effort on their costumes and makeup. Fourth, more concrete wins can include raffles, door prizes, and public service competitions. Raffles and door prizes are easy ways for people to participate in a competition and share in the potential to win a prize. Public service competitions involve participants competing on teams to provide a more general benefit. A competition of this kind may include events such as competing on a team to remove the most trash from a beach, repaint a public park, or run in a 5K to raise money for a worthy cause. These explicit games create opportunities for attendees to succeed at the event rather than merely be passive attendees. Give-away items in the form of buttons, posters, downloadable content, and other low-cost Con-themed items provide similar experiences. Fifth, the exhibit hall sale of goods and the sale of autographs and signed photos also provide feedback much like the small wins just described. The attendee is rewarded for standing in line, for being a stalwart fan, and for being part of the community. The theory behind these small wins can be contextualized in the learning theory approach popularly known as gamification. Karl M. Kapp provides two definitions that explain the concept behind the rewards listed above: “A game is a system in which players engage in an artificial conflict, defined by rules, that results in a quantifiable outcome.” – Katie Salen & Eric Zimmerman, Rules of Play: Game Design Fundamentals.5 “A game is a system in which players engage in an abstract challenge, defined by rules, interactivity, and feedback, that

5 Katie Salen and Eric Zimmerman, Rules of Play: Game Design Fundamentals in KARL M. KAPP, THE GAMIFICATION OF LEARNING AND INSTRUCTION: GAME-BASED METHODS AND STRATEGIES FOR TRAINING AND EDUCATION 7 (Pfeiffer 2012).

16 Cons and Festivals

results in a quantifiable outcome often eliciting an emotional reaction.” – Raph Koster, A Theory of Fun.6 Con organizers necessarily create an artificial conflict as attendees compete for the scarce resources of prime seating at panels, front row concert tickets, autographs, photo opportunities, and limited edition sales items. The community’s value on these scarce items creates its own quantifiable outcome. In this regard, the Con is the gamified version of attendance at a university conference or lecture. This closely tracks the first definition of gamification. The second definition applies equally well. Attendees’ participation at a Con place themselves in a system which challenges them to compete for scarce resources, interact with other participants as well as the professionals at the Con, and receive feedback by the event organizers and peer attendees. The attendees’ interaction triggers strong emotional reactions based on their joy or frustration at the Con. Understanding that the experience of a Con is itself a game should help organizers understand that they must make the gameplay fair, transparent, predictable, and positive. Reinforcing positive behaviors, acknowledging the moments of success throughout the experience, and using many different positive reinforcement mechanisms all help improve the experience for the attendees. Effective game designers understand how to keep the players engaged even if the final win state is many, many turns ahead. Con designers must think strategically along those same lines. Adding very explicit informational guides add to the transparency and predictability of the design. If such guides are published, then the Con organizers should make every effort to remain consistent with those guides.

6 Raph Koster, A Theory of Fun in KARL M. KAPP, THE GAMIFICATION OF LEARNING AND INSTRUCTION: GAME-BASED METHODS AND STRATEGIES FOR TRAINING AND EDUCATION 7 (Pfeiffer 2012).

2. Con Revenues When organizing a Con, the economic model used to develop the event will drive many of the key decisions. If one accepts that the designing of the Con is a form of building a complex game for the attendees, then the Con economy will define many of the structural design choices which will come later in the planning. This chapter describes the revenue sources. The next chapter covers the types of expenses that will be incurred and the approaches to help assure that the revenue exceeds the expenses.

A. Sources of Revenue

Each Con must earn sufficient revenue to pay the rent on the venue, pay for the rental of lights, staging, sound, and other equipment, pay the professional presenters, pay staff, cover the costs of marketing and promotion, purchase insurance, and if the Con is operated as a for-profit, earn sufficient profit to keep the investors willing to continue to invest. Operating even a small Con can become a large enterprise. While ticket sales are the most obvious form of income, they are just one of many potential sources of revenue for the event. The most common revenue sources are:  Ticket sales  VIP passes  Vendor booths – license fees and/or percentage rents  Advertising in a guidebook  Banners at the event  Underwriters program opportunities  In-kind contributions from airlines, hotels, restaurants, and liquor sponsors  Hotel occupancy taxes or other economic development funds  Gifts from nonprofit organizations, private foundations, and individuals, if organized as a charitable organization rather than a for-profit enterprise

17 18 Cons and Festivals

 Crowdfunding  Use of the infrastructure for year-round education rather than just the event The ticket fees generate the most obvious form of revenue because that income is paid directly by the attendees. Typically, the Con will have a daily ticket price, an every-day pass, and some combination of multi-day passes. VIP passes will include the every-day pass plus access to certain exclusive panels and various parties. Equally important for the successful event are the fees earned from renting vendor booths. The simplest of these booth rental agreements provides that vendors can rent booths based on the size of the booth. There may also be premium charges for the location of the booth in the exhibit hall. If the Con has the contractual rights to rent out food booths, then the right to sell food also would include a significant premium expense for the vendor. The more complex pricing model requires the vendor to disclose its sales to the Con operators and provide a percentage of its income as part of the booth rental fees. This model is based on how rent is calculated in shopping malls. The benefit for the vendor is that the costs of the booth are based on the success of the Con. If the sales revenue at the Con is low, then the costs to the vendor will be lower, but if the vendor is successful, then the Con benefits as well. There is the risk of cheating by the vendor, but assuming sales taxes are collected, any cheating would also be tax fraud and relatively easy to track. Vendor booths can be further segmented into categories of vendors. An “artists’ row” can feature a section of visual artists, graphic artists, craft artisans, or other genres as appropriate for the event. These artists are themselves a draw to the Con and an important revenue source for the Con. The artists’ sales of original works and autographing published materials will add foot traffic and create that “win condition,” enabling an attendee to acquire an original work and meet the artist. Similarly, performers and artists are often sought out for autographs. Creating vendor space for autograph sales has become an increasingly popular and lucrative aspect of modern Cons. The publication of a guidebook for the event presents other opportunities to market to the attendees. In this guidebook paid

2. Con Revenues 19 advertisements can highlight booths, nearby restaurants, local event sponsors, and similar advertisers. Similarly, banners and signs can festoon the Con, including some that are advertisements for vendors, restaurants, and others. Because Cons are cultural events, there is also an interest by other cultural organizations to promote these events. As a result, there may be opportunities for the Con to receive underwriting support by various institutions. Just as both for-profit and nonprofit enterprises promote public radio, many enterprises see a close affinity with the attendees at the Cons and would want to be partners in the Cons’ successes. In an age where universities aggressively advertise for students, sponsorship by regional universities may be a natural relationship. City, county, and state arts and cultural organizations also provide potential funding opportunities. In some cases, special taxi, hotel, and restaurant taxes are designated for funding tourism and trade promotion. For example, the Victoria Comic-Con in Texas received a grant of over $9,000 from hotel occupancy tax funds in 2014.7 Such funding, in turn, promotes the legitimacy and institutionalization of the event, which may help when negotiating with venues and permitting authorities. These funds can often be marketing dollars, and even for-profit enterprises are eligible to receive these public funds to help propel local tourism. Similarly, gifts from nonprofit organizations, private foundations, and individuals provide another potential source of revenue. These sources of funds are only available to nonprofit organizations. Those donors who believe in the artistic and cultural purpose of the Con are likely to be the primary supporters, but there will also be donors who understand the importance of the Con as part of the geographic investment in the community. Together, a coalition of those who see the Con as helping build the culture in the community and those who will give funds to promote the culture supported by the Con make powerful organizational allies. Finally, Cons are well suited to take advantage of crowdfunding opportunities. Crowdfunding is available to both for-profit and nonprofit

7 Melissa Crowe, Comic Con Receives Almost $10,000 of HOT Funding from Victoria Film Fest, City Council, VICTORIA ADVOC. (Aug. 19, 2014, 11:06 PM), https://www.victoriaadvocate.com/news/2014/aug/19/comic-con-receives-almost- 10000-of-hot-funding-fro/.

20 Cons and Festivals organizations. In the older model of crowdfunding, the Con seeks funds from the crowdfunding backers by offering incentives to the backers. The incentives can range from a “thank you” in the program guide to pre-sales of event tickets and merchandise. The benefit of this model is that it provides early working capital to the Con while also providing a marketing platform. If the Con is operated as a for-profit enterprise, then there is an option to offer backers equity or ownership stakes in the company. Under this model, the Con would offer a percentage of its stock for sale to the backers. The required disclosures are complex but significantly easier than raising funds through the sale of these same securities to the public. Only a few of the crowdfunding platforms have the regulatory infrastructure to offer the ownership shares of the Con to be sold. Sales of securities are highly regulated under both state and federal law, so Con organizers should use this funding tool with great care and attention to the regulatory obligations. Nonetheless, this does create a potential source for true capital investment in the Con.

B. Pricing Strategies

Careful financial planning is essential for long-term success. Unpaid bills could leave the organizers personally responsible for the expenditure. Even if all unpaid expenses are limited to the Con itself, the community damage caused by the losses will undermine all the social and cultural goals of those involved. To assure positive net revenue, Con organizers must take a number of factors into account. The first is the operational costs of the Con. In order to earn a profit, the total gross revenue from all the various potential revenue streams must exceed the total costs of operations. The business model must provide for reasonable, conservative estimates of attendance, booth rentals, advertising revenue, and other financial sources. To the extent possible, the Con financial operations should plan separately for fixed costs and scalable costs. For example, the venue will likely have a rental expense minimum. This is a fixed cost. Whether one person attends or one thousand people attend, this minimum cost will be incurred. In contrast, the venue may have additional rooms available as add-on charges. These rooms can be added during the months leading up to the event itself. As ticket sales and booth sales increase, the rental fees

2. Con Revenues 21 for these additional rooms can be added incrementally. Expenses such as sound, lighting, printing, and security will have some combination of fixed and scalable costs. Con organizers should plan advertising and marketing expenses in a staged strategy that also makes these expenses largely scalable. (See Chapter 3 for a more detailed exploration of budgeting.) Having determined the expense budget, the Con organizers will thereby establish a minimum goal for revenue. The next step is to establish a pricing philosophy for the event. The pricing philosophy will shape the promotional strategies and marketing for the Con. Many events have a simple, for-profit goal: maximize revenue. While there is nothing wrong with this goal, it may be inconsistent with the purpose of operating the Con, particularly if the Con is organized on a nonprofit basis. Maximizing revenue generally means pricing the tickets, booths, and advertising at the highest price consumers are willing to spend. Maximizing revenue tends to focus on short-term returns instead of long- term relationships. Setting the maximum price for each revenue stream is generally done by comparing the rates paid by the same customers in competitive situations. A market survey or Internet search should help reveal the typical prices paid by attendees at similarly sized events. Of course, prices range dramatically between the hottest music festival concerts and shows with few headliners and numerous unknown acts. Organizers must step back from their unbridled enthusiasm in their project to place ticket prices in the context of realistic value from the potential audience. Moreover, the willingness to pay top dollar is fueled by marketing, so if the Con does not have the ability to market heavily, then it must adjust its pricing expectations accordingly. The goal of maximizing revenue eliminates the need to balance the pricing for tickets, booths, advertising, and other sources. Under this model, every price decision is the same: charge the highest possible price, based on the market history of the Con or of new, similar events in similar markets. There are consequences to this revenue strategy. The first is that the higher the prices, the higher the expectations of the purchaser. This pricing strategy is likely to increase the demands of the vendors and expectations of the attendees. Failing to meet these expectations will result in the Con’s failure to deliver on its expectations even if it met all of its minimum goals.

22 Cons and Festivals

Another consequence is that maximizing revenue signals that the relationship between the Con and the vendors and attendees is primarily a financial relationship. This tends to diminish the long-term relationship between the Con and its audience. Successful business owners understand that more supportive relationships with vendors and consumers tends to provide needed support and flexibility to manage unseen challenges. The Con organizers should take the benefit of good will into the planning, if possible. At the same time, it may be that the costs of operation are such that the only way the Con can meets its minimum revenue goals is to maximize revenue across the board. Thus, maximizing revenue may be a discrete goal of the enterprise, or it may be a necessity born from the costs of operations. If the initial projections provide significant net revenues, then there are other pricing considerations to take into account. The price of the tickets changes the nature of the audience. Expensive tickets increase revenue and resources but reduce the audience that can afford to attend the event. A variation on the ticket pricing modeling is for the Con to charge for particular add-on activities. A theme park like Disneyland does not charge for each ride. Instead, the admission charge covers all the basic rides. Many modern museums and traveling carnivals, in contrast, charge an admission fee and then separately charge for many of the rides and exhibits. Disney also charges for certain premium experiences. The tiered pricing has the benefit of reducing the cost to attend for some patrons while monetizing the high demand for headline events. Many Cons do not charge additional fees for key panels. Others, however, sell additional tickets for key panels, programs, shows, concerts, or parties. In fact, most Cons have some form of VIP pricing for at least some aspect of the add-ons. The selection of the events requiring secondary tickets directly impacts the strategy and structure of the event, but VIP pricing has the benefit of increasing revenue and segmenting audience experiences. Another variation is to utilize group sales. Group ticket sales offer significant ticket discounts to groups in exchange for the group being responsible for purchasing the minimum block of tickets and generally purchasing the group tickets early in the ticket sales timeline. The value of

2. Con Revenues 23 early sales cannot be understated for an organization that needs revenue to pay deposits and advance costs. Commercial theatre, for example, has long used group booking as a strategy to balance ticket discounts with the need for advanced sales and cash flow. Cons can work with community groups to sell groups of tickets at a discount for resale by that group to its membership. This is another approach to let the Con work with local fan clubs, gaming societies, and other communities. The group will then become an asset for the Con, promoting the sales of the tickets to its membership. Of course, an additional pricing strategy is to stratify the ticket prices for certain communities. Seniors, students, and veterans are common designations for price discounts. Discounts for public radio/public television members, for members of fan clubs or game clubs, or for other affiliated groups may further the goals of creating a strong community relationship with key stakeholders while maximizing revenue from the general public. Discounts for affinity groups often result in great promotional support from those organizations. Similar strategies work for the booth rentals as well. Creating lower- cost booth rental opportunities for nonprofit organizations such as universities and public service groups help build strong community relationships. For the new Con, additional flexibility may be needed. Commercial vendors may be reluctant to rent booths if there is not a track record of attendance, so offering rebates in the event that paid attendance drops below a certain threshold may be essential to get these companies to agree to participate in the event. (The Con will find it far easier to pay a rebate than try to collect a surcharge weeks after the event, so rebates are more practical than scaling up the rental fee as attendance expands.) The same rebate strategy might be appropriate for key advertisers.

C. Resale of TicketsBrokers and Scalpers

Ticket resale creates another challenge for the Con organizers. Some musical artists have insisted on setting low-cost ticket prices for their concerts as an effort to promote a close relationship between the artist and audience, but these efforts often prove ineffective. Ticket brokers and

24 Cons and Festivals scalpers often purchase the lower-priced tickets and resell them at substantial markupsometimes many times the face value of the tickets. Ticket brokers are generally licensed businesses that purchase the tickets in bulk. Sometimes these bulk purchases are negotiated with the event organizers. In other situations, the brokers use sophisticated software and staff to snap up ticket inventory. Scalpers are individuals who buy and sell tickets, typically in the area near the venue itself. Of course, scalping by individuals has also moved online. A third version of scalping has developed where individuals acting as unlicensed brokers purchase tickets and resell them through third-party resale ticket sites. The majority of states have only limited laws to prohibit these practices. Even where the law requires licenses of ticket brokers and prohibits unlicensed scalping, there are numerous exceptions and relatively little enforcement. Each state is different and these laws change often, so while this section should not be read as legal advice to begin scalping tickets, it does serve as a warning to the Con organizer that laws generally do not stop scalping and ticket-price gouging. For a Con that does not sell out, the concern is modest. Same day, at- the-door ticket sales serve as their own economic cap on the prices ticket brokers can charge. The situation changes, however, if the Con anticipates selling out or if significant programs at the Con are likely to sell out. For high-demand tickets, the Con organizers have two choices. First, the Con can sell these tickets at very high prices and capture the revenue that would otherwise be earned by the ticket broker. This helps the Con with revenue but makes it much harder for the general public to be able to pay to attend the Con. Inevitably, high prices lead to some audience resentment and bad- will. An alternative option is to both bar and block ticket brokers and scalping. Both steps are necessary. Barring ticket resales requires that the ticket contract specify that the ticket is non-transferable. The language should be made part of a binding contract with the purchaser. This practice can be accomplished easily if the tickets are sold via a website. A “clickwrap” agreement creates a mandatory dialogue box during purchasing which sets out the terms of the ticket license. In that contract, the limited right to personally attend the Con is specified. The contract explains that the ticket represents a non-transferrable license to attend the event. It provides that the license is automatically revoked if transferred

2. Con Revenues 25 and that there is no refund of the license fee if it is transferred. The attendees must click on the “I agree” button as a condition of purchasing the ticket. The legal right to bar transfers of the ticket provides the Con the power to stop ticket transfers, but the Con must also provide a physical mechanism to effectuate the rule. Often, the technique for this works by having the tickets printed on-site with the individual’s name printed on the badge. Then, the badge is checked against a valid proof of identity of the individual seeking to gain admission. Often this is paired with a one-use wristband, so that the security can see that the identity badge has been verified on each day. The Con selects a different color for the wristband each day to reduce the chance that the badge is shared among multiple people. The process of proving one’s identity as a part of the ticket-purchase reinforces both the previously discussed game-play notion of the patron’s Con experience and the tribal aspect of the event. Even something as trivial as making it through security and identity is an achievement. The name badge then becomes a tribal marker and memento of the Con. People often retain their badges as souvenirs. Printing the name, nickname, location, or interest/genre on the badge creates a way for attendees to find each other and interact while in lines.

D. Food Sales

Sale of food and drink is an important aspect of the Con experience for attendees but can easily be overlooked as an opportunity for the organizer. First of all, the food concession should be understood and negotiated as part of the venue selection. Many convention facilities and hotels have exclusive catering arrangements that prevent the Con organizers from controlling either the food selection or the pricing. In the convention lease agreement, the concession revenue often goes to the convention center rather than to the event. If the nature and quality of the food selection is important to the Con organizers, then control over these items may require the use of a university, fairground, or other type of facility that is less restrictive in the catering provisions of the lease and offers more choices or flexibility. Renaissance festival and medieval fairs are best known for making use of programmatically relevant food to promote food vendors who provide

26 Cons and Festivals food to fit the themes of the event. The sales of ales and drumsticks are often a key driver for attendance at these venues. Science fiction and comic book Cons have not yet established a tradition for such experiential enhancements, though Mos Eisley-styled cantinas8 are growing in popularity among some science fiction events. Convention centers typically sell highly overpriced and unhealthy food and drink. These agreements significantly limit the food products that can be sold by the organizers or by vendors. If this exclusivity can be avoided, then food revenue may be an excellent opportunity for the Con organizers to increase revenue without increasing ticket prices. Again, Disney provides an excellent example of the themed restaurants and snack shops that are a highlight of its theme parks. Con organizers can take advantage of certain items, even if they cannot control all food sales. Most attendees, for instance, will succumb to impulse purchases of candy and bottled drinks. The candy concession can be extremely profitable and can be added to areas where volunteers are providing patron services. A more sophisticated retail approach could include other impulse items like batteries, rechargers, phone cables, and similar items. The Con may be able to acquire the product on consignment or else specifically seek an outside vendor to add these resources to the event. Water remains an important part of the patron experience. In my book Own It, I discuss the harmful economic and environmental aspects of selling bottled water (which is often nothing other than repackaged tap water). Con organizers should consider selling branded reusable water bottles or including them with ticket sales. If the venue has water fountains which work with reusable water bottles, then the only cost is the bottles. If not, then the Con organizers should consider contracting with a water company to provide free water to accompany the branded reusable water bottles. These items will generate revenue and tremendous good will. They may become the collectibles that set each year of the Con apart from the

8 See STAR WARS EPISODE IV: A NEW HOPE (Lucasfilm May 25, 1977). The bar featured was in the city Mos Eisley on the planet Tatooine. The actual name of the bar is Chalmun's Cantina. Cf. TALES FROM THE MOS EISLEY CANTINA (Kevin J. Anderson ed., 1995).

2. Con Revenues 27 other years. Moreover, giving away water is simply the right way to treat patrons. Increasingly, food trucks are becoming more popular in urban areas. As a Con grows and its audience increases, the Con organizers should assess the area surrounding the venue for the potential to invite food trucks to support the patrons. In some cases, this can include renting spaces for the food trucks in an adjacent parking lot. In other situations, the food truck owners are simply provided with the schedule of the Con so that they can utilize municipal street parking to make themselves available for the patrons at convenient times and locations. Even if there is no direct revenue to the Con from the food trucks, their presence will help retain patrons at the event, improving their experience and increasing their purchases from the exhibitors. The Con also has the opportunity to arrange exclusive after-party events at local bars and restaurants. The post-party events can provide another great experience for patrons while earning additional revenue for the Con itself. Because of state liquor laws, private catering of such events must be done through licensed companies. The Con can arrange to have such an event in a private venue, or it can arrange to have its event at a local bar and negotiate with the bar regarding the financial arrangement. Premium parties that charge enough to earn a profit after the costs of the entertainment, food, and liquor should be organized by the Con. The typical event, however, seldom earns net revenue, so partnering with a local bar can reduce the cost and administrative issues for the Con while still offering the premium event to the attendees.

E. Exclusives, Giveaways, and Artist Experiences

To build the positive game reinforcement elements into the Con experience, organizers should be mindful to create specific give-away items, exclusive opportunities, and chances to interact with willing professional attendees. For many Cons, this is the natural ethos of the event. Nonetheless, careful planning can maximize the impact and experience. Some aspects of the totemic giveaway experience should be offered to every attendee. Everyone coming to the Con should receive a benefit, both tangible and intangible. This may be as simple as the patron’s name badge with sufficiently interesting artwork and Con logos so that the badge has

28 Cons and Festivals some long-term value. For comic conventions, the art in the exhibit book or a special edition of a comic book published exclusively for attendees is an excellent promotional item. The cost of such an item is not prohibitive and the per-item cost of production is sufficiently low, so that value to the patron is high while the cost for the Con to produce is low. As discussed above, the Con should also consider branded, reusable water bottles. Digital distribution of specialty items reduces the distribution and per- unit cost to nearly zero. Screensavers, digital art, music, and similar items can be accessed or unlocked by attendees through the ticket purchasing process. Likely the most popular item is the printed T-shirt. Slightly more costly and bulky than the other items suggested, the T-shirt is an excellent tribal giveaway because it enables patrons to wear their subculture allegiance and advertise their affiliation to the world. Since T-shirt giveaways are ubiquitous, many patrons collect their Con shirts as well. Event cultures differ greatly. While attendees at Comic-Con receive a free T-shirt as part of their ticket purchase, music concerts which may cost vastly more rarely give the tour shirts away for free. Instead, tour T-shirts are sold at tremendous mark-ups. Having an understanding of the particular cultural expectations is essential in making the selection of items for sale. From this perspective, it is important to understand what items will be appreciated and which will be treated as junk. Posters are often given at Cons, but different age groups react to free posters with very different responses. For an event involving Magic: The Gathering (a trading card-based competition), exclusive promotional cards or cards with alternative artwork have a very high value to its players, even though the physical cost is quite modest. Being culturally relevant provides the giveaway the patron value it needs. Beyond giveaways for all attendees, the Con can choose to have additional exclusives for select patrons based on premium purchase, first- come, or lottery system. The premium purchase has the benefit of providing additional revenue and creating a self-selecting, appropriately sized audience. The first-come system also limits the size of the community receiving the exclusive. Ironically, although a lottery system seems to be the most egalitarian and fair, the perception will be one of lost opportunity for most patrons. The experience for the patrons will actually highlight the loss rather than the gain, so true lotteries tend not to work as well.

2. Con Revenues 29

A variation can be the sale of lottery tickets. This does limit the game to those who wish to pay and changes the sense of participation. Surprisingly, sale of lottery tickets is highly regulated as gambling in some jurisdictions, so the Con should check locally before offering any paid lottery tickets. Some jurisdictions treat nonprofits which sell lottery tickets differently than for-profit companies that attempt to do the same, so depending on whether the Con is organized as a for-profit or nonprofit may determine the legality of selling lottery tickets. The premium tickets are often for exclusive panels, preview nights, receptions with the guest artists, after-parties, limited edition artwork, or limited edition products. At some Cons, these are the premiere items and the limited edition nature of these products and artwork may result in a very lucrative resale market for these items. The panels, receptions, and parties are events that enhance the experience but do not result in a resale market. Any combination of these activities and products can be used. Unlike the giveaways for all attendees, these premiums are not necessary for a successful Con, but may be helpful to build buzz and an inner circle of patrons that support the event. If the Con is a nonprofit that relies on sizeable gifts from a small group of dedicated donors, then these premiums are often an excellent way of thanking the donors, assuring that those donors feel like insiders, and encouraging those donors to stay committed so that they retain their leadership status within the organization.

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3. Con Expenses and Budgeting The budget of the Con is built by comparing the potential revenue to the long lists of expenses involved in operating the Con. As discussed in Chapter 9, a nonprofit, tax-exempt Con may be augmented by donations and reduce some of its tax obligations. The biggest difference between the nonprofit Con, such as Comic-Con, and the for-profit concerts at Coachella or Monterey may be the need to generate sufficient profits (or excess revenues) to generate a business return in addition to making the Con a success. Of course, many nonprofit Cons go on to make significant excess revenues. Those charities typically expand their missions to provide artistic and educational programming beyond the Con itself, funded by the revenues generated during the Con. The Con cannot succeed for very long if it does not earn sufficient income to cover its expenses. To achieve this, the Con organizers must plan carefully to manage the fixed expenses and limit the variable costs.

A. Fixed Costs, Stepped Costs, and General Overhead

Fixed costs are those expenses that remain the same regardless of the size of the attendance. Only a few costs are truly fixed costs, such as the cost to obtain a city permit (if one is required). Stepped costs are those costs that increase in general proportion to the number of people served, but in very large blocks. For example, eggs are typically sold by the dozen or by the gross (twelve-dozen). To serve one person an egg requires a restaurant to purchase a package of one dozen eggs. Until the next package of one-dozen eggs is needed, there is no extra cost. Each package of eggs steps up the cost from group to group. In organizing a Con, as in many businesses, costs are typically stepped costs because they have limited variability. For example, the lease for the venue can be treated as a fixed cost because there is one fee for the lease. If the Con were to grow enough, then the Con might need to step up the cost by renting venue space at nearby facilities. Few Cons have such large events that they have stepped costs that grow the venue as thousands of additional attendees require expanded facilities, but there are some Cons that do operate in this fashion.

31 32 Cons and Festivals

Staffing, talent, and advertising may fall into the category of stepped costs. These are costs that would change for an event at large changes in the Con, such as at steps of 1,000 people, 10,000, and 100,000, but these costs will not adjust on a per-person basis. If the event grows so large that a new venue is needed, then the Con has moved to the next step and this impacts the entire budget.

B. Fixed Cost of Staffing

The front-office staff for the Con is a similarly structured stepped cost. The smallest Con can rely on volunteers or a paid staff of a few people sharing all the work. The Con staffing will quickly grow to include these typical positions:  Manager/Chief Executive OfficerThis person is responsible for making all final decisions and supervising the decisions and approaches of all other senior leadership.  Producer/Chief Programming OfficerThis position may go by many different names. This person is responsible for the thematic decisions; booking acts, performers, and artists; and assuring the programmatic integrity of the Con.  Business Manager/Chief Financial OfficerThis person is primarily responsible for managing the budget, assuring that all operations conform to the budget and to the contracts that define the scope of the Con. Typically, this position assumes responsibility regarding payroll and human relations obligations.  Marketing ManagerThis person is responsible for developing and implementing the marketing and publicity strategy that will bring the audience to the Con. Marketing and publicity are essential to create an audience and build the brand for the Con.  Technical Director/Operations ManagerThis person is responsible for all aspects of the operations throughout the Con, namely coordinating with the venue to assure the power, lighting, audiovisual equipment, rented

3. Con Expenses and Budgeting 33

equipment, and all other aspects of the production operate smoothly and as anticipated. This position also includes coordinating with all the exhibitors, performers, bands, and other artists to arrange proper specifications and expectations for their use of the venue when they load into the location.  Additional Hired Staff and VolunteersThe officers and managers typically head up departments that include a number of people with critically important subordinate positions. These individuals will also need to be trained and managed throughout the planning stages of the Con, the Con itself, and the break-down work following the event. Generally speaking, each of these leadership positions would require a fixed salary, either as an hourly employee, or more likely as an exempt salaried employee. Here, however, the Con organizers can borrow lessons from the independent film and music industries to reduce or defer these expenses. In many of these types of organizations, the basic payment system is a flat fee for the project. Each of the officers, managers, and other key members of the Con team will be quoted a fee for the duration of the project. That fee will then be paid in weekly or bi-weekly installments throughout the project. The Con and the personnel will often both characterize the relationship as that of an independent contractor to avoid the limitations of salaried employment. Under labor law guidelines, the regulations governing salaried employment may require most or all of the staff to be paid on an hourly basis, which is inconsistent with the agreement of the parties and would require higher payments than budgeted by the Con. As a result, companies in the arts fields and independent creative industries such as Cons sometimes risk violation of federal labor law. Such companies rely on the participants to ignore the protections offered by the law. The employees are part of the creative process and resort to labor complaints on a very infrequent basis. Nonetheless, such a business decision does violate the labor codes. Moreover, being a nonprofit does not exempt a company from adhering to the minimum wage laws.

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To help the Con with cash flow and to manage the risk of financial failure, two common financial arrangements can be used: deferrals and profit participation. If the salary is deferred, the employees will earn their specified salary only from the revenues of the Con. Typically, the employment agreement specifies that the deferred salary will be paid after the other third-party costs, such as the venue, talent, equipment rentals, credit cards, etc. After those third-party expenses are paid, the remaining money is used to pay the deferred salaries. In the event the remaining revenue can cover all the deferred salaries, the employees are all paid at the same time. If there is not enough money to pay all the deferred salaries, however, then the agreements should provide that the deferred salaries are paid on a pro rata basis, meaning that the same percentage of the unpaid salary is paid for each employee. If there is only enough money for half of the salaries to be paid, then each person will receive fifty percent of their salary. To protect all employees, the Con cannot choose to pay some members of the staff and withhold payment from others. As a preferred variation on this model, the Con can first pay the full minimum wage owed to each individual in order to meet labor regulations, and then pay the remaining deferrals on a pro rata basis thereafter. Profit participation agreements reflect the opportunity or potential up- side of the business. As a method to encourage key employees, artists, bands, or other participants to take part in the Con, the Con organizers can choose to pay a profit participation. Those who are entitled to profit participation will receive their percentage share of the profits generated by the Con, after all specified expenses have been paid. Profit participation agreements make salary a deferred, variable expense. These agreements protect the Con from needing cash up-front to sign important talent. These agreements also create incentives for key personnel to work to maximize the revenue of the Con. In the film industry, these profit participation agreements are notorious for running in excess of twenty pages in length and all but guaranteeing that no profits will be earned. This is not the case in the independent film and music industries and it need not be the method of writing the profit participation agreement for the Con. At the same time, the definition of profit participation must be clearly explained in a written agreement between the Con and the key individuals.

3. Con Expenses and Budgeting 35

Typically the profits would only be earned after all third-party expenses had been paid in full, including outstanding credit card obligations and all deferred salaries had been fully paid. Profit participation may be offered instead of salary, but in the more typical situation, the person would receive some combination of salary and profit participation. Finally, the Con may provide a daily per diem for those working on set- up, break-down, and operations of the Con. Even if a person is not receiving the weekly minimum wage, the Con may choose to pay a per diem, which is a modest payment on a daily basis to cover gas and food expenses for the employee.

C. Variable Costs and Scalability

Other costs will vary much more greatly depending on the size of the crowd attending the event. Costs for items such as booths and stages, marketing, giveaways, catering, and ticketing will vary directly with the number of Con attendees. Even with these items, however, the ability of the Con to increase or decrease the number of goods, purchases, or money spent will depend on the projections of likely attendees. To manage variable costs effectively, it is very important that the Con encourage advance ticket sales. For example, guaranteeing that all pre-sale attendees will receive a T-shirt in the size requested (whether for free or separately purchased) will help ensure that the Con does not end up with a bill for thousands of dollars in unsold/ungifted T-shirts. Having a limited supply for walk-ins is essential to control the risk of wasting money on unused items. For vendors renting booths at the Con, it is important that the contractual deadline to secure the booth is sufficiently early so that the correct number of tables, chairs, power outlets, and other rented items are selected. Once the deadline for changing such vendors’ orders has passed, the Con will not be able to make adjustments without incurring significant expenses. Timing is critical to effectively manage the variable costs and limit wasteful spending by the Con.

D. Cash Flow and Credit Lines

The timeline to secure a venue and assure that the key talent will appear at a Con may begin months before the Con can actually sell the first of the

36 Cons and Festivals pre-sale tickets. Although Cons have become much larger and more popular in recent years, only a few of these events have significantly early pre-sales of their tickets. In addition to managing the overall budget of the Con, the business manager must pay careful attention to the cash flow of the business. The business manager must keep track of the total amount of money being transferred into and out of the Con on a daily basis. In most instances vendors will require at least partial payment at the time of contracting. These costs can easily exceed the financial resources of the Con. While the use of personal credit cards might seem like a simple solution, this is not really the case. The use of a personal credit card is a loan made by the cardholder to the Con. If the Con cannot find the funds to repay the credit card, the cardholder is responsible for that expense. Credit cards do provide rolling payment terms, but the interest rates are much higher than most commercial loans or lines of credit. The methods available for securing funds depend once again on whether the Con is a nonprofit or for-profit venture. Nonprofit Cons can seek donations and hold fundraisers to gain the operating funds necessary to cover the preliminary costs of operating the Con. For-profit Cons can sell the ownership interests in the Con in exchange for sufficient operating funds to cover these advance expenses. (These funding strategies are discussed more fully in Chapter 10.) In addition to shareholder capital and donor funding, the Con may also wish to consider a line of credit from a local bank. A line of credit would provide operating capital with a much lower interest rate than that offered through a credit card. The interest is paid on only the amount actually borrowed, but the line of credit could remain available from year-to-year, enabling the Con to plan its income and expenses on an annual basis. The revenues from an established Con should satisfy the bank that the Con is a credit-worthy risk. A new Con, like any new start-up, may face some challenges in obtaining a line of credit. But even if the bank requires guarantees from senior management, the interest rates will still be substantially lower than those paid on the personal credit cards.

3. Con Expenses and Budgeting 37

E. Financial Responsibility – Protecting the Funds

Until recently, Cons and concerts were predominantly a cash business. The music and theatre industries are rife with stories of venues skimming money, ripping off the artists and the IRS. With online ticket sales and individually printed badges, the ease of skimming money at the door has diminished, but new technologies also create opportunities for new forms of graft and theft. Accountability, financial management, and careful financial procedures remain a significant obligation for the business manager and the Con. It is very important that both the revenue and expense aspects of the Con business have sufficient safeguards to protect against theft. Checks should only be paid upon receipt of proper invoices. Reimbursements should only be paid upon receipt of physical receipts. All expenses need to be carefully documented and all vendors must be double-checked to be sure they are bona fide (real) companies providing services to the Con. Each day, the actual expenses should be fully reconciled with the budget to project the needed adjustments to the plan for operating the Con and to assure no inappropriate expenses are being incurred, whether by accident or as a result of theft. The procedures to approve payments must have sufficient safeguards so that no staff members are in a position to authorize their own reimbursements. Careful financial records are also essential to meet IRS reporting requirements for employee, volunteer, and vendor reimbursements. Each step in the payment process should be verifiable and auditable. Revenues must also be tracked. Each separate revenue stream should be monitored individually to assure that the revenue from that source aligns with projections, exceeds the associated costs, and fits with the operational expectations of the Con. Attendance, for example, needs to be tracked to assure that the distribution of tickets from sales and comps does not exceed the attendance inside the Con. Careful management will help detect and reduce fraud, whether it is committed by the public or by those inside the organization. Ticket software and online services can provide very helpful tools to assure the revenue management works well. If there is a box office

38 Cons and Festivals managed by the Con rather than the venue, then there needs to be physical security for the funds and accountability that no one has sole access to uncounted funds, particularly during the chaos of the Con itself. Trust, but verify!

F. Sample of a Simple Expense Budget

The team at Concert Ideas, Inc. publishes the “Concert Ideas Event Planning Guide,” which is designed to help produce music concerts at schools. This very helpful guide lists the key elements of the sample budget, which is adjusted slightly to reflect the use for both music concerts and other types of Cons. This sample budget is reprinted at the end of this section. For each of the categories, there may be dozens of sub-categories of budgets. For the operational aspects, each of the separate days of the event should be budgeted so that there are funds and support ready. There is no rule of thumb for the proportion of expenses to be allocated for one particular category or another. The costs of venues, talent, marketing, and other expenses can vary so greatly from city to city and among different types of events that no guide is practical. Nonetheless, the categories of expenses tend to be generally consistent from one type of Con to another. Once the budget has been agreed upon, it becomes the “bible” of the event. The budget should not be revised without careful consideration and input. The actual expenses must be carefully tracked to assure that areas of the budget do not balloon out of control. If significant deviations are made, they must be agreed upon by the senior management of the Con organizers and the re-allocated budget distributed so everyone is working within the same financial constraints. A Con that did not pay its bills was not a successful event, no matter how much fun the participants had during the event. The budget is the most important tool to assure success of the Con. While financial success is only one measure of a Con’s overall benefit and impact, fiscal responsibility is essential for the Con to succeed on any programmatic measures.

3. Con Expenses and Budgeting 39

Pro Forma Expense Budget Venue Cost Salaries and Staff Office Rental for Con Management Equipment for Exhibitors and Vendors – Tables, Chairs, Power, Sound, Internet Equipment for Stages and Performances – Sound, Lights, Barricade, Backline Talent – Bands, Headliners, Artists, etc. Marketing – Google, Facebook and Other Social Media, Newspaper, Radio, TV, Misc. Purchased Goods for Sale or Giveaway Catering for Staff and Talent Catering for Special Events (Preview Parties, After-Parties, etc.) Ticketing Services, Credit Card Fees, and Surcharges Printing and Materials for Program, Signage, Awards, etc. Miscellaneous Operational Expenses Sales Tax Reserves (at least 10% of Budget) TOTAL COSTS9

9 HARRIS GOLDBERG ET. AL., CONCERT IDEAS, INC., CONCERT IDEAS EVENT PLANNING GUIDE 10-12 (rev. ed. 2010); CONCERT IDEAS, INC., http://www.concertideas.com/pdf/CIEventPlanningGuide.pdf (also available https://www.scribd.com/document/95029942/Concert-Planning-Guide).

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4. Contracts and Agreements to Operate a Con To create and operate a Con, the organizers need to make arrangements for the procurement of a venue, equipment rental, staff, advertising, and many other services. For many of these services, the Con organizers will be expected to sign a contract provided by the outside party. In other cases, the Con will be expected to provide a contract. For example, the Con will likely create the agreements for staff and the terms for the sale of the Con tickets. The contracts create the rules under which the Con operates, so understanding and managing the contractual obligations becomes an essential part of the business operation for the Con.

A. Transaction Management – Contract Basics

At its most basic, a contract is an agreement entered into by at least two parties to promise to undertake an action in exchange for the promise of the other party to undertake another action. They take this form: “I promise to pay you $10 in exchange for your promise to mow my lawn.” Most business contracts are bi-lateral, meaning that both parties promise to do what is specified in the contract. Contracts may be either oral or in writing. Because oral contracts are harder to prove and harder to follow, all contracts should be in writing. The written agreement serves as much more than a written record of the understanding. In most business transactions, the parties share a good faith goal to have the transaction or relationship succeed. But without a clearly understood, written agreement, the parties will be forced to rely on fading memory and conflicting information. The written agreement provides a blueprint for the ongoing maintenance of the relationship. The parties should not treat the contract as an historical document to be filed and forgotten. Instead, they should refer to it as the organization framework to help solve problems and collaborate effectively. The duty of the Business Manager is to ensure that only appropriate agreements are executed (signed) and then to ensure that they are being closely followed. In both of these duties, the Business Manager should be supported by all other members of the Con’s leadership team.

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There are key provisions in every agreement. These include the identification of the parties to the agreement, the amount and timing of payments, the conditions of performance for each party, the promises (in the form of warranties and covenants) made by each party, and the consequences of non-performance. Many agreements also include provisions that limit damages or liability. (Additional terms are described and illustrated in Part 3, Chapters 19-20.) PartiesThe Business Manager or CEO will have authority to sign most contracts on behalf of the Con business entity. In extraordinary situations, the authority will need to be given by the governing body of the Con business entity. No one else should sign contracts without express authority to do so. The other party to the transaction needs to be carefully identified in each transaction. PaymentMost contracts involve a series of financial payments based on specific conditions being met. At the simplest, a sales contract provides that the payment and delivery of goods are simultaneous. Many of the agreements involved in the Con will include an advance payment, often due at the time the agreement is executed; additional payments as various milestones are achieved; and a final payment if all the conditions of the contract are met. ConditionsAs contracts become more complex, the most important language is based on conditions included in the agreement. A condition requires performance of something from one party before the other party is obligated. Conditions can also be negative, which if met can trigger the end of certain obligations or the termination of the entire contract. At festivals, it is not uncommon for bands to be paid at the end of their performances. In other situations, however, a band may require that it receive an initial payment upon agreeing to perform. The band will often insist that the initial payment be non-refundable. The non-refundable advance is a common term in band agreements since there is an opportunity cost incurred by the band for agreeing to book a particular event. Even if the Con organizers later cancel the event, the band may have been forced to forego other bookings on that date. Of course, if the band is the party to cancel the contract, then terminating the contract is their responsibility, and the contract should provide that the band must repay the initial payment.

4. Contracts and Agreements to Operate a Con 43

As this illustration suggests, even a term like non-refundable will change with context. Take the following example: “Payment: Company agrees to pay Band the amount of ______dollars ($______) by check immediately following the Performance. … “Excuse of Obligations: Company and Band shall be excused from their obligations hereunder in the event of proven sickness, accident, riot, strike, epidemic, act of God or any other legitimate condition or occurrence beyond their respective control.” 10 If the contract uses these clauses, what duty does the Con have towards the band? If the Business Manager has to cancel because the Con could not secure a venue, does the Con still have to pay the band? Even though the Con was not held and the band did not perform, it is unclear whether the Con must pay the band. The quoted “excuse of obligations” clause appears limited to events outside the control of both parties. So if the Con was cancelled because of floods, fires, or riots, the payment would be excused. The Con’s failure to secure a venue due to lack of funds is likely a situation within the control of the Con (or at least not an Act of God). Under that condition, the failure to perform was caused by the Con and, provided the band is available to perform, it is likely still owed the entire fee. Both parties might be better protected if the contract provides for partial payment along with clearly specified conditions for performance and further payment: “Performance: Subject to the terms and conditions of this Agreement and any amendments or riders incorporated into this Agreement, Band shall perform a musical set running between XX and YY minutes in duration. “Payment: Company agrees to pay Band the amount of ______dollars ($______) by check. Twenty percent shall be paid immediately upon execution of this Agreement (the “Advance”) and the remainder shall be paid immediately following the Performance. …

10 See Festival Entertainment Agreement, BRIAN HEATH, http://www.ispgroupinc.com/contracts/festival_booking_agreement.html (last visited Feb. 1, 2017).

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“Nonperformance: Both parties shall be excused from their obligations hereunder in the event of unpredictable events occurring outside the control of either party (e.g., proven sickness, accident, riot, strike, epidemic, act of God or any other legitimate condition). Any amounts previously paid will be refunded. In the event Company is unable to otherwise perform its duties hereunder, Band shall be entitled to retain the Advance but shall not be entitled to any other payments or damages. In the event Band is otherwise unable to perform its duties, Band shall refund the Advance and be responsible for any additional costs incurred by Company in securing alternative entertainment.”11 This more complicated version of the transaction makes clear what happens if each party were to fail to perform. In practice, most bands expect to be paid if they perform but are unwilling to be responsible for the costs associated with their cancellations. As a result, the contract might limit the band’s financial obligation to the Con to an amount not greater than the original contract price. The difference between the two illustrations highlights the importance of understanding the conditions that can be incorporated into these agreements. Since many aspects of the Con are contingent on other occurrences, using contingent language to limit liability and promote the correct chain of events is essential. The contracts should not leave “what ifs” to chance. Covenants and WarrantiesThese provisions provide promises regarding the statements made in the contract or the promises to complete tasks specified in the agreement. Unlike a condition, a covenant is a promise to meet goals or undertake actions (or to forebear from taking actions). Warranties and covenants also vary slightly. A warranty is a present promise while a covenant is an ongoing promise. For example, a party would properly state that “I warrant that I have paid my insurance premiums for the past three years.” The Con is more concerned, however, that the insurance premiums continue to be paid. The contract should therefore provide, “I covenant that I am fully paid on all insurance

11 Id.

4. Contracts and Agreements to Operate a Con 45 premiums, and I shall continue to pay all insurance premiums on a timely basis throughout the term of this agreement.” If a covenant is breached or a warranty is proven untrue, the party making the covenant or warranty has breached the agreement. A breach of an agreement allows the other party to seek remedies, usually in the form of money. In contrast, a condition triggers the next occurrence specified in the agreement. Covenants and conditions also have different consequences. Copyright provides an excellent illustration of the distinction between a condition and a covenant. In this illustration, a contract that allows players to enter a particular video game’s virtual world prohibits the use of bots, spiders, automated miners, and other non-human interaction with the software. If the promise not to use these items is written as a covenant, then the players using unauthorized software would have breached the contract, but the player would not be prohibited from using the platform. Instead, if the promise not to use unauthorized software was a condition to acquire the nonexclusive copyright license needed to play the game, then the failure to meet the contingency would have two consequences: first, there would be no right to access the game software, placing the unauthorized players in violation of copyright law; and second, the use of the software without permission would be a breach of the agreement. Copyright carries statutory damages, which can run much higher than the contract damages. For the Con, another important example is the difference between a covenant and a condition for the ticket purchase. If the Con wants the tickets to be non-transferrable, then a covenant that the holder of the ticket is the named purchaser would result in a breach of contract were the ticket transferred. If the wording makes it a condition of the ticket purchase that the holder of the ticket be the named purchaser, however, then the attempt to use an unauthorized ticket voids the ticket and bars the holder from attending. This is a much more practical solution than a breach of agreement. In most cases, the Con is better served drafting its contracts using conditions rather than covenants. Consequences of nonperformanceAs highlighted in the earlier example of the band’s non-appearance at a festival, some performances under contracts are much more important than others. The law generally allows a company to substitute performance with another party and then seek to have the additional costs paid by the breaching and nonperforming

46 Cons and Festivals party. This is sometimes difficult to do and even harder to prove in a court of law, so specifying what happens if the contractual conditions are not met helps both parties follow the guidelines of the agreement.

B. Venue Agreement

The venue agreement sets the terms that control what types of activities can occur at the event. The venue agreement will vary considerably depending on the scale of the event. Convention halls and hotels will have very standardized and highly specific agreements. These venue agreements will have been carefully drafted to limit the use of the space, guarantee payment for use of the space, and specify the activities prohibited in the space. Venues that are used for Cons less frequently may not provide as much information. Convention halls and hotels also earn a great deal of their revenue by offering supplemental services at very high prices. Sound systems, furniture, projectors, Internet access, and other modifications to a room arrangement can quickly run thousands of dollars. The Con organizers should plan carefully to determine what the various activities in the venue will require. The Con organizers should plan and budget carefully for any needed supplemental services, and where possible, negotiate to bring in those services from outside the venue. In addition, Con organizers must be sure to specify what rooms or spaces are under the Con’s control. Typically the remaining space will be available to be leased to third parties. Other important provisions of the venue agreement include these terms:  Dates and times for access – including load-in and take- down time for the event  Fees for space and equipment rental, lighting, sound, power, Internet, etc.  Ability for vendors to sell goods and services  Required use of personnel for set-up, security, and other functions  Limits on sale of concession items

4. Contracts and Agreements to Operate a Con 47

 Overtime charges and add-on expenses  Required insurance policies Beyond this introductory list, there are a multitude of provisions that protect the venue from illegal conduct by the Con or its patrons, restrictions on sale of food and alcohol (except by the venue), copyright and trademark infringement, indemnification, and many more. These contract terms serve to remind the Con of its obligations and typically require the Con to assume all responsibility for the event. Nonetheless, the venue will often retain authority to resolve any issues that might arise and include the right to bill the Con for the costs incurred in doing so. Generally, these agreements are not very negotiable, so the Con organizers must familiarize themselves with the obligations of the potential venues and select the venue that has the most appropriate size, cost, and management demands. The specific terms of these agreements vary quite extensively in scale between venues, so selection of the venue is a critical first choice in managing the Con.

C. Ticket Terms and Agreements

The Con has the opportunity and obligation to establish the contractual terms for attendance at the Con. At a minimum, the tickets should condition attendance on meeting whatever restrictions are required by law and by the venue. This can include age restrictions (for example, if alcohol is being served), weapons restrictions, fire restrictions (so no fire- breathing stunts by anyone other than paid performers), and behavior policies. The process of purchasing the tickets should include a click-through process so that the patron is required to agree to the terms as a condition of purchasing the tickets. While it may be sufficient to merely post the terms, it is much better to have established a process of formal assent by clicking “I agree” or by including a statement that provides that “by purchasing these tickets, I agree to the terms and conditions provided to me on the website.” As one of the largest Cons with extremely hard-to-get tickets, San Diego Comic-Con has no on-site ticket sales. Advance registration is required and highly competitive. As a result, the ticket purchasing rules focus on the prohibition of transferring either the e-mail confirmation or

48 Cons and Festivals the badge. Comic-Con retains ownership of the physical badge, enabling it to demand that patrons relinquish their badges upon request. Given the press and marketing presence surrounding Comic-Con, the ticket contract language includes an express right to use the names, likeness, photographs, and identities of those attending the event. This is a very useful right for the Con and essential to help market the Con in future years. Combined with express consent to publish this information, such a provision eliminates any later claims of invasion of privacy. MCM Comic-Con in London uses this quaint but broad disclaimer in its terms: We would advise customers that no refunds will be offered to customers who are refused entry or ejected from a venue on account of late arrival, being or appearing to be under age, declining to be searched, abusive, threatening, drunken or other anti-social behaviour (including smoking in no smoking areas), carrying offensive weapons or illegal substances, or making unauthorised audio, video or photographic recordings. Full rules for photography are at the bottom.12 The U.S. version of this paragraph would list these unauthorized behaviors in one section of the agreement and provide that attendance at the Con is conditioned on not violating any of these policies. Then the agreement would include that patrons are not entitled to refunds for any reason other than cancellation of the Con. Other key provisions include these standard terms:  Release of liability for the Con for any harm which might occur during the event  No refund/cancellation policy, including no replacement for lost/stolen tickets  Limitations on photography, videography, audio recordings, etc. in designated areas

12 Ticket Terms & Conditions, MCM LONDON COMIC CON, http://www.mcmcomiccon.com/london/ticket-terms-conditions/ (last visited Feb. 1, 2017).

4. Contracts and Agreements to Operate a Con 49

 Limits on unsheathed swords, working handguns and firearms, or any other item that could pose a danger to the attendee or third parties  Parent/guardian authorization for minors who attend the Con and responsibility of the parent/guardian for adhering to the terms of the ticket agreement, indemnification, and responsibility for the minor  Arbitration agreement (with waiver of right to join a class action) There are many examples available but the key terms tend to be very similar from event to event.

D. Talent Agreements

In all entertainment industries, talent agreements have three key elements: compensation, credit, and control. The talent interested in the Con is no different. The compensation provision identifies the amount of money the Con will pay the artist for participation in the Con and how that payment is to be structured. As illustrated by the band agreement described above, it is common for the talent to receive a non-refundable advance and the remainder on the day of the Con or very soon after the conclusion of the Con. The timing of the artist payment is conditioned both on the need for the artist to be paid and the concern that the Con will not honor its obligation once the event is concluded. The better established the Con, the less pressure there will be for same-day payment. Although less typical for a Con than for a festival or a theatrical performance, the agreement can also provide that the artist receive a portion of ticket sales proceeds, or net profits from the entire Con. These types of profit participation enable the Con to let the artist assume a portion of the risk regarding the attendance, and encourage the artists’ engagement in promoting the event. Even a small profit pool can provide a positive incentive and help to keep the talent active and motivated. Artistic and sports talent are often represented by agents. If there is an agent handling the presentation of the talent, then the contract should

50 Cons and Festivals specify the name of the agent; identify whether the agent or the artist will receive the payment; and explicitly provide that the amount paid is for the artist, as the artist is solely responsible for the amount of money due to the agent. The credit provisions will specify the nature of the use of the artist’s name and likeness in the marketing of the Con, identifying the size and placement for any mandatory use of the name in the paid ads, programs, posters, or other marketing under the Con’s control. As a related provision, the agreement should also specify the right of the Con to use the name, likeness, and identity of the talent to promote the Con. This provision enables the Con to use photographs and video created during the Con for marketing in future years, to highlight who will be at the Con, and to avoid any later claims of infringement of publicity rights or privacy rights. The control provisions of the talent agreement will vary a great deal depending on whether the event is a music festival, comic convention, film festival, or other type of event. The control provisions will also vary a great deal depending on the nature of the talent involved. At a minimum, the terms that fall into this category focus on the dates on which the talent is required to perform/attend, the amount of time required on those dates, and the nature of the performance. If the agreement is a band agreement, then the control provisions will be extensive. They will include an equipment list, rehearsal requirements, green room or dressing room requirements, sound checks, and many similar obligations of the venue. For example, there was an infamous requirement by the ban Van Halen that included a list of “Munchies” to be placed in their dressing room: Munchies Potato chips with assorted dips Nuts Pretzels M & M’s (WARNING: ABSOLUTELY NO BROWN ONES)

4. Contracts and Agreements to Operate a Con 51

Twelve (12) Reese’s peanut butter cups Twelve (12) assorted Dannon yogurt (on ice)13 The reason for the detailed list of munchies was to serve as a simple way to check on the management of the venue. If Van Halen could walk into its green room and see a bowl filled with M&M’s devoid of brown ones, the band knew the management was paying careful attention to the many practical and safety issues. If the venue missed the brown M&M’s contract provision, the band had to pay more attention to guarantee that other important issues were not also missed. The M&M’s requirement was not a perk but rather an example of Van Halen asserting and monitoring its contractual control. Actors and dancers will often have provisions about dressing rooms for similar reasons. Professional dancers will want contractual control over the type of floor on which they are expected to perform. Cement is very damaging to one’s knees, so these contracts will typically require wooden floors or other safety precautions. A sample of a talent agreement that can be used for both bands and guest artists is provided in the sample agreements. It provides examples of the compensation, credit, and control provisions along with provisions on warranties and limits of liability.

E. Employment and Volunteers

Managing the employee and volunteer team needed to conduct the Con can be a full-time position itself. The Con must begin by identifying and hiring the key personnel who serve as the principal organizers of the Con. As the event gets closer, additional operational staff and marketing personnel will be added to help manage the finance, human resources, marketing, sales, and logistical needs of the event. Depending on the scale of the Con, this could be a few people, or it could become a small army of employees and independent contractors. Federal and state laws provide specific guidelines regarding the method of selecting new employees. Although the law generally allows an employer to select whomever the employer wishes, laws protecting from

13 See Van Halen's Legendary M&M's Rider, http://www.thesmokinggun.com/documents/crime/van-halens-legendary-mms-rider, (last visited April 22, 2017).

52 Cons and Festivals discrimination protect the public during the initial selection and hiring process. For example, “Title VII of the Civil Rights Act of 1964 prohibits discrimination in hiring, promotion, discharge, pay, fringe benefits, job training, classification, referral, and other aspects of employment, on the basis of race, color, religion, sex or national origin.”14 Other laws extend protection based on age, veteran’s status, and disability. These anti-discrimination laws and regulations govern the hiring and selection process and then continue to apply to all aspects of ongoing employment. This means that an employer may not discriminate against either current or potential employees. If an employer uses Google, Facebook, or other social media tools to pre-screen employees, that employer may be exposed to information about race, color, religion or other information that cannot be used in the hiring process. If the employer wants to check on the social media presence of potential candidates, it should be done by someone outside the search process. The person providing the screening should forward only information that is relevant to the hiring decision. The screener should not provide the interviewing and hiring team any information that could be used for a discriminatory purpose. Even information that is not discriminatory on its face, such as marital status or number of children, may have the effect of discriminating on the basis of gender or religion. It is best not to ask any questions that might be perceived as discriminatory. If the inquiry is made, then care must be taken to assure that all candidates are asked the same questions. Although employment discrimination laws generally do not extend to volunteers, state laws and other rules may cover the volunteer participants as well as the employees. As a result, the Con should take care to comply with anti-discrimination steps for its volunteer workforce in the same manner it applies it to the paid staff. Once the employees are selected, the next issue tends to be the status of the worker as employee or independent contractor. Each year, the Con will likely hire a number of employees and contract with a much greater

14 Equal Employment Opportunity, U.S. DEP’T OF LABOR, https://www.dol.gov/general/topic/discrimination/ethnicdisc (last visited Feb. 1, 2017).

4. Contracts and Agreements to Operate a Con 53 number of independent contractors. Employers “must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee.”15 There is no obligation to withhold or pay these taxes to an independent contractor. However, because the failure to withhold taxes and pay minimum wage can result in serious costs and penalties for the Con, it is important to make an accurate status determination for each person involved in the event. One is labeled either an independent contractor or employee based on the specific relationship one has with its employer. The determination of independent contractor relationship or employment relationship depends on the degree of control and is very fact specific. “Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties.”16 Under the behavioral control category, the determination focuses on the degree to which the employer has the right and ability to control the activity of the person. An independent contractor would typically make independent choices about how the work would be completed and would not tend to use the employer’s tools, equipment, supplies, or assistants. Front office personnel would typically be under the control of the Con. The same categorization would typically apply to the issue of financial control. A person who has a significant investment in the business is more likely to be an independent contractor. A person who is paid an hourly wage and has no risk of financial loss (other than not being paid) is more likely to be an employee. The relationship between the parties also tells a good deal about the employee’s status. If the Con treats individuals like employees, then the IRS and the courts will also tend to do the same. If the individual can work for multiple clients at the same time (such as a band which has touring dates in multiple venues), then the relationship is more likely that of an

15 Independent Contractor (Self-Employed) or Employee?, IRS, https://www.irs.gov/businesses/small-businesses-self-employed/independent- contractor-self-employed-or-employee (last visited Feb. 1, 2017).

16 INTERNAL REVENUE SERV., DEP’T OF THE TREASURY, PUBL’N 15-A, CAT. NO. 21453T, EMPLOYER'S SUPPLEMENTAL TAX GUIDE: SUPPLEMENT TO PUB. 15, EMPLOYER’S TAX GUIDE (2016), https://www.irs.gov/pub/irs-pdf/p15a.pdf.

54 Cons and Festivals independent contractor. As such, the agreement between the Con and the individual should specify the relationship. While the contract will not necessarily bind the IRS, the agreement should help clarify the relationship between the parties. This general approach, however, may also vary considerably from state to state. In New York, for example, there are categories of workers that the state regulations classify as employees even though the state recognizes that the general test should classify them as independent contractors.17 New York targets musicians and others engaged in the performing arts to assure they get the benefits of employment insurance, matching tax contributions, and the other financial benefits of having employee status. Outside of New York (or other jurisdictions that follow the New York model) musicians, free-lance artists, and service providers would typically be independent contractors. The rules for categorizing employees are complex, so it is important to work with a qualified legal and accounting team to be sure these rules are followed. In addition, certain tax obligations will change if the Con operates as a nonprofit, charitable organization rather than a for-profit entity. The sample agreements provided at the end of the book provide two different examples. The sample band agreement presumes an independent contractor relationship. The sample employment agreement provides terms for the employees of the Con. In addition to the rules on withholding, the status of the individual may affect the minimum amount the individual is entitled to be paid. Most of the employees hired by the Con are non-exempt employees, meaning that

17 Independent Contractors, Unemployment Insurance Division 1-2 (NY Dep’t of Labor), http://www.labor.ny.gov/formsdocs/ui/ia318.14.pdf. Professional musicians or persons “engaged in the performing arts”, who perform services for a television or radio station or network, a film production, theater, hotel, restaurant, night club or similar establishment unless, by written contract, such musicians or persons are employees of another employer. “Engaged in the Performing Arts” means performing services in connection with the production of, or performance in, any artistic endeavor that requires artistic or technical skill or expertise.

4. Contracts and Agreements to Operate a Con 55 they are entitled to receive at least minimum wage and are protected by hour and overtime laws. The Fair Labor Standards Act (FLSA) establishes the federal minimum wage as well as overtime pay, recordkeeping, and child labor standards. State and local laws can increase the minimum wage and add additional protections for employees. These rules establish the amount the Con must pay its employees, provide overtime for those who work more than a 40- hour work week, and limit the work for minors. While there is a federal system, these wage and overtime laws vary a great deal from state to state and vary by city or county in many jurisdictions. The U.S. Department of Labor produces the “Handy Reference Guide to the Fair Labor Standards Act,”18 which provides an excellent overview of these complex rules. Because these rules only reflect the federal minimum rules, however, the Con organizers should consult with local and state agencies to be sure they are in compliance with the rules in its jurisdiction.

F. Special Considerations for Con Contracting

Most of the contractual issues faced by the Con are similar to those faced by any other business entity. Unlike most businesses, however, the Con will typically do its entire years’ worth of business during a single weekend. As a result, the Con should employ “time of the essence” clauses in all its vendor agreements to make all vendors understand the critical importance of timely deliveries and the time-sensitive nature of the work. A second consideration that is somewhat unique to the Con industry is the contractual issues that surround the copyrights and trademarks used by exhibitors, vendors, artists, and third parties. In most cases, these third parties are the entities creating and exploiting intellectual property. While

See also Labor Law 511(1)(b)(1-a); Michael Steinberg & Kathryn White, Classifying Artists and Skilled Technicians as Employees or Independent Contractors under New York Law, SHERMAN & STERLING PRO BONO PARTNERSHIP, 7 (Aug 1, 2016) https://www.probonopartner.org/wp- content/uploads/2016/08/Classifying_Artists_as_Employees-Shearman-Sterling- LLP.pdf.

18 U.S. DEP’T OF LABOR, WAGE & HOUR DIV., HANDY REFERENCE GUIDE TO THE FAIR LABOR STANDARDS ACT (rev. Oct. 2016), https://www.dol.gov/whd/regs/compliance/wh1282.pdf.

56 Cons and Festivals the Con will have its own name and logo, it is the characters of the comic book publishers, the compositions of the bands, and the trademarks of the participants that are at the heart of the attendee experience. The Con should be sure to specify the extent to which it has the right to use these works in the marketing of the Con. If the Con has an arrangement with a particular publisher to use the comic book characters on posters or on the exhibit hall guides, these uses must be specified in a license agreement. The corollary of the Con’s reuse of third party copyrights and trademarks is the inability of the Con to enforce the intellectual property rights of its vendors, exhibitors, employees, and independent contractors. Each of these parties is responsible for owning all the rights to this intellectual property and these parties should be contractually responsible for enforcing these rights. The Con should specify in its agreements that it is held harmless from liability resulting from third party infringement of the intellectual property of the contracting party. This will not absolve the Con from claims of secondary liability, but it should focus the copyright or trademark rights holders’ focus on the vendors rather than on the Con. To the extent the rights holders do insist on involving the Con, these contractual provisions require the vendors to take primary responsibility. The third special consideration for the Con to take into account in all its contracting is the Con’s relationship with the venue in which the Con is held. The Con cannot offer any space or accommodation that it does not actually have. The Con cannot contract to hang banners if the venue agreement does not allow for the hanging of banners. If the venue prohibits the use of tape on the walls, then the Con must include these limitations on its exhibitors. Although the Con is not the agent of the venue, it is still limited by the scope of the venue’s rules and limitations. If the Con makes contractual promises to its exhibitors or artists that the venue does not support, the Con will find itself in breach of contract and struggling to operate. The Con organizers should treat the vendor agreement almost like a local ordinance, a set of rules that complement the federal, state, and local laws regulating its operations.

5. From Celebrities to Stall Operators – Vendors and Exhibitors The vendors at a Con are often the stars of the show. Attendees are likely to spend more time in the exhibit hall than at the programs, stages, and panels. For the Con organizers, it is very important to create a great experience that matches the overall goals of the event. The exhibit hall serves the same function as the village square or the summer market by bringing together the patrons and the commercial interests. The layout of the area, the signage, the selection of the vendors, the pricing strategies, and the specials all come together to define a significant aspect of the Con experience. A well-run Con will manage these experiences for its patrons and for the vendors who are the financial guarantors of the Con’s success. Patrons expect to be able to purchase items which take on special meaning. Buying products on-site imbues these items with an experiential significance that greatly increases their personal value.

A. The Vendors

The vendors at the Con play an important role in shaping the patron experience. The theme and message of the Con will be reinforced or undermined by the selection of the vendors. If a comic book themed convention is filled with pet-toy stands, gym outfits, and scented candle stands, the patrons will be put off by the experience and unlikely to want to return. If instead the vendors include comic book retailers, rare book traders, costume shops, replica weapons shops, and independent publishers, then the exhibit hall creates an opportunity for the patrons to immerse themselves in the culture of the comic book store. The Con organizers, therefore, should create an application form for potential vendors that specifies precisely what range of products will be sold by the vendor. These terms must then be incorporated into the rental agreement between the Con and the vendor. If the Con is fortunate enough to need limits on the number of vendors, then the Con needs a process, including clear deadlines, for the Con organizers to select the vendors. As suggested by the earlier examples, the Con should strive to have a careful range of vendors. If the only

57 58 Cons and Festivals retailers are used comic book sellers, then the patron experience will become boring. The patrons will want somewhere to look at T-shirts and themed clothing, collectibles, and harder-to-find craftwork or other items that make attendance special. The Con should also take the price range of the sellers’ goods into account. Having items that sell for a few dollars addresses a very different market than having premium items that sell for hundreds or thousands of dollars. By having different products available in different price ranges, the Con will engage a wider segment of the attendees.

B. Becoming a Con Vendor

For established companies, operating a stall or booth at a Con is often a standard part of the company’s brand strategy. It enables the established business to support the Con, build a relationship with its existing customer base, and ensure that competitors do not steal market share. For hobbyists and entrepreneurs, however, being a Con vendor can provide a simple way to move into the retail aspects of the industry. Running a stall is much less expensive than operating a retail store. The exhibit hall is much easier than the Internet for attracting potential customers and for gauging the customers’ interest in the products. Operating as a vendor at a Con requires fewer steps than being a professional retailer in any other field. The Con vendor need not operate a retail location or conduct its own marketing. In addition, the vendor receives the added benefit of receiving special access to the Con, putting the entrepreneur on the inside of the velvet rope that separates the crowd from the professionals at the Con. Although the Con vendor agreements do not typically ask the vendor for proof of a business license, it is still the vendor’s obligation to be licensed to sell products in the state and to collect sales tax as required by state law. The vendor will also be asked for proof of insurance and typically be required to name the Con and the venue as additional insureds. The vendor will need to be prepared to transact business both in cash and through electronic payments. Until the past few years, the expense to establish a credit-card vendor account was a substantial undertaking. Today, however, with mobile payment platforms such as Square, Intuit’s GoPayment, or Capital One’s Spark Pay, hobbyist vendors can provide the same full-service as well-established companies. In addition, PayPal and

5. From Celebrities to Stall Operators 59 mobile app products are providing even more competition to the mobile payment industry. Hobbyists and emerging entrepreneurs will also face challenges in having sufficient stock to manage their stalls and sufficient staff to support the number of hours required of the exhibit hall. Exhibit hall operations typically require a set time schedule to load in the stall, require that the stall is open throughout all hours of the exhibit hall, and require that the booth is emptied in the time window specified by the contract. Depending on the venue’s additional rules, the schedules and limitations can be very restrictive. Some events, for example, charge for each outlet within the stall and prohibit the use of power strips. Most have rules regarding permitted signage. While these types of limitations are commonplace for the larger vendors, compliance with these detailed rules and planning for the additional expenses are often obstacles for a first-time exhibitor. Despite these challenges, using a Con exhibit hall to launch a new game, comic book, design series, or similar item can be a very effective means of promoting the vendor’s brand. The immediacy of the interaction combined with the concentration of potential purchasers makes any Con an ideal environment for the right products and promotions.

C. Trademarks, Bootleg Products, and Transformative Artwork

Both the Con organizers and the vendors must be very mindful that the goods or products sold at the exhibit hall are legitimate goods. Bootleg products that are sold without the permission of the copyright and trademark owners are a significant problem for the creative industries. Musicians increasingly rely on merchandise to replace the revenue lost to the decline of music sales. The unauthorized products are also typically manufactured with substandard materials, so the consumers are ultimately disappointed by the great deals that bootleg goods promise. From the perspective of liability, both the vendor and the Con can be held legally accountable for selling bootleg products. By selling the bootleg products, the vendor is directly violating the trademark or the copyright interests of the licensed manufacturer of those products. If the Con organizers are aware of the products being sold, then the Con’s ability to control the resale of those products and its lack of enforcement can give rise to the same liability as the vendor selling the products.

60 Cons and Festivals

At a minimum, the Con should require the vendor to sell only licensed products or products original to the vendor. Some Cons, such as Anime Central, require that all products have hangtags with appropriate product codes on all merchandise sold.19 The issue is much less clear for original works sold by the hobbyist or entrepreneur that use copyrighted or trademarked images for transformative original products. As discussed in Chapters 12-13 on copyright, these unauthorized works may fall within the realm of fair use and therefore not infringe on the copyright or trademark. Because the question is very fact specific and based on subjective criteria, it is far less likely that the Con will find itself held responsible for this type of vendor conduct. For the hobbyist or entrepreneur creating these works, there is a risk that the owners of the intellectual property will object and make efforts to stop the sales of these items. As a general rule, the more these items are presented as individual creative works, the less likely there will be enforcement. Conversely, the more commercial the activity, the more likely the copyright owner will feel obligated to stop these sales. Put another way, selling individual mash-ups of well-known characters is quite common and generally tolerated. Selling runs of those images on T-shirts and mugs is much more likely to invite a cease and desist letter. As a practical matter, the most important thing is to manage any interaction between the intellectual property owners and the entrepreneurs. If the entrepreneur immediately stops selling a potentially infringing product, the entrepreneur is then free to bring a declaratory lawsuit to establish that the work is fair use. Instead, if the entrepreneur keeps selling products and does not address the intellectual property owner’s objections, then the enforcement action can become very expensive and damaging. Increasingly, intellectual property owners understand that creative, transformative products enhance their brands and promote goodwill among their loyal customers. But some do not. The creative entrepreneur must understand these risks when using any intellectual property that is

19 See Exhibitor Rules, ANIME CENTRAL, https://www.acen.org/exhibitors- industry/exhibitors/exhibitor-rules/ (last visited Feb. 1, 2017).

5. From Celebrities to Stall Operators 61 not original, operating in a nimble manner while managing the financial risk.

D. Selling Autographs and Original Art

The exhibit hall is just one aspect of the commercial activity at the Con. Even more active aspects are the “artists’ alley” and the autograph sections. The truly unique and personal activity at the Con can come from the time spent with the live-action versions of television and film characters or with the artists who are creating these new works. For the artists, selling signed books and artwork is a fairly traditional business. For the actors, the “special appearance” business has grown tremendously into a very lucrative second industry. The top stars add tremendous visibility to the Con, helping drive press coverage and boost attendance. The Hollywood Reporter provided a useful summary of the emerging business model: Here's how it works: Actors typically ask for a price guarantee — often paid up front — to show up, sign autographs, pose for photos and sometimes take part in a panel discussion or two. Most conventions charge an entry fee, collect $5 for every autograph and $10 per photo (with a photographer taking another $10). The stars — who receive luxury travel and accommodations — pocket the rest. Anything over the guarantee is icing on the cake. According to multiple sources familiar with convention deals, the basic guarantee rate for genre stars is in the $5,000 to $10,000 range per appearance — with leads on such current TV series as The Walking Dead, Once Upon a Time, Supernatural, The Vampire Diaries, Netflix's Marvel shows and The CW's DC Comics fare commanding anywhere from $35,000 to $250,000 and up, depending on their popularity and the frequency with which they appear. At top conventions, it's not uncommon for a star to earn anywhere from $50,000 to $100,000 on top of their guarantee (more if they spend extra time signing).20

20 Lesley Goldberg, Stars Getting Rich Off Fan Conventions: How to Take Home “Garbage Bags Full of $20s,” HOLLYWOOD REPORTER (Sept. 29, 2016, 5:30 AM PT), http://www.hollywoodreporter.com/live-feed/stars-getting-rich-fan-conventions- 933062.

62 Cons and Festivals

The Hollywood Reporter also notes that the actors may also spend time signing additional items for autograph dealers as part of their weekend at the Con. This revenue stream is quickly being integrated into the Hollywood revenue model, which means agents are helping book talent, and both the agents and managers are expecting the actors to include this revenue in the gross income that is subject to their respective fees. A final word of caution for both the Con and the talent – this practice has become sufficiently mainstream that there is likely to be IRS interest in the declaration of this revenue. Although the model suggests a cash business, the use of mobile payments applies equally to these transactions. Surprisingly, the success of the autograph revenue has not made its way to the music festival circuit at the same level. The model applies equally well to a group tour that has band members signing autographs and photos if the performing schedule is not too burdensome. The fans for these artists are every bit as dedicated and the revenues could make the tours much more successful. In fact, the use of autograph revenues could take some of the pressure off the ticket prices to these events. The model will undoubtedly be incorporated as the full scale of its economic potential becomes better known.

E. Competitions and Special Events

Appearances by well-known film and television stars are just one aspect of the special attraction that can transform a Con into a bucket-list experience for the attendees. Product manufacturers sometimes arrange product launches at the largest Cons. At other events, special editions of comic books, games, and albums have been sold to commemorate the occasion and highlight the experience. If these items are exceptionally sought-after, then there may need to be some lottery system or procedure for getting in line to buy the items. Other items may be designed or selected to be part of premium packages. This works particularly well if the Con is organized as a nonprofit and the limited edition item is a premium for donating a significant amount above the ticket price. Con organizers should take full advantage of these special attractions by working closely with their vendors in advance of the Con to promote these on-site only, live opportunities. For example, Con organizers can arrange for one vendor to sell a Con-only limited edition specialty item for

5. From Celebrities to Stall Operators 63 one particular day during the Con. Each day can include the release of an item for that day only. A variation on this is the common practice of selling concert tour T-shirts only at tour venues. In certain situations, the Con could also commission particular products for the Con to sell in its own stall. The Con needs to coordinate these vendor-based specials, if possible, so that they keep some of the special ambiance about them. The Con can grant permission to use the event’s name and logo to some of these vendors to manage the partnership to create these items and potentially to share in some of the additional revenue created through the specialty-goods partnership. The revenue is always helpful for the Con. More importantly, however, is the opportunity for the Con to create those special moments where attendees have experiences unavailable anywhere other than the event.

64 Cons and Festivals

6. The Reel Story: Film Festivals and Markets There may be between three thousand and four thousand film festivals running this year.21 Compared to fewer than 750 feature films that are released theatrically during the year, the overwhelming number of film festivals make this experience somewhat unique within the Con culture. A film festival attracts its audience in order to highlight the best work it can showcase and to recognize those films with awards and prizes that have the potential to propel the selected works into the cultural mainstream. Top prizes help establish new writers and directors, open doors to theatrical distribution, and bolster marketing to the general public. A film market differs from a film festival. The market is primarily a venue where works are screened for potential buyers. The attendees at a market are primarily industry sales agents and distributors hoping to acquire content for their upcoming season. Film markets do not rely on public events and awards to drive the organization of the event. Film festivals have two very different audiences. For one type of audience, they attract local film enthusiasts who want to watch films not otherwise available in commercial theaters. For the other type of audience, they attract the filmmakers, actors, directors, producers, and technical craftspersons who are presenting their current work while also hoping to develop connections for their next project. The hunger of this second audience combined with the unbelievable range of venues makes filmmakers vulnerable to financial scams and unreasonable expectations. Organizers of high quality film festivals must guard against any practices that could tend to take advantage of this vulnerability.

A. Established Global Leaders

Not all film festivals are the same. Within the hierarchy of the motion picture industry, no event captures the international film market with the

21 See http://www.filmfestivals.com/. (Filmfestival.com uses the title “4,000 Film Festivals,” which highlights the sheer magnitude of the film festival market.). See also Stephen Follows, How many film festivals are there in the world?, Film Data and Education Blog, https://stephenfollows.com/many-film-festivals-are-in-the-world/ (last visited May 20, 2017)( Writing in 2013, Stephen Follows noted the he “found 9,706 unique festivals which have run at least once the past 15 years.”).

65 66 Cons and Festivals same cultural impact as the Festival de Cannes which began in 1946. Thierry Frémaux, General Delegate to Cannes provides some insight into the content of the event: The Official Selection serves to highlight the diversity of cinematic creation through its different sections, each of which has its own distinct identity. Films that are representative of "arthouse cinema with a wide audience appeal" are presented in Competition, while Un Certain Regard focuses on works that have an original aim and aesthetic, and are guaranteed to make a discreet but strong impact on screens around the world. The Official Selection also includes Out of Competition films, Special Screenings and Midnight Screenings, the historically important films featured in Cannes Classics and the Cinéfondation selection of films submitted from film schools.22 Cannes is not the oldest of the prestigious film festivals. That honor goes to the Venice International Film Festival, which was founded in 1932. The festival is organized by La Biennale di Venezia. As explained in its submission guidelines, its purpose is “to raise awareness and promote international cinema in all its forms as art, entertainment and as an industry, in a spirit of freedom and dialogue.” The Venice International Film Festival also features retrospectives and tributes to the giants in global cinema. The third European festival of international renown is the Berlinale, the Berlin International Film Festival. The Berlin festival bridges across a wide range of categories beyond international cinema and independent film and includes categories for younger audiences and new filmmakers. Founded in 1952, the Berlin International Film Festival has often been the largest film festival of the year. Global film festivals are not limited to Europe. The Hong Kong International Film Festival and the Melbourne International Film Festival are two of the most prominent in the Southern Hemisphere. In North America, the key festivals are Sundance Film Festival, Toronto Film Festival, New York Film Festival presented by the Film Society of Lincoln Center (FSLC), the Telluride Film Festival, South by

22 Festival de Cannes, Who We Are, http://www.festival-cannes.com/en/qui- sommes-nous/festival-de-cannes-1.

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Southwest, and the Tribeca Film Festival, which was founded to revitalize lower Manhattan in 2002 after the September 11 attacks on the World Trade Center. Of these, perhaps Toronto and Sundance compete with Cannes, Venice, and Berlin on the world stage. Nonetheless, the global dominance of the U.S. motion picture industry gives the somewhat less prestigious festivals a disproportionate role in establishing global culture. Although each varies in the specifics, the major U.S. film festivals all tend to encourage new and independent artists while recognizing the top filmmakers at their craft. Specialized categories often include documentaries, short films, and animated films. Many of these festivals also feature premieres of more traditional studio productions. For example, Star Wars: Attack of the Clones had its premiere at the Tribeca Film Festival in 2002 and in 2013, the festival screened King of Comedy, with principal cast of Robert De Niro, Jerry Lewis and Martin Scorsese in attendance. Similarly, South by Southwest typically shows approximately 25 films that previously appeared at Sundance and Toronto among its 125- 150 movies. Attendance at any of these events is both exhilarating and exhausting. These are among the world’s largest and most influential cultural events. Even seasoned attendees will benefit from the planning strategies of Chapter 7. There is no single criterion to use when judging or ranking film festivals. Nonetheless, for short films, the approximately thirty U.S. festivals that have awards which will qualify the winner for Oscar eligibility. This standing within the eyes of the Academy of Motion Picture Arts and Sciences makes those festivals stand out from similar festivals. Moreover, the Oscar eligibility will tend to attract a larger and stronger pool of submissions, thereby enhancing the quality of the films exhibited.

B. Essential Elements for a Successful Film Festival

Thousands of film festivals are held every year. Many of them last for only a single season or two before disappearing from the media landscape. For organizers, most of the lessons discussed throughout this book will help them launch a new film festival and survive to grow it from year to year. Nonetheless, there are some specific steps that can help the film festival succeed.

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Congregate. A film festival is as much about the audience as it is about the films being shown. The successful film festival creates very intentional spaces for gatherings, parties, and complementary events. It integrates into its physical environment to enable the audience members to engage with each other. This is particularly important for the industry professionals who are attending to make those critical connections for new job opportunities, production financing, and project development. Complementing the festival with luncheons, workshops, and interactive events will make the trip to the festival much more valuable than just taking home a trophy. Creating the communal experience is equally important for the cinephiles who attend only as the audience. Undoubtedly, these fans want a chance to meet the actors and creators. They also want to share their experiences with each other. Creating both formal and informal opportunities will greatly enhance the experience. Regionalize. Most film festivals are geographically established. Whether it is Cannes, New York (e.g., Lincoln Center) and Tribeca (because the two neighborhoods serve different audiences), or Toronto, the most successful film festivals have a destination in mind. The film festival needs a destination to help brand the event. More importantly, the location will help the organizers develop the network of support necessary to create a financially viable and operationally sustainable festival. A festival highlighting the location will be better positioned to seek discounts and sponsorships from other community boosters, local bars and restaurants, and media support from the local press. Specialize. Although it may seem illogical to narrow the potential audience for the festival, specialization enables the organizers to target the intended audience and participants. A smaller pond will allow the new entrant to grow more quickly rather than become lost in the vastness of the broader ocean. If the event is successful, then over time, the organizers can expand incrementally or they can partner with similar projects to expand the scope. From the perspective of a submitting artist, the cost and risk associated with a relatively new festival is much lower if the festival is dedicated to the work of that artist. It improves the chances that the attendees will be better suited to networking opportunities, and it means that the work will get more focused attention.

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Animated short films may not compete well against feature-length narrative films. Each deserves its own program. There are successful festivals that focus on format such as animation, documentaries, or short films. Others focus on subject matter, such as science fiction, anime, horror, queer, comedy, Asian, or Jewish. There are even architecture film festivals. Still other film festivals focus on the status of the filmmaker or the technology utilized, such as student film festivals, language-based film festivals, foreign films, Internet film festivals, and iPhone film festivals. Establishing a new festival within the context of an existing genre will facilitate the community support needed to launch the festival. Network. Film festivals are inherently community events. Audience members generally watch a few films, dine out, and return over a period of days. The usage pattern enhances the audience’s engagement with the region. As the organizers focus on how to build a community around the region, certain specialties may be of particular relevance. Certainly, language-based film festivals tie into the use of language and dialect within the region. By integrating with the local business and community organizations, the film festival can grow its base and its financial support. The most successful film festivals are nonprofit organizations that benefit from arts and culture funding provided by government agencies and private philanthropies. As nonprofits, the film festivals can work with nearby businesses for financial support and promotion. This regional integration will help move the film festival from the periphery of local culture to the center of the annual calendar. Coordinate. The filmmakers essential to the success of the film festival are actively working the festival circuit to promote their project and establish the next work in their pipeline. The timing of a film festival will have an important influence on its popularity. Again, this tends to overlap with the geographic nature of the festivals, so the organizer must schedule the event to align the best timing for this type of festival in this geographic area. While some filmmakers will fly anywhere in the world, most are not in a financial position to be flying from festival to festival. As a result, the schedule of competing festivals in a 250-mile radius are likely to be the most important factors in determining the time of year for the new festival. Most festivals are in October. It may be preferable to find another month. Promote. Festival organizers do not need to be reminded of the need to promote their festival, but it is equally important to remember that the

70 Cons and Festivals festival is there to promote its winners and participants more than the event itself. Unlike a comic book or science fiction convention, film festivals (and book fairs) are designed to improve the success of those attending. As a result, the festival organizers must emphasize their participants’ success stories in all the marketing and promotional material. The film festival will have its greatest chance at fame and longevity out of its efforts at launching successful careers. The more the festival does for its participants, the more new entrants will come knocking and the more its reputation for discovering great artists will emerge. Protect. Film festival organizers must understand the unquenchable drive felt by filmmakers, eager to get their beloved projects into the hands of a paying audience. With thousands of film festivals available, the potential for festivals to take advantage of this need is understandable. Add the naiveté often demonstrated by first-time filmmakers, and the potential for manipulation is manifest. The successful film festival will avoid the many opportunities to take advantage of the filmmakers and instead make special efforts to inform the filmmakers on the true history of the film festival, the expenses and fees, the nature of the juries, the range of the prizes, the likelihood of success, and other factors that tend to influence the filmmakers into submissions. The festival organizers need not go overboard. It is not their task to warn filmmakers about the economics of the film and television industries. But any claims about the success of prior participants or the individuals participating must be accurate and regularly updated. For example, the film festival should not list jurors merely because they were invited to participate. Anyone could invite Steven Spielberg, Robert De Niro, and Dame Judi Dench to serve as festival jurors, but unless they agree to serve, the promotion of the invitation creates a false association of participation in the event. In the same manner, lists of event sponsors and organizations must include only those who have actually agreed to provide support to the festival. Filmmakers may be relying on these promotional activities to decide whether to pay for submission, so the information must at all times be completely accurate. Over the long term, the care and protection afforded to the submitting filmmakers will enhance and benefit the quality of the film festival and lead to a stronger reputation within the film industry.

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C. Competition Rules

The competition rules establish the identity of the film festival. Because the festival takes on the personality of the films it screens, the competition rules play a far larger part in branding the festival than any other aspect of the organization’s planning. The defining characteristics of the festival will be established by the rules regarding genre and exclusivity. In addition, the rules regarding the technical delivery requirements and the rules regarding the legal delivery obligations comprise the three primary areas covered by the competition rules. The rules for genre and exclusivity focus on the types of films accepted for consideration and the prior public exhibition history of the film. The competition rules should explain what categories of films are being accepted and the types of competitions for which the film may compete. Such distinctions may include the running length to establish short-films; film techniques to establish animations films; financing or locations to establish domestic or foreign films; and other similar categories. Festivals of greater stature can demand that their exhibition is the first public exhibition of the film, either world-wide or regionally. Filmmakers must be particularly mindful of this limitation, since they can only premiere their film once. Other festivals are less concerned with the public premiere and more concerned with the distribution status of the production. These festivals focus on featuring films without distribution agreements and as a result, a film that is schedule to be distributed may not be considered eligible for those festivals. Many festivals want new films, so the date of completion is important in knowing whether the film is sufficiently new to be eligible for submission. At the same time, however, films are often edited and tweaked months or years after principal photography has ended, so the concept of a completed film is somewhat fluid. The technical requirements are of equal importance, because a festival will likely disregard a submission made in the wrong format. The advance in digital cinematography has unfortunately resulted in a wide range of technical specifications. For example, the Austin Film Festival offers some flexibility regarding the acceptance of submissions, but its rules highlight the array of choices. Filmmakers may submit “as an online streaming video

72 Cons and Festivals via a participating submission platform (WithoutABox or FilmFreeway), a password-protected streaming URL, or on DVD with NTSC or PAL formatting (please test before sending).”23 Nonetheless, the Austin Film Festival is selective regarding the technology used for exhibition: “AFF screens films as digital files during the Festival and does NOT screen films on Blu-Ray, HD-CAM, or DCP. If you are unable or unwilling to provide us your film as a digital file for exhibition, DO NOT SUBMIT your film.”24 Filmmakers preparing to start on the festival circuit may find themselves required to reformat their film for a variety of competing formats. Invariably, every adaptation to a new format comes with both additional expenses and additional technical challenges. The third category of submission guidelines focus on the legal obligations of the filmmaker. The competition rules and submission form will typically comprise a legal contract between the festival and the person submitting the film. This provides some recourse to the film festival against the filmmaker, if the submission is done improperly. The first requirement is that the filmmaker has all legal rights necessary to exhibit the film. These standards vary significantly depending on whether the project is a fictional work or a documentary. For documentary filmmaking, a certain amount of unauthorized content is permitted, provided it is consistent with fair use guidelines for copyright and journalistic standards for reporting. Fictional works are required to have the rights to all the content well documented. This includes contracts or releases signed by everyone appearing in the film, rights to all copyrighted material incorporated into the film, and releases from most living persons depicted in the film. Fictional works are afforded a more limited ability to rely on fair use, and many festivals and exhibitors are unwilling to take such risks. When it comes to retelling a true story without the subject’s permission, the law protects the free speech rights of the filmmaker, but some film festivals and exhibitors are unwilling to take this additional risk.

23 Austin Film Festival, Film Competition Rules and Regulations, https://austinfilmfestival.com/submit/film/rules/. 24 Id.

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Among the underlying rights that must be secured by the filmmaker are the rights to publicly perform any music selected for the film. Fortunately, many record labels are willing to provide low-cost and even no-cost music licenses for film festivals. The filmmaker must tread very carefully, however, because the festival music license will not extend to any agreement for distribution of the film. The music used at the festival often proves to be much too expensive to use when the film is released, so the filmmaker is much better off to understand in advance of the festival what the final cost of the film rights will be when the film is eventually distributed to the public. The contractual agreement between the filmmaker and the film festival will invariably include language that make the filmmaker legally responsible for any claims made by third parties regarding the exhibition of the film. The filmmaker will be expected to pay the costs to defend any lawsuit and to pay any resulting liability. Such lawsuits are typically triggered by claims of copyright infringement or defamation, but they can also include breaches of contract, trademark infringement or other claims. The filmmaker must take care to assure that all rights have been acquired before entering the film festival circuit.

D. Strategies for Safe Submissions when Entering Festivals

Given the large number of film festivals and the tremendous range of genres covered by film festivals, filmmakers who plan to submit films must be mindful of the financial costs and the opportunity costs associated with participation on the film festival circuit. Festivals can be very emotionally rewarding, but they are designed to be a means to public distribution rather than a very expensive hobby. Establish a plan. The lifecycle associated with the festival circuit can readily turn into a multi-year ordeal for the filmmaker. Instead, the filmmaker should have a definite plan with a schedule carefully laid out. The schedule should include the date at which the movie will be locked, and no longer subject to editing and tweaking, include a reasonable amount of time to obtain festival showings and a distribution deal, and have an end date, after which the filmmaker is committed to working on the next project. Finish the film; Do not submit early. Most festivals will judge the film based on the first submission, so additional inclusion of sound effects,

74 Cons and Festivals music, or edits will not help with the acceptance. Festivals have frequently been known to exhibit the wrong version of the film that was submitted. After all, that version was the basis for the acceptance in the festival. All these problems disappear if the only film submitted was the correct, final version. The take-away is that the plan for the festival submission cycle should begin only once the film is fully completed. As tempting as it may be to submit the nearly finished version and update before the event, too much goes wrong to rely on that extra time. Prioritize the submissions. Stretch goals are motivating and lightning does strike, so filmmakers should not be reluctant to submit to the top festivals. Nonetheless, the math suggests that the top festivals are the most challenging, so filmmakers should prioritize the festivals that can achieve beneficial goals for the film and the production team. For example, if Sundance, South by Southwest, or Tribeca is a stretch goal, then schedule applications to go out once a response is provided by the top festival. Emphasize genre and region. Depending on the filmmaker’s larger agenda, selecting festivals known for animation, for documentaries, or other specializations will generally result in a greater likelihood of acceptance and it will improve the contacts to help line up the next project. Equally importantly, independent filmmaking is highly regionalized. Becoming well-known in the local community can often lead to new work and important partnerships. Filmmakers should be sure to take advantage of the regional film resources and be generous with their projects to build the local production ecology. Watch for the warning signs. Poorly managed and fraudulent opportunities abound.25 Filmmakers must be very careful to be sure not to let exuberance get in the way of careful planning.  Filmmakers must be wary of look-alike festivals by confirming that the film festival has the exact same name and url as the festival researched.

25 The following suggestions are based on these three articles. See Benjamin Craig, How to spot a scam film festival, http://www.filmmaking.net/198/How-to-spot-a-scam- film-festival, Dec. 8, 2016; Alex Ferrari IFH 062: Top 5 Film Festival SCAMS Filmmakers Need to Be Aware Of!, https://indiefilmhustle.com/film-festival-scams/, April 5, 2016; Jason Guerrasio, Can You Trust This Film Festival?, http://www.indiewire.com/2013/07/can-you-trust-this-film-festival-36221/, July 30, 2013.

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 Filmmakers should do a thorough background search before submitting a film. Photographs from a lengthy history suggest a strong event. If these are missing, then perhaps the events were not very memorable or did not take place.  Filmmakers should use submission tools WithoutaBox or FilmFreeway as a method to help identify the film festival, but filmmakers should not expect these services fully to vet the companies.  Filmmakers should reach out to prior participants to get a sense whether the festival was worth the expenditure in time and money. Most artists are happy to share their experiences, and this intelligence will be essential in planning where to invest the time for the festivals.  Filmmakers should confirm the public screenings and related event schedules from prior years. The quality of the festival can readily be assessed by looking at the range of activities in the past, or at least planned if the festival is new. If this information is not publicly available, it is unlikely to be a successful festival.  Filmmakers should watch for other red flags, including overly long submission windows, new festivals at otherwise already prestigious locations, lack of sponsors, high submission fees, and unclear jury information.26 Complete the paperwork. The filmmaker is responsible to deliver a great deal of documentation regarding the cast, locations, music, and all other aspects of the film right to the festival. Moreover, if the festival experience has been successful, the filmmaker may be required to deliver a completed film to a distributor. The completed film includes all of the documentation and all the ancillary materials such as music cue sheets, conformed scripts, coverage shots, and even dubbing or subtitling. Since the purpose of the film festival is to complete the project, this work should be done while waiting for the film to be accepted in the festival and not put off until after the festival circuit has run its course. Stick to the plan. When the festival process is over, the filmmaker must move on. The initial plan set deadlines for public exhibitions at

26 Benjamin Craig, How to spot a scam film festival, http://www.filmmaking.net/198/How-to-spot-a-scam-film-festival, Dec. 8, 2016.

76 Cons and Festivals festivals, goals for distribution deals, and contingency plans. The plan likely included attending some additional festivals to learn more about what works best and to make additional contacts. While extensions might open new doors, it is far more likely that the filmmaker will achieve more success by moving onto the next project once the planned time and effort have been expended.

E. Juries and Jurors

The duty of the film festival jury is to select the winning films from among the competition. The role of the film jury has much more to do with who is selected to serve as a juror than merely their task to watch and rate the competitors. Take for example the “Global Road Safety Film Festival,” sponsored by the United Nations Economic Commission for Europe, United Nations Inland Transport Committee, subtitled “the Center of UN Transport Conventions.”27 In 2017, the jury for this UN-sponsored festival included Jean Todt, The UN Secretary General’s Special Envoy for Road Safety, Christian Friis Bach, Executive Secretary & Under-Secretary-General of the United Nations Economic Commission for Europe, Zeid Ra’ad Al Hussein, United Nations High Commissioner for Human Rights as well as Luc Besson, an award-winning film director, screenwriter and producer. Besson was the only juror with film experience, and indeed, Todt was the only juror with road safety experience. The composition of this jury for the UN-sponsored film festival highlights the often political role played by the jury panel. The prominence of the jury members represents the importance of the film festival to the media and the public. As a panel, the group should have the knowledge necessary to judge the films, but not every panelist needs to be a filmmaker. As the illustration highlights, knowledge of the subject matter and knowledge of filmmaking are both important. Nonetheless, a panel comprised of community college film studies faculty may provide the most knowledgeable panel available, but this expertise will be ignored in favor of panelists who add visibility and cultural importance to the jury panel. Despite the political nature of jury panel composition, the process of serving as juror can be quite grueling. There may be dozens or more films

27 See https://www.roadsafetyfilmfestival.org.

6. The Reel Story: Film Festivals and Markets 77 that are in competition. Each film deserves the same time and attention as the others. Nonprofessionals may not realize the time and effort necessary to judge the movies fairly, nor may they realize the diligence it takes to treat the last five films screened with the same openness as the initial five films. Competitions do well to let the panelists collaborate and discuss their consideration, rather than relying too heavily on score cards. In this manner, those more knowledgeable on the filmmaking and those more knowledgeable on the subject matter will have the opportunity to educate the other panelists on the key elements that make certain films stand out among the competition. There may, of course, be some governors, financiers, and local celebrities who have excellent film knowledge and taste, but for those situations where the majority of jurors have less expertise, a collaborative jury process will help steer the consensus towards awards that reflect the strongest merit within the pool. Given the important role the jury panel plays in branding the film festival, invitations to participate should be made months before the event, and the information on those panelists who have agreed should be made publicly available as close to the opening of the submission process as possible. While the festival can always add additional jurors, the information about the jury panel is critical for some filmmakers, particularly if the film festival does not have a long track record. During the film festival, the organizers should pay close attention to the role of the panelists, assuring that their hard work is recognized and valued while also assuring that their impartiality and fairness is essential. The jury panel, as a group, is part of the festival royalty. There should be meaningful moments during the activities to recognize their contribution and to let the audience engage with them in a social environment.

F. Academy Award Eligibility

Turning a movie idea into a completed motion picture is a long-shot, which is only accomplished by a small portion of those who contemplate the idea. Exhibiting a movie before a live, paying audience is also a long- shot. So those who have overcome the first two hurdles and get their films into film festivals can rightly hope that their project will go on to make the cut of those very few films that earn an Oscar nomination from the Academy of Motion Picture Arts and Sciences.

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For a feature film (with a running time over 40 minutes), eligibility requires the move receive its first public distribution theatrically and that it run for at least seven consecutive dates in Los Angeles County with at least three shows each day, including an evening performance.28 35mm and 70mm are still considered standard format, but the film may be shown digitally, provided it is in an acceptable format. 16mm prints are not eligible. Any nontheatrical public exhibition or distribution makes the film ineligible. For documentary features, the qualifications are even more stringent, requiring a seven-day theatrical release in both Los Angeles and New York. Many additional limitations also apply.29 Fortunately, film festivals are a form of theatrical exhibition. They do not preclude features from Oscar eligibility. They do not, however, generally count towards the seven consecutive days needed for general eligibility. For documentary short films, the film festivals are an alternative method of eligibility. A short documentary can qualify for the Oscars if it has “won a qualifying award at a competitive film festival, as specified in the Documentary Short Subject Qualifying Festival List, regardless of any prior public exhibition or distribution by nontheatrical means.”30 There are additional rules as well, but the recognition of the film festival-qualifying film adds an important recognition to the festival and incentive to the filmmaker. Narrative short films, like their documentary counterparts, are also eligible for Oscar eligibility if they win the qualifying award. There are categories for both live action and animation, in addition to the category for documentary. Short films are much less likely to receive theatrical distribution or earn significant revenue in any distribution platform. But they often form the lifeblood of the festivals. The additional form of Oscar eligibility reflects this reality and highlights the importance of this creative artform.

28 90th Annual Academy Awards of Merit for Achievements During 2017, Rule Two – Eligibility, http://www.oscars.org/sites/oscars/files/90aa_rules.pdf. 29 See id. at Rule Eleven. 30 Id.

7. Attendee BasicsSurvival Guide for Patrons, Customers, Guests, and Goers Cons use a range of labels for the people who attend the event as paid ticket holders. Whether the people are labeled attendees, patrons, guests, concert-goers, or customers, many of the chapters of this book identify how the Con organizers address these differing ticket holders and should plan and prepare to assure each group has a safe, fun, and memorable experience. This chapter focuses on the attendees and what they should do to hold up their side of the equation to assure themselves that they have the kind of experience they desire. The relationship between the Con and its customers is akin to a partnership. Customers should be able to expect the Con to deliver on its promises and hopefully to exceed them. Similarly, the Con will be most effective when the attendees do what is expected. As discussed below, purchasing tickets on time, treating other attendees with respect, following directions to attend programs, and engaging in cosplay with both fun and safety in mind will all help make the Con successful. When the guest and the Con work together, then the event is at its best. Attendees should also consider what their goals are for attending a Con. Attending the most famous events may be a point of pride and a personal achievement to check off their bucket lists. The largest of these events are also incredibly crowded, and seats for the top panels within those events are hard to get. Smaller events will often provide much greater access to the headline panels and attractions. In addition to planning how to attend a particular event, fans should consider whether attending a combination of events will better meet their goals. Some fans will have a better experience by attending a variety of Cons to achieve the balance of the programs and experiences they seek.

A. Planning the Trip

The planning to attend a Con will depend on the distance to travel, the availability of the tickets, the size of the group attending, and the goals for attending. There are a number of Cons that commonly are on people’s bucket lists. San Diego Comic-Con, the Sundance Film Festival, South by Southwest, Burning Man, and similar events are so iconic that people spend years thinking about these events and months planning. For some

79 80 Cons and Festivals locals, in contrast, these same bucket list events are a ten-minute ride away and special tickets are easy to obtain. Travel. For the iconic Con travel adventure, the basic planning requires event tickets, hotel or other accommodations, transportation, and a strategy to successfully navigate the Con. The attendee should have a budget for each of these items as well as for food, local transportation, and on-site purchases. Each person’s budget must be enough to support that person’s plan. At the same time, scrimping on the Con to pay for the plane ticket can result in a very unsatisfactory experience. Realistic budgeting is the essential first step to ensure a successful Con experience. Housing. Because hotels generally offer reservations with generous cancellation policies, hotels are the most flexible of the major expenses, so hotel rooms should be reserved the furthest in advance. Often, the destination Cons will partner with the nearby hotels to reserve rooms at pre-arranged prices for the benefit of the attendees. There will be many other hotels that have rooms outside these blocks. An attendee should reserve a room with a cancelable reservation well in advance of the event. If rooms closer to the venue or rooms that are less expensive become available, then the first reservation can be cancelled. If instead, there are no hotel rooms at the closer facilities, at least the early room reservation will assure the attendee that there is some place to stay. Tickets. If the event does not sell out, then acquiring tickets is not a problem, but the premiere Cons have tickets that are more difficult to acquire. Some events have lottery systems. Others sell tickets based on premium packages. Although these packages can become expensive, the attendee should consider the overall cost of the event. For some attendees, a ten percent premium for an all-event pass may be a very worthwhile investment, given the cost of travel, hotel, food, and merchandise. In contrast, a one-day pass is more than sufficient for a day trip to a local event. There is no “right way” to attend the Con. The important thing for the attendee is that the planning meets the expectations. Transportation. Transportation need only be booked a few weeks in advance. Flight costs will rise dramatically if left until the last minute, but there is no savings in booking three months in advance instead of one month in advance, and life has a way of upsetting long-range plans, so non- refundable expenses should be budgeted but not ticketed unduly early. Ground transportation also should be planned in advance. Parking is very

7. Attendee Basics: Survival Guide 81 difficult to find at some locations, but it may be free and convenient at other sites. Public transportation is often an excellent alternative, but public systems can be overburdened during large events. This applies to taxi systems, Uber, and Lyft as well. When planning ground transportation, allowing for wait times is also essential. Cosplay. Another important aspect for attendees to consider is whether the attendee will participate in significant cosplay. If the attendance includes cosplay, then the time and expense to create the costume should be part of the attendees’ budgeting and planning. Even a simple costume idea will invariably require additional time and some unbudgeted props or materials to complete the costume. If the cosplay is part of a group cosplay, then the schedule and shared expenses should also be added to the planning. Building these costumes is part of the whole experience and can be an important part of the overall event. Group Attendance. If the attendee is traveling in a group or party, then coordination among the group is also important. To make the best of the experience, the expectations of each group member must be made clear in advance, and the group members should negotiate the necessary compromises. Where group members have differing expectations at the Con, there is likely to be a conflict over the planning aspect. For example, if half the group is planning to spend for an expensive five-star hotel, top restaurants, premium post-parties, and a lot of merchandise while the other part of the group is scraping by at an out-of-town hotel, a Greyhound bus, and camping out in one of the conference halls, the group is likely to have difficulties and experience conflict. Even in this example, however, the group can plan an accommodating agenda so each faction can have its own experiences while allowing the group to share a common experience or two. If instead, one faction insists the other faction to follow its agenda, the ensuing dynamics will ruin the experience for some or all of the group.

B. Planning the Day

Some events have a single focal point for all attendees such as a headliner band or keynote panel, while more typical Cons offer many different experiences to many different attendees. It is important for an attendee to develop and execute an actual game plan in order to engage the various activities at the Con. Using a comic book convention as an

82 Cons and Festivals example, the schedule for the day should take the following items into account:  Cosplay, costuming, and makeup in advance of the event  Cosplay, costuming, and makeup on the day of the event  Travel time to the Con  Parking and walking time to convention center  Badge acquisition  Meals and drinks  Finding desired panels  Lines and waits to attend specific panels  Competing for limited edition items being sold in the exhibit hall and general exhibit hall exploration  Lines for autographs  Walking time back to parking  Opportunities for neighboring programs and events  Travel time home  Repeat for each day The list is not exhaustive, but it is exhausting. The logistical planning usually begins with parking, but if there are significant costume issues or travel times, then even getting into the car will have some challenges. Provide sufficient time so that there is a safe buffer to arrive at the Con in time to participate in the key events. Look up the time when badge distribution starts. Have the necessary photo IDs and matching credit cards for will call. Print or download tickets in advance and be ready to help move through lines quickly. Since it is an inevitable part of the Con experience, attendees should decide in advance if there are key elements of the Con that are essential to the visit. The schedule should be built to assure the key elements are achieved. Even with this advance planning, however, attendees are better off providing for some flexibility, since many events restrict attendance and there can be a multitude of scheduling conflicts or inordinate waits to get into the most popular halls.

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When traveling as a group, be sure to have some pre-arranged locations at which to meet if the members of the group become separated. Attendees may also consider scheduling specific times for the group to reconvene, so that members of the group have opportunities to do their own exploring before returning to any centrally-planned schedules. Panels often fill up at the larger Cons, so scheduling often requires lining up for one or more panels in advance of the one the attendee identified as the most important. That means a great deal of waiting in line. Time spent waiting in line will limit time spent elsewhere, so realistic time budgeting is essential. The largest of the events also tend to spill over into programs by neighboring organizations. Fandoms that could not get into the main event might be hosting panels, screenings, parties, and other events nearby. Game competitions and open play may be happening at nearby retailers. These related events allow attendees who do not have badges good for every day to continue to participate in a part of the Con experience on days without a badge, as well as to vary the kind of activities. Attendees should make the most of their time in line. Socialize with the others in line, take pictures, have food and water, and otherwise use the time to make the Con interesting. By engaging with the Con and other attendees during the lines, the entire experience becomes more social and more interesting.

C. Basic Necessities

To succeed in making the Con a memorable event, there are simple steps that can improve the experience. The attendees’ most important planning step is to understand the rules of the venue. Each event will have its own rules about what can be carried into the facility. By reading those rules in advance and following them, the attendees will not be wasting time returning barred items to the car and becoming frustrated by seemingly arbitrary rules. One rule is universal for all Cons: attendees will spend hours walking and standing. Therefore, comfortable and supportive shoes are essential to maintaining endurance and overall comfort throughout the event. If the

84 Cons and Festivals attendee plans to be in costume, then design the costume carefully to allow for good footwear. This general advice goes for the attendees’ entire costume. If the costume takes two people and 75 minutes to put on, then bathroom breaks are going to be a scheduling challenge. Cosplayers should try to design costumes to be conveniently put on and taken off. In addition, attendees should be sure to have a change of clothes in case of wardrobe issues or costume problems. Beyond footwear, other important considerations include water, nutrition, and bathroom breaks. Most convention centers have drinking fountains, so carrying a refillable sports bottle serves to cut costs and assure good hydration for the duration of the event. Hydration also reduces fatigue. Since most of the food choices at convention halls are an unhealthy mix of carbs and fats, health-focused attendees should also bring healthier food and snacks or plan to leave the Con for nearby restaurants. Some venues offer a variety of improved food options, but those with better food often have long lines and full tables. However, there are some attendees who are comfortable taking the time to enjoy the food while others will feel frustrated at the wait. Know the personalities of the members of the group and plan the food scheduling accordingly. Power will also be a challenge. Even phones with long battery life may be challenged if they are being used for thousands of photographs, social media, and to kill time during the long wait in lines. Attendees should bring back-up power supplies, spare batteries if the technology allows, and chargers with extension cords for the occasional chance to be near a wall outlet. A generous attendee with a multi-socket extension cord will soon become the most popular person in any line. Finally, attendees need to compare their logistics with their budgets. Attendees should have enough money to get through their planned agenda plus a contingency for unforeseen emergencies and opportunities. The money should be carried in the form of both cash and credit cards. Virtually all vendors take credit cards or other forms of electronic payment, but some venues struggle with Internet service during large Cons. In addition, some autograph lines may still be cash only. Having both cash and credit cards available will add flexibility when making purchases. Some vendors will prefer cash and may give a small discount. Others will be

7. Attendee Basics: Survival Guide 85 electronic-only because they do not want the problems associated with managing change.

D. Be Respectful

The appropriate conduct for social interaction at Cons and other events has become more of a challenge in recent years. Dressing in a villain’s costume does not create a license to treat other attendees, volunteers, or staff badly. Neither does being tired and dehydrated or being stuck in long lines. Those are the costs of attendance at large events. Attendees must respect everyone who attends an event. The audacity, technical skill or outrageousness of a costume does not translate into an invitation to touch, fondle, caress, or harass another attendee. Anyone who feels like they are the target of such inappropriate behavior should seek out a staff member immediately. While dressing in costume in public generally invites photographs, common courtesy is still to ask someone’s permission before taking their photograph, particularly if the photographer is asking someone in cosplay to join with others for the photograph. Asking permission improves the experience for the person being photographed, enhances the interaction among the group, and sets a more positive tone.

E. Event Strategies

As noted in prior chapters, Cons are often organized and may best be understood as quest adventures. Attendees will have the most rewarding experiences at Cons if they consider their own participation as something of a quest. There are people to meet at every stage of the travel process as well as at the Con itself. There are often great opportunities to take pictures, share with others on social media, and be part of the overall experience. Time is the universal frame of reference for the Con experience. Each day begins, runs, and ends. If an attendee decides to spend three hours in a series of panels, that time cannot be spent in the exhibit hall. If one is a gamer, then the time spent watching and playing games will replace time spent photographing cosplay. Each such choice is reasonable. What makes Con attendance successful is understanding how to make the most out of

86 Cons and Festivals the time spent on the various experience while maximizing the opportunity to engage in those experiences most important to the attendee. Success also means avoiding failure. Since getting sick, sore feet, or lost frustrates these goals, attendees need to follow the recommendations to avoid these pitfalls. Attendees should first schedule the most important parts of their experience and then fill in the rest of their plans accordingly. Without a prepared plan, it may be hard even to make it out of the exhibit hall. If an attendee has a limit on the number of hours that can be spent in line, then that attendee should prioritize less well-known panels. Often, these programs are just as interesting as the main attractions and the more intimate setting results in a great audience experience. Attendees should also understand that there is a high degree of chaos in many Cons. Schedules will change, weather will not cooperate, equipment will break, and the unwanted will occur. By adding some flexibility and some resiliency, the attendee will be able to make that another experience at the Con rather than a frustration that destroys the event. Increasingly, Cons use social media and apps to update the attendees on the changes to the schedule to alert the public about upcoming issues or opportunities. At the same time, both the Con organizers and the attendees should be mindful to review the privacy settings and the terms of use policies associated with the app. Many apps add great convenience and efficiency. Others, however, may take unwanted liberties with the users’ data, location information, and even the photos stored on the phone. Careful selection of apps will provide a wealth of useful tools without creating the risk of unwanted public disclosure of personal data. By utilizing thoughtfully-selected tools, attendees can navigate the updates and ensure that the experience is as positive as possible.

8. Safety, Security, and Insurance Risks can never be eliminated. Instead, the responsibility of the Con organizers is to minimize the potential risk and reduce the harmful impact of anything that goes awry. Con organizers can achieve this through a combination of preparation, practice, and insurance. As discussed in Chapter 4, a timeline and task list to manage the contractual obligations helps ensure that all senior Con personnel understand the status of the event. The same procedure helps ensure that all significant risks are addressed as well. Use of contracts with indemnification provisions and waivers of liability can shift some of the primary responsibility onto the venue, vendors, or others who are most directly responsible for potential accidents or who are in the best position to reduce risks of accidents. However, the contracts can only reduce some of the risks. Careful planning and operations are essential to minimize risk. Even a minor mishap can dampen the enthusiasm for an otherwise successful event. A serious accident could close the Con and prove financially ruinous to future years. Moreover, if not properly organized, the liability for any property damage or personal injuries could result in the personal responsibility of the Con organizers.

A. Tort Liability Basics

The Con, like any business, has an obligation to prevent foreseeable harm. This duty extends to the attendees, volunteers, employees, and contracting parties. In some cases, the duty will extend further to the general public. The legal term for a legal harm is “tort.” If a person fails to act to prevent foreseeable harm with reasonable prudence, then that person will be determined to have committed a tort. Different laws require different standards of care, but the general rule is that the Con must act with reasonable care. The failure to act with reasonable care is labelled negligence, and one who fails to act with reasonable care to forestall foreseeable harms is negligent. Foreseeable harms are those that can be reasonably anticipated. For example, fire codes establish the legal and reasonable number of people who can be in a particular room. Proper lighting rigging requires that both a clamp and a safety chain are used to secure a hanging light. If a liquid has

87 88 Cons and Festivals been spilled on the floor, proper maintenance requires that the spill be cleaned up immediately so that no one has an opportunity to slip. The duty to protect against foreseeable harms is limited. For example, take the duty to protect against an earthquake. An earthquake might be predictable, but the instance of an earthquake is outside any person’s control. At the same time, the risk that a building will collapse during an earthquake remains predictable, so municipal building codes establish the minimum standards required by builders to limit the risk. Building codes are enacted to limit these risks. If the builders fail to meet their duty to build to the code specifications, then the builder would be liable for the harm caused by the failure of the construction. If the builder fully complies with the required construction code, then the builder cannot be responsible for damage from an extraordinary earthquake. To the extent that an activity is under the direction, control, or influence of the Con, then the Con has a duty to protect from any foreseeable harm that might reasonably occur. The best way to do this is to meet all obligations under various codes, regulations, and contractual duties. There are some common steps that every Con should highlight:  Designate a safety officer who has the duty to ensure that patron safety is not put at risk  Ensure that all rooms are not overcrowded by complying with fire code limits  Require all high-risk activities (building, light rigging, wiring, special effects, pyrotechnics, weapons discharge, etc.) be performed only by licensed professionals  Employ professional security to assist with crowd control appropriate for the size of the event  Employ drivers for vehicles who have licenses appropriate for the size of the vans and trucks rented  Sufficiently rehearse all stage activities, particularly fight scenes, scenes using weapons, and scenes involving flying, wires, or aeronautic maneuvers  Plan for contingencies such as disruptive patrons, medical emergencies, weather events, power outages, etc.

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Managing risk simply requires planning to ensure that when the unexpected occurs, it is not a surprise. It is highly unlikely that any of these accidents will occur in any particular festival or convention, but over the course of the year, there are undoubtedly patrons who suffer heart-attacks, overdoses, drunken fistfights, and food poisoning. Somewhere there will be power outages plunging audiences into darkness, tornadoes that drive patrons into shelters, smoke machines triggering fire alarms, and rigging that collapses because two members of the construction crew each thought the other had checked the construction. Managing risk means checking to assure the contingencies are covered in the hope and expectation that these contingencies are never needed.

B. Responsibility and Liability

As the host of the event, the Con is responsible for the reasonably foreseeable risks that arise during the event. As discussed below, this responsibility will be shared with the venue. The typical Con is organized as either a corporation or a limited liability company, as is discussed more fully in Chapter 9. The basic rules for responsibility and liability are the same for both. The Con entity operates through the people involved in its operations. These include officers, directors, employees, and volunteers. The Con has the right and ability to control these individuals when they are acting on behalf of the Con, so when an employee or volunteer acting in a Con- related role commits a tort, then the Con is responsible for the harm that is caused. For example, if a Con employee runs an extension cord through the seating area of a room without taping down the cord and a patron trips, breaking a knee, then the Con is responsible to the injured patron for the injury. The patron does not need to find which employee failed to use tape or identify the number of other employees who might have noticed the cord but failed to move it or tape it down. The responsibility ultimately falls on the Con as the employer. The Con would be equally responsible even if the cord were left by a volunteer. The legal term for this responsibility is vicarious liability, meaning that the company is liable for the actions of those it controls when such actions are for the general benefit of the company or within the scope of their employment. It does not change the result if the company has rules and

90 Cons and Festivals the employee is violating those rules. For example, if the company rents a truck, the company will be responsible if the employee-driver is speeding negligently and causes an accident. In this case, it does not matter that the company has a policy prohibiting speeding by employees. Although the law is complex when it comes to defining the limits of the employer’s responsibility, as a general matter, all actions taken while on duty during the Con will likely fall within the responsibility of the Con. As a result of the vicarious liability – and good practice – the Con must take steps to be sure its employees and volunteers are well trained regarding their duties during the Con. All employees should be trained to identify and correct simple safety issues (such as spills, cords on the floor, etc.) and how to efficiently seek help from the proper personnel for more significant situations.

C. The Con’s Responsibility for the Venue

Many of the duties to provide a safe environment are shared by both the Con and the venue. Under most state laws, both the venue and the Con will have responsibility to protect the public. In the written agreement between the venue and the Con, the venue will likely require the Con to indemnify the venue for any harm caused by the Con which results in legal damage. This means that any costs incurred by the venue will be passed back to the Con. On the other hand, the venue should be primarily responsible for issues involving common areas such as leaking pipes in the bathrooms, physical plant issues, concessions sold by the venue, and similar items. If the venue is a large convention center or similar municipal facility, the written agreement will do more than just specify how the risk is allocated between the two parties. Provisions of the agreement may specify the requirements for electrical equipment, physical equipment, security personnel, and other operational needs. Even if the contract does not have these clauses, it is likely that the management of the venue has a great deal of experience regarding these matters. The Con organizers should meet with the management of the venue to discuss the logistics of the event. During these meetings, the Con organizers should ask for help assuring that the Con has the correct plans in place for all stage areas, patron facilities, and common areas so that both the large security issues and small management issues are covered under the comprehensive plan.

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The ProSight Specialty handbook31 identifies another issue with the common, inflexible venue agreement. These take-it-or-leave-it contracts may shift liability for the venue’s preexisting deficiencies and safety hazards onto the Con. Unfortunately, many venues, particularly unique sites in a geographic area (e.g., large arenas or stadiums) and public grounds, require you to sign inflexible contracts with burdensome mandates, including clauses that obligate stakeholders for any liability related to an accident at the venue, regardless of fault. In such cases where you may not be able to negotiate contractual changes, you can form an effective defense by bringing physical and administrative deficiencies to the attention of personnel at the venue with overall responsibility for workplace and spectator safety prior to the event. These should be documented either in the form of an e-mail or in written notes or a diary. Physical Deficiencies Examples include but are not limited to cracked curbs, blocked exits, malfunctioning emergency lighting, and anything else that might impede an evacuation. Administrative Deficiencies Review the venue’s emergency action plan. If it’s one-size-fits-all, it is likely substandard. A proper emergency plan will anticipate a wide variety of situations. If it only talks about evacuation, then the emergency strategy will increase danger rather than mitigate it in the event of an earthquake, tornado, or riot. In the case of the Indiana State Fair stage collapse in 2011, the Indiana State Fair Commission’s emergency plan did not address instances of severe weather, nor did it anticipate large crowds. If the plan had been reviewed by the Authority Having Jurisdiction (AHJ), that AHJ might have flagged its shortcomings.32

31 PLASA & PROSIGHT SPECIALTY INS., ENTERTAINING SAFETY HANDBOOK: THE ENTERTAINMENT TECHNOLOGY PROFESSIONAL’S GUIDE TO INSURANCE AND RISK MANAGEMENT (2016), http://prosightspecialtystage.com/wp- content/uploads/2016/11/EntertainingSafety.pdf. 32 Id. at 22-24.

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The Con’s operations manager should visit the venue to understand the physical layout and logistics. This also creates an opportunity to document any safety or security issues that should be addressed by the venue prior to the event. If the venue refuses to address these situations, the request to fix the deficiencies should at least be documented in case there is either an accident or a dispute between the venue and the Con.

D. Required Insurance

The Con organizers have a duty to provide insurance. Most venue agreements will require this. Most equipment rental companies will require this. Sophisticated bands and other performers will put insurance provisions in their contracts. But even if no third party requires that the Con purchase insurance, the Con owes its attendees, employees, volunteers, and contractors the protection provided by insurance. There are many companies that provide such insurance. Supple-Merrill & Driscoll, Inc., happens to have a division entitled ProductionInsurance.com that offers “Promoters Insurance.” SC Insurance Holdings, LLC, offers “Festival Insurance.” There are many others. The important process in selecting coverage is to assure it covers a sufficient range of activities and has a sufficiently high pay-out to address the potential claims of highly unlikely events. The coverage for the insurance may include some or all of the following areas:  General Liability  Inland Marine  Rented and Owned Equipment  Errors & Omissions  Automotive  Workers Compensation  Volunteer Protection  Liquor Liability  Commercial Crime

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 Umbrella  Fine Arts Event Insurance Now has a policy entitled “Commercial General Liability,” which it describes as covering “‘Public Liability’ or ‘Spectator Liability’ [that] will satisfy the requirements of most rental locations. The policy can also name the venue/fairground as Additional Insured at no greater expense to you.”33 A.M. Best Rating Services provides a comprehensive glossary of insurance terms that can be very helpful to navigate the complex and seemingly contradictory terms. While there are many insurance policies available from a wide range of companies, these policies still represent a fraction of the insurance industry. Particularly for a Con with unique themes or staging demands, it is important that the Con work closely with an insurance agent who understands the nature of the event. A book festival has very few risks. But a multi-stage, multi-day, outdoor multi-media rock festival could have expensive sound equipment, fine art displays, pyrotechnics, fireworks, stunts, food, liquor, minors, rain, windstorms, lightning, and swarming crowds. Understanding the differences is critical for the success of the book festival and the concert. Insurance is also highly limited and specific. For example, weather disruption insurance will protect from storms but not floods. Most insurance policies will not cover earthquakes or other natural disasters. Insurance policies will have significant deductibles, exclusions, and other limitations. It remains important to negotiate for the right selection of policy coverage to protect the people relying on the Con organizers. Workers’ compensation insurance is mandatory for the Con’s employees, but this also provides a protection to the Con, because the state insurance system typically limits claims for injury. Volunteers, on the other hand, are generally not employees and therefore will not be covered by the workers’ compensation system in most states. These rules vary considerably by state, so Con organizers need to determine the best available method of providing some form of liability insurance for their

33 Event Insurance Now, Festivals, https://www.eventinsurancenow.com/index.cfm?fuseaction=cContent.festivals, (last visited April 22, 2017).

94 Cons and Festivals volunteers. In California, for example, the employer can elect to extend coverage to volunteers, but this is not true in many other states.

E. Beyond Insurance and Code

Insurance provides a financial resource for compensating for damage which already occurred. Through a good insurance agent and positive relationship, the insurance agent may provide useful guidance and advice to minimize risk and solve some problems. Despite this, insurance is primarily used to remediate problems after they occur. Health and safety codes provide very general guidance while setting minimum standards. If a person violates these minimum codes, there is a chance the Con could be shut down. But it is often the case that there are voluntary “best practices” guides that require designs well beyond the minimum standard set forth in the codes. Whenever designing, building, or operating a stage, special effect, or facility, there is tension between the cost, the time required, and the quality. A risk minimization focus requires that the test to balance the good, fast, and cheap must be balanced against the best practices for safety rather than the minimum requirements. Experienced theatrical professionals are comfortable understanding tolerances and specifications, but that does not permit the usage of short-cuts. The 2015 collapse of the Westfield High School stage in Westfield, Indiana, was caused by the faulty construction of a cover for the theatrical pit that did not meet the municipal construction code and was not secured properly. The collapse of the sound wall at the 15th annual Ultra Music Festival in Miami may have been triggered by missing industry-standard safety practices. The collapse of stage trusses at the Indiana State Fair occurred despite meeting OSHA safety standards. The voluntary entertainment industry standards, however, required a more stringent building standard that may have been sufficient to withstand the strong winds that swept across the stage. Pipe-and-drape staging fell during a political rally in Texas for former presidential candidate Carly Fiorina because of improperly secured structures. Each of these failures could have been avoided by focusing on the risk management rather than on the minimum requirements to erect the structure. A stage strong enough to hold a dozen students may not be

8. Safety, Security, and Insurance 95 strong enough to hold seventy. The taller a structure, the more likely it will tip and fall. More than any other rule, the most important rule for risk management is common sense. It is the duty of every Con organizer and all employees and volunteers to be aware of potential risk issues so that they can be addressed before they become problems. This is particularly true if work is being completed in the early hours of the morning as the deadline to open looms. Small mistakes in security can be critical, so it is important to keep alert and follow best practices regarding safety and security management.

F. Security and Anti-Terrorism Considerations

Crowd control and general safety considerations have always been a part of event planning. These concerns have taken on greater prominence in an era where every public event is a potential target for domestic or foreign-based terroristic threats. The Con organizers must plan ahead to integrate public safety and crowd control into the Con planning. For larger events, the venue will require a safety plan as part of the venue negotiation. But even if the plan is not required by the venue, the Con is obligated to keep its participants safe, so security should always be part of the planning and execution of the program. There are typically four layers of security at a Con: volunteers, paid staff, outside professional security staff, and law enforcement. The volunteers are typically the ushers and line monitors who help keep crowds moving in the right direction, answer questions, and assist patrons. The vast majority of incidents that occur during a Con are not significant from a safety standpoint, and the simple training of a volunteer staff will enable them to handle these issues. Paid staff support the volunteers, answering questions the volunteers cannot handle and seeking to diffuse situations involving somewhat more belligerent patrons. The paid staff should be trained to talk with the angry attendee or the attendee who is intoxicated or ill. For larger events, the internal staff is supported by outside professional security. These staff members work for the service company. The service company contracts with the Con to provide the correct level of staffing, to develop a security plan, and to address external threats beyond unruly

96 Cons and Festivals patrons. These vendors may be able to provide access control equipment, or they may help the Con organizers work with national equipment rental companies. The professional security companies will help the Con organizers assess the underlying security needs for the event, based on the size of the anticipated crowd, the nature of the venue, any known threat risks associated with the event or the location, and any other intelligence available to law enforcement and the security industry. In addition to the three levels of private security, every event is protected by local law enforcement. The relationship between law enforcement and the event can vary greatly. If the event requires a municipal permit, then it is common for the Con organizer to be required to hire off-duty or overtime police officers to serve as supplemental security for the event. Under this scenario, the police officers will be in uniform. They will be providing additional security with the ability to arrest those individuals who break laws or breach the peace. Unlike the volunteers, staff, and paid security officers, they are not working to handle the general flow of the event. Nonetheless, a police presence often has the effect to encourage better behavior on the part of patrons and serves to reduce the risk of problems escalating. Insurance remains an issue for police (or fire and rescue personnel) serving in an overtime or off-duty capacity. Since these officers are not on duty, they may not be covered by standard workers’ compensation protections. At the same time, they are not employees of the Con, so they are not covered by the workers’ compensation provisions of the Con. Yet, these officers bear the same risks of ordinary accidents as any of the other Con workers, plus the additional risks associated with violent or terrorist incidents. This is a concern each Con must address in conjunction with the municipality, if the event is of a size sufficient to require off-duty police and fire department personnel.

G. Pyrotechnics and Stage Safety

Pyrotechnic displays are perhaps the area subject to the greatest potential risk. These risks are exacerbated if the displays are intended for indoor use. In an essay by pyrotechnic expert Bill Ofca, he notes that “any mixture of oxygen and fuel, under the right conditions, may explode if it

8. Safety, Security, and Insurance 97 ignites.”34 He notes that fireworks materials are finely ground, divided powders, so materials like charcoal dust will explode as a cloud in the air. For those of us who have worked backstage or in older venues, it is common to watch stage lights illuminate the heavily laden dusty air that swirls through the wings. Such an environment risks approximating the explosive clouds of properly manufactured fireworks. Grain-dust fires are a well-recognized risk. The same conditions that can occur in some dance clubs, theatres, and other older venues must be taken into account. Ofca states that the first “responsibility and duty of all fireworks makers, from the hobby mixer to the industrialist pro, is to take all steps to prevent accidental ignition. The second most important duty is to limit exposure by preventative means, should accidental ignition occur.” Simply put, this means limiting the amount of explosive material used, keeping any other potentially flammable materials away from the fireworks, and isolating the operations of the fireworks from everything else. Electrical sparks and extreme heat are both triggers for the unintended ignition of fireworks. Both of these sources are common in stage lighting and sound equipment. As a result, additional care must be taken to secure the onstage fireworks from the unusually risky environment of stage effects. Finally, history has shown that some venues – particularly music clubs – take shortcuts in their building and fire code compliance. Everyone involved with using pyrotechnics should pay attention to the environment. It may be difficult to see whether the ceiling tiles are flammable or properly fire-rated, but it is much easier to check to see that all exit doors are unlocked and functioning. If the fire doors are locked or blocked, it is much more likely that other forms of safety violations are also occurring. There are many other steps that everyone can take to keep the Con safe and still put on an excellent show. OSHA provides a simple list of introductory safety precautions:

34 Bill Ofca, Fireworks Safety Manual, SKYLIGHTER, http://www.skylighter.com/skylighter_info_pages/Books/fireworkssafetymanualofca.h tm (last visited Feb. 1, 2017).

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1. Make sure personnel are trained and competent. 2. Obtain required licenses, permits and inspections. 3. Maintain display site security and communications. 4. Wear protective gear and proper clothing. 5. Prohibit accidental ignition sources. 6. Properly install mortar boxes, racks and drums. 7. Keep fireworks cartons closed. 8. Keep fireworks dry and in good condition. 9. Always handle fireworks carefully. 10. Stay away from loaded mortars.35 This list of advice applies equally to the professionals hired to put on any fireworks display and to the Con organizers who must pay careful attention to the professionalism and quality of the hired pyrotechnic experts. Before hiring a fireworks display provider, the Con organizers should ask about the qualifications, training, and experience of the pyrotechnic team. Once on site, the Con organizers should ask questions about storage of fireworks, safety precautions, and contingency plans to assure that the professionals are focused on safety as well as on achieving the intended production values. The Con organizers are responsible for addressing these questions and making sure the right people are handling the explosives and that they are paying attention to safety as well as the show itself.

H. Weapons and Physical Safety

For some Cons, the visibility of weapons can pose an additional safety risk. Weapons should not be available to the general public. This requires the Con to implement a policy to prohibit the carrying of potentially dangerous weapons such as unsheathed swords or working handguns.

35 OSHA & AM. PYROTECHNICS ASS’N, ALLIANCE PUBLICATION 3248-04N-05, FIREWORKS SAFETY: DISPLAY OPERATORS (2005), https://www.osha.gov/Publications/fireworks_card.pdf.

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(States with liberal conceal-carry laws may pose additional difficulties in this regard.) The ticket agreement should provide that attendees are not permitted to carry “working” weapons. For any Con that has a cosplay component, costume items and props that are potentially harmful weapons should be permitted only if these devices are “peace-tied” or otherwise disabled. For example, swords should be permitted only when locked into their sheaths. The difference between a weapon and a prop is often a matter of judgment, however, so the Con must also have a security procedure to empower appropriate staff to make the determination regarding which devices should not be carried on site. In addition, some attendees may be able to re-enable their device once inside the Con. It is a rather simple matter to cut zip-ties or reinstall missing components of a firearm. To address this concern, the attendee ticket policy should prohibit such behavior. The admissions rules are insufficient, however, to guarantee compliance. Instead, security personnel must be alert to this risk and prepared to address patrons who re-enable dangerous weapons. The Medieval Fair of Norman, Oklahoma, has a simple weapons policy consistent with this guidance. The fair adds this interesting proviso: “No weapons may be sold to minors. Schools are responsible to enforce and inform their students of school policies regarding weapons.” Presumably, the additional rule is likely published on the website as an effort to avoid liability for students who buy or bring peace-tied weapons that still violate the zero-tolerance weapons policies in effect for most school districts. For medieval festivals, it is quite common to have rules prohibiting the carrying of knives and swords while at the same time permitting an exhibitor to be selling such weapons. There have not been reports of aggressive attendees buying expensive weapons on-site to use in rampages, so Con organizers need to balance common sense with reasonable precautions. It may be sufficient that the vendor be required to carefully bubble-wrap and tape all sales, so that the items sold cannot be used during the Con.

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I. Americans with Disabilities Act Obligations

In addition to the multitude of health and safety regulations, the Americans with Disabilities Act (ADA) obligations are worthy of additional attention. ADA regulations are responsible for comprehensive changes to the physical accessibility of facilities in the United States since its adoption in 1990. The ADA made it a discriminatory practice not to make reasonable accommodations for an employee or patron. A reasonable accommodation is one that is not excessive financially or administratively. For both the venue and the Con, the ADA requires some self- awareness regarding any temporary structures in the venue. The ADA is now part of all building codes, so the permanent structures should be fully ADA compliant. If the facility predates 1990, however, the Con organizers should be sure that there are no accessibility issues in the facility that, while grandfathered under the law, will nonetheless interfere with the operation of the Con. For the temporary facilities built or rented by the Con, the ADA should guide its construction and layout. Good attendee flow generally requires wide hallways, but at a minimum, areas such as halls, doors, and ramps should be able to accommodate wheelchairs. Checkout counters, security procedures, and similar points of entry/exit should be accessible. Ramps should be available in addition to stairs. Extension cords and other impediments should be minimized and carefully secured. Finally, the use of any third party services, such as bus or van services, should also be ADA compliant, so the Con is not providing a service that does not meet the ADA requirements.

9. Legal Structure of the Con The decision to launch a new Con does not always start from a clean slate. In some cases, a school organization or student group operated an event, and as that event grew, the organizers made the decision to expand it from its origins into something much larger. Other Cons may have started as small social gatherings that took on an independent life as time went on. For others, they were originally programs run by community centers or other charities and their budgets outgrew the operations of the nonprofit where they started. In today’s legal and economic world, informal organizations are not well suited to the operation of a Con. The appropriate organizational structures for Cons are often large employers with significant operations. They require a well-constructed legal entity that can serve as the contractual partner for the vendors, the employer for the staff, and the source of continuity from year to year.

A. Organizations to Avoid: Sole Proprietorships and General Partnerships

As provided under most state laws, in the absence of any legal structure, the Con will be treated as either a sole proprietorship or a general partnership. If the Con has any volunteers, significant contracts, or attendees, the Con organizers should avoid these forms of business organization. A sole proprietorship is nothing more than saying that the Con organizer is legally the same person as the Con itself. The Con may use its trade name, but all legal responsibilities rest solely on the Con organizer as the owner of the Con. If Bob Smith rents a hotel room, invites gaming enthusiasts to see demonstrations of new games and meet some game authors, then there is relatively little risk to Mr. Smith or those involved. The revenue, if any, is treated as Mr. Smith’s personal income. If there are any expenses, Mr. Smith is solely responsible to pay them all. A general partnership is any business organized for profit between two or more people. So, if Mr. Smith works together with Ms. Brenda Jones, splitting any profits, then both Mr. Smith and Ms. Jones are legally considered general partners. General partners are each entirely responsible for all the losses that the business could incur. So if Smith rents a hotel ballroom that is much larger than the event needs, the hotel can demand

101 102 Cons and Festivals payment from either Smith or Jones. If Smith has no money to cover the expense, then Jones will be responsible for the entire amount as the general partner of Smith. It does not matter that Jones was not consulted or that Jones did not sign the rental agreement. As general partners, the law provides for unlimited general liability among all the general partners as a method to protect the public from financial loss. There are no valid reasons to operate a business as a general partnership (unless the partners are comprised of other corporations or legal entities). General partnerships increase the potential liability for the partners while providing no benefit to them. The law provides that all profits, like all losses, be shared equally among the partners, unless the partners have agreed otherwise. But because the legal requirement for revenue sharing often comes as a surprise to the typical members of a general partnership, even this rule of equitable distribution may sometimes cause more mischief than provide help. Most Cons take a small army of volunteers. A sole proprietor may inadvertently become a general partner engaging some of these volunteers to participate. Since the legal standard is an understanding upon two or more people to engage in a business for profit, a volunteer may easily self- identify as a partner in the enterprise. Unless the sole proprietor takes steps to correct that misinformation with the public and with that volunteer, the assertion by that volunteer has the potential to change the legal relationship between the parties. The same problem exists for general partners. It is very hard to determine who is a volunteer and who is a general partner, particularly if the Con either earns a good deal of money, or worse, owes a good deal of money to its creditors. Instead of operating as a general partnership, the Con organizers should take the time and invest the effort to create a legal entity that best serves the goals of the Con.

B. Comparisons between For-Profit and Nonprofit Organizations

For most Cons, there are four basic structures from which the Con organizers can choose: corporations (including subchapter S corporations), limited liability companies, social enterprise corporations, and nonprofit corporations. Today, many of the most successful Cons are operated as nonprofit corporations, although there are many that operate as for-profit corporations and limited liability companies as well.

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All four entity types have certain common features. The entity is a creature of state law. The Con organizers file organizing documents with the state where the Con is located (or another state, if there are particular state law benefits in that state). The entity then provides the organizers limited liability. This means that the entity is the legal person with which the vendors contract. The entity, rather than the Con organizers, is responsible for fulfilling its contracts. Similarly, the entity, rather than the Con organizers, is primarily responsible for any liability in the event of accidents or torts. These limitations are not absolute, so personal liability remains a concern in some situations. As discussed in Chapter 8, limited liability does not replace the need for insurance. Nonetheless, the risk of personal financial liability is significantly reduced by the existence of the legal entity. Corporations, limited liability companies, and social enterprise corporations all have the same basic structure. They set forth what parties own the entity through distribution of shares or membership units. The state laws provide a series of rules regarding how the owners and the management must operate, provide certain protections for the owners and for creditors, and specify the tax treatment of the revenue and loss from the business. The differences between these three forms will be discussed later in the chapter. While there are some significant differences in management and tax obligations of these forms of for-profit business, they all fill substantially the same role. The for-profit entities will be organized with rules requiring an initial financial contribution from the shareholders or members. The organizing agreements may provide that the shareholders or members are responsible for providing additional capital, or the documents will specify how the business will sell its ownership stake or equity to raise additional capital and take on new investors. The alternative to the for-profit entity is the nonprofit entity. Comic- Con, for example, is a nonprofit educational organization. A nonprofit organization operates in a substantially different manner than a for-profit organization. First, a nonprofit organization must have a bona fide charitable purpose. Internal Revenue Service regulations provide the general rules for nonprofit organization purposes:

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The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.36 While this federal tax code provision provides the national standard, each state also has its own comparable state law version of this rule. Broadly speaking, most Cons have the potential to qualify as nonprofit organizations provided they take on either an educational or literary purpose. The educational component of the Cons and the art forms promoted and developed are fairly traditional forms of nonprofit advocacy, even if the media was not historically mainstream. The Con must have this charitable purpose in practice, not just on paper. The purpose test is likely to be met if there are educational panels and programs, outreach efforts for schools or community organizations at other times in the year, or similar efforts to educate about the genre or to promote the artistic and literary work of those featured. Second, the nonprofit organization differs substantially from the for- profit organization because it has board members (and often has general members) but it does not have shareholders. No person owns a nonprofit. Instead, there is a board of directors that governs the organization. Larger organizations have a professional staff, and the executive director of a large nonprofit has a job very similar to that of a corporate CEO. Third, there is no sharing of profits in a nonprofit organization. Although the nonprofit can employ paid staff, it cannot pay dividends or share profits with its staff or board of directors. There are strong IRS regulations prohibiting “private inurement,” meaning that the leadership

36 Exempt Purposes Internal Revenue Code Section 501(c)(3), IRS, https://www.irs.gov/charities-non-profits/charitable-organizations/exempt-purposes- internal-revenue-code-section-501c3 (last rev. or updated Nov. 1, 2016).

9. Legal Structure of the Con 105 of the nonprofit cannot use their influence to make money off the charity, other than their reasonable salary. Since these rules are enforced by the IRS through its tax auditing function, these rules have significant teeth, and many abuses of nonprofits are caught and punished. The prohibition on distributions is consistent with the need for a charitable purpose. If the Con has a very good year, then the excess revenue should be used to expand its educational or artistic and literary efforts. In good years, it can use the proceeds to further the cause. Having no shareholders also means that the Con does not have to return profits to investors. The greatest benefit of operating as a nonprofit is the ability of the charity to accept donations. This enables the Con to seek gifts and donations which are deductible from the income tax of the donor. As a tax-exempt entity, the Con is also excused from paying certain taxes, such as property taxes and sales tax on items it purchases. The downside of creating a Con as a nonprofit organization is that Con organizers are limited to reasonable salaries. If the Con becomes a tremendous success with a high profit margin, the nonprofit’s staff will not be eligible for dividends or the opportunity to sell highly appreciated stock. Instead, they will continue to receive only reasonable salaries. The Con organizers will forego any chance at windfall profits when they make the election to operate as a nonprofit organization.

C. Comparisons among Corporations, Limited Liability Companies, and Social Purpose Corporations

Among the for-profit entities, corporations are the oldest form and the best established. Each state has its own state corporations law. A corporation is created by filing the Articles of Incorporation with the state, paying any required fees, and following the other steps set out in the state law. These steps usually include:  Adopting bylaws, which establish the governing rules of the company;  Electing directors;

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 Accepting the resignation of the incorporator, the person who filed the Articles of Incorporation; and  Filing any state securities documents establishing the initial ownership of shares in the company. A traditional corporation is managed by a board of directors. The duties of the board of directors are listed in the bylaws. The shareholders only vote on major changes to the company or other items specified in the bylaws. Under most state laws, the board of directors and the shareholders must each hold an annual meeting to reelect officers and directors, although these meetings can be replaced with actions taken by unanimous written consent. Corporations also typically have certain annual reporting requirements and annual fees that must be paid to remain in good standing. Provided these minimum steps are taken, the corporation remains in good standing. Corporations, as separate legal entities, are taxed directly. This means that any profits of the corporation are taxed and any dividends the corporation pays to the shareholders result in a tax liability to the shareholder. Sometimes referred to as double-taxation, the two-tier tax structure for corporations results in a higher tax obligation than if the business was operated as a partnership. A partnership, being a collection of individuals, is not taxed directly. Instead the proportionate share of profits and losses are assigned to each partner and that partner pays the single tax on any net profits earned (or uses any losses to offset other profits). As previously noted, however, a partnership structure has many inherent problems, so the tax benefits do not outweigh these disadvantages. Fortunately, state laws and the federal tax code allow for the benefits of both partnership taxation and corporate liability limits through two types of entities: the subchapter S corporation and the limited liability company. Unlike the traditional corporation, the subchapter S corporation can be managed directly by its shareholders, and the law allows for the elimination of certain other corporate formalities. Because the subchapter S corporation is managed like a partnership, tax laws allow the subchapter S corporation to elect to be treated as a partnership for tax purposes. This avoids the double taxation of the traditional corporation.

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As a tradeoff, the subchapter S corporation may only issue one class of stock. While this is not a significant limitation for the typical Con, it substantially limits the creativity of the financing structures for more heavily financed start-up businesses. The limited liability company (LLC) is a more recent variation of the business model, which operates as something of a hybrid between the subchapter S corporation and the general partnership. The ownership is held by members rather than shareholders. The members own membership units instead of shares or partnership interests. The LLC is managed either by its members or by managers, depending on the terms of the membership agreement. In an LLC, the operating agreement takes the place of both the articles of incorporation and the bylaws. The LLC has the ability to elect to be taxed as either a partnership or a corporation. Unlike the corporation laws that provide shareholders the right to change from the statutory rules only in limited situations, the typical state laws governing LLCs allow the operating agreement to set out almost every term regarding the relationship among the parties. Very few rules are required under state law. LLCs are great financing vehicles for certain types of start-up enterprises and very effective at carving out the rights of different kinds of owners. With this flexibility and freedom comes a much greater need to understand and craft the organizing documents. For some Con organizers, the flexibility will be a great benefit, but for most, a subchapter S corporation will provide more structure while reducing the chance of something going wrong. The most recent addition to the corporate lineup is the social purpose corporation. Social purpose corporations vary from subchapter S corporations in that they specifically allow the corporate charter to include social interests to be an express component of the corporate purpose of the business, rather than the corporate purpose being limited to making profits for a return to the shareholders. In this way, social purpose corporations provide a model that combines the for-profit structure of the corporation with the social purposes of the nonprofit. These exist in only a few states. Even where they do not exist, however, an explicit statement in the Articles of Incorporation and the Bylaws will enable most companies to have these social purposes. They are of particular value to companies like

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Newman’s Own, which markets traditional grocery items but provides all its net profits to charity. In a traditional company, the minority shareholders would correctly object to all of the profits going to charity as corporate waste. The most common way to solve that problem historically was not to have minority shareholders. Today, the social purpose corporation also allows such behavior. Corporations do not have to be organized and operate in the same state. A corporation operating in another state is known as a foreign corporation. If the Con organizers believe the social purpose corporation is the best corporate form, then they can organize the company in a state that recognizes the social purpose corporation and file a certificate as a foreign corporation doing business in the state where the Con operates. The steps to qualify as a foreign corporation are very simple and most companies use a low-cost service to complete the process. The ability of business entities to qualify as a foreign corporation enables Con organizers to select the laws of a particular state to organize the business, while still operating in the locations they choose. Social purpose corporations are not charities, however, and they are taxed as for-profit companies. They have shareholders and may pay dividends. The benefit to the Con organizers is the flexibility to provide a much greater percentage of the profits to charity than the normal corporation.

D. Organizational Structure of the For-Profit Business Entity

The basic corporation is operated by a board of directors. The board of directors is elected annually by the shareholders or by the corporation. In small organizations, the shareholders typically elect themselves onto the board of directors, serving in both the role of owner and decision maker. A board member has no direct, individual authority over the organization. Instead, decisions are made only through votes of the board of directors acting as a single body. If the organization is a subchapter S corporation or a member-managed LLC, then the board is replaced directly with the owners. The operating documents will state whether the board operates on a one person, one vote basis or votes based on the proportion of ownership interest.

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In larger organizations, the board of directors is often comprised of some internal officers of the corporation and some outside board members. These boards are much more independent of the shareholders, bringing professional expertise to the management of the organizations. Such boards operate on a one person, one vote basis. The day-to-day operations of the corporation are conducted by the officers of the corporation who oversee the employees and the activities of the business. Traditional corporate law identifies the president, vice president, secretary, and treasurer as the four key officers, but practice has evolved considerably. A single individual may hold more than one position. These four duties have been updated and divided. The “president and chief executive officer” (CEO) has ultimate responsibility for all operational decisions and reports only to the board of directors. As chief executive officer, the president also convenes the board of directors and helps direct and manage the board. Occasionally, the president and chief executive officer are positions held by two separate individuals, but usually the business has only one leader who may choose to select one or both of these titles. The “treasurer and chief financial officer” (CFO) has the responsibility for all financial reporting, budgeting, financial compliance, tax reporting, and similar functions. If the person is designated as CFO, that person will also typically be named one of the executive vice presidents. Many organizations also utilize a “chief operating officer” (COO) who undertakes the primary responsibility for personnel, operations, marketing, sales, and other internal financial aspects of the company. For organizations with a COO, the person will often be named the vice president or one of the executive vice presidents. The “secretary” has a unique role within the board of directors’ operation. This person is responsible to assure that notices of meetings are provided to board members, minutes of meetings are properly taken, and if any actions require a state filing, that those filings are properly recorded. For larger corporations, the secretary is often a member of the legal staff or law firm. For small companies, the secretary can be any senior officer. The titles of CEO, CFO, and COO work equally well in corporations, subchapter S corporations, and Limited Liability Companies. All other

110 Cons and Festivals employees and departments report to supervisors who, in turn, report up through the organization’s structure to one of these three positions. The CFO and COO also report directly to the CEO, and together, they report to the board of directors.

E. Legal Structure of the Nonprofit Corporation

For organizations that meet the state and federal definition of a public charity, there are significant benefits. In particular, a charity receives an exemption from federal income tax on income related to the organization’s charitable purpose, reduced postal rates, and the ability to accept tax- deductible contributions from its supporters. Most states also exempt the charity from paying sales tax and may exempt the organization from paying property and other state taxes. The tax benefits can add up to substantial savings and the charitable deduction status sends a signal to supporters that the organization is sufficiently well organized to receive donations. A nonprofit corporation is organized by volunteers for a specified public benefit, such as public educational, charitable, or literary purposes. A nonprofit corporation cannot be organized to benefit private interests or private individuals, and it does not have shareholders or owners. These limitations do not eliminate the ability of the nonprofit corporation to pay reasonable, fair-market wages to staff, including the executive director and other officers. Instead, the limitation is designed to assure that the donations and earned income go primarily to the charitable purpose. Because there are no shareholders or financial owners, the nonprofit corporation differs from the for-profit corporation. Rather than being elected by owners, the board of directors is elected under one of two possible structures. If an organization is a member organization, then the bylaws of the nonprofit will provide for an annual meeting at which the members of the board of directors are elected. Membership will be determined by the bylaws of the organization. Most typically, nonprofit membership is given to all donors to that charity. Many nonprofits also extend membership to all volunteers who work on behalf of the charity. The other option is for the board of directors to retain the right to vote for the members of the board of directors. This is known as a self- perpetuating board. Though it might seem that a self-perpetuating board is far less democratic and vaguely unfair organization, there are practical realities that make the non-member process quite reasonable.

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First, in most instances, the board of directors knows who will be the best potential leaders for the charity. A well-organized nonprofit has a volunteer committee structure that allows volunteers to take on greater responsibility over time. Election to the board of directors should reflect the commitment board members have made to the organization, to the contribution those individuals have made in the past, and to the qualities of leadership that will make them effective to help guide the organization in the future. The general membership will largely rely on the recommendations provided by the board of directors to make this determination. Using a nominating committee, the board of directors will identify a slate of candidates best suited to leadership of the nonprofit. At member-elected annual board meetings, it is extremely rare for the members to ignore the recommendations of the board and elect a different group of board members. Second, the process of conducting annual meetings that attract enough voting members to constitute a quorum of votes is expensive and time- consuming. Many nonprofits find that the process of conducting these annual meetings is not the best use of resources, and assuring a sufficient turn out often results in very low quorum requirements. If the quorum requirement is only one-third or fewer of the voting members, then the goal of a representative voting population is lost anyway. Third, under state law there are certain activities that require votes from the members, if the organization is a member organization. Many of these topics are set by state law, though others can be added in the nonprofit’s bylaws. These would include votes on dissolution, merger, sale of assets, or reorganization of the corporation among the items to require member approval. Many nonprofits struggle to get the membership to attend special or regular meetings needed to accomplish these goals, creating legal challenges. As a result, it is far more convenient for the nonprofit to be organized as a non-member charity. Nonetheless, most charities find it useful to offer “membership,” which promotes engagement by donors and volunteers. The nonprofits can have it both ways. The nonprofit can specify in its bylaws that membership for purposes of donor recognition does not entitle the person to have voting privileges.

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Other than the board of directors, the nonprofit corporation operates very much like the for-profit corporations. Instead of the CEO title, the chief executive often uses the title “executive director,” but in most other respects, the combination of the executive director, CFO, and COO are responsible for the operations of the organization.

F. Qualifying as a Nonprofit Corporation

Launching a new nonprofit organization takes time and planning. The initial step in creating a nonprofit corporation is to file the incorporation papers with the state. This includes the articles of incorporation, bylaws, and charitable organization elections required by the state. To be tax exempt, the IRS requires that the articles and bylaws for the organization provide the following components:  The corporation is organized for a charitable purpose;  No part of net earnings will be paid or distributed to anyone, though the corporation can pay reasonable salaries;  The corporation will not be organized for lobbying or political purposes; and  The corporation will dedicate its resources to its charitable purpose. Both the charitable purpose and the nonprofit corporation’s operations must be consistent with the IRS definition of a charity. To establish that the nonprofit is eligible for tax-exempt status, the organization must apply for a federal charitable tax exemption. The purpose of the filing is to establish that the organization is both a charitable organization and that it is organized as a public charity rather than a private foundation. The IRS summarizes the public charity standards as follows: Generally, organizations that are classified as public charities are those that – Are churches, hospitals, qualified medical research organizations affiliated with hospitals, schools, colleges and universities, Have an active program of fundraising and receive contributions from many sources, including the general public, governmental

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agencies, corporations, private foundations or other public charities, Receive income from the conduct of activities in furtherance of the organization’s exempt purposes, or Actively function in a supporting relationship to one or more existing public charities.37 A private foundation, in contrast, typically has a single family as its funding source and distributes its funds to public charities. Private foundations do not typically operate their own charitable programs. Under the tax code, however, the nonprofit must establish it is a public charity or it will be classified as a private foundation. To avoid this, the application process and the operations of the nonprofit must make clear that it falls within the public charity definition. IRS Publication 557 includes the following example of the type of organization that meets the test as an educational organization: “An organization whose activities consist of conducting public discussion groups, forums, panels, lectures, or other similar programs.” This definition provides an excellent description of a standard science fiction convention, comic book convention, or book fair. A number of revenue rulings highlight that public performances of music, film, and art can all satisfy the condition that they are charitable in purpose. The IRS will look closely to be sure that these organizations are not being used to promote the founder, but instead have a public focus on educating aspiring artists, furthering the art form, or promoting the public’s knowledge and appreciation of works.38

37 “Public Charities,” IRS, https://www.irs.gov/charities-non-profits/charitable- organizations/public-charities (last rev. or updated Nov. 1, 2016). 38 See Benjamin Takis, Art Law Visiting the Non-profit Side: On Qualifying for 501(c)(3) Status as an Arts Organization, CENTER FOR ART LAW: ART AND CULTURAL HERITAGE LAW AGGREGATOR (May 27, 2014), https://itsartlaw.com/2014/05/27/visiting-the- non-profit-side-on-qualifying-for-501c3-status-as-an-arts-organization/. Public exhibits or performances are also typically valid 501(c)(3) activities, provided that steps are taken to ensure that the selection of artists is disinterested (i.e. the organization is not merely a vehicle for

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Once the nonprofit corporation has established its bona fide charitable purpose and organized itself so that its operations and funding qualify as a public charity, the board of directors must authorize the filing of the tax exemption application. The tax exemption application should be filed as soon as possible after the formation of the nonprofit corporation. As IRS regulations provide, if the organization files the tax exemption application within 27-months of its initial formation, the organization’s exemption will be recognized retroactively to the date it was organized. Otherwise, exemption will be recognized based on the postmark of the application to the IRS (or the date of receipt by the IRS if there is no postmark).

G. Nonprofit Partnerships and Fiscal Sponsorship

Although the IRS tax exemption process will cover the time between the organization of the nonprofit corporation and the date the exemption is granted for those organizations that file on a timely basis, there may be other reasons to delay seeking tax-exempt status. A tax-exempt charitable organization does have significant, ongoing reporting obligations. If the initial volunteers for the Con are unsure of its long-term viability, they may be better off seeking the assistance of an established nonprofit to operate in the formative years.

i. Operation as a Committee Within Another Charity

The least formal way to accomplish this is to partner with an existing public charity which shares a public purpose similar to that of the Con. Many film festivals, cultural festivals, music events, book fairs, and other events are actually conducted by charitable community associations or by universities. The volunteers working on the Con operate as a committee within the community organization or under the auspices of a university. The community organization is the legal entity conducting the event, and it is that organization that enters into the various contracts described throughout the book, acquires the needed insurance, and undertakes the legal responsibilities.

showing the work of founders, directors or other insiders of the organization), and provided that the artists or works are chosen for their artistic merit rather than their ability to appeal to a mass audience.

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This strategy has two additional benefits. First, the community organization or university already has a preexisting group of donors, volunteers, and constituents so finding the initial audience becomes much easier than starting from scratch. Second, the community organization or university already has the fiscal, human resources, and risk management systems in place so the necessary employment policies, insurance standards, and other operational needs are already established. Using this strategy, the new Con committee can focus on the subject of the Con without the necessary work on everything else that goes along with creating a new business enterprise. The drawback to this approach, however, is the control retained by the nonprofit organization. The community organization’s board of directors remains responsible for the event, and it may have an opinion regarding the operations and structure of the event. It may also be less likely to risk a financial loss because that cost would negatively impact the charity. As a result, this strategy may prove much easier to launch the Con but it may also have too many limits to achieve the purpose of the Con organizers.

ii. Fiscal Sponsorships

A fiscal sponsorship provides another way for the new Con to receive benefits from an established nonprofit organization while retaining more of its autonomy. The fiscal sponsor may be either a community organization which hopes to help the new enterprise spin off into its own public charity or it may be a nonprofit organization that primarily supports other public charities through its fiscal sponsorship activities. Under the fiscal sponsorship relationship, donations are made to the fiscal sponsor. Although the fiscal sponsor must legally retain the right to use those donations at its own discretion, it operates on the assumption that those funds will be made available to the sponsored organization as long as the sponsored organization remains eligible to receive the funds. The funds must, of course, be used only for expenditures that are allowed under charitable tax rules, but this includes most of the operational expenses for any Con other than direct payments to the Con organizers. A fiscal sponsorship is particularly helpful if the Con organizers are concerned that their tax exemption application will be rejected. Fiscal

116 Cons and Festivals sponsorships are available for for-profit organizations and for organizations that have not yet received their tax-exempt status. For example, if a for-profit, nationally recognized band wanted to launch a music festival, it could work with a fiscal sponsor so that the charitable music festival met all the tax-exempt qualifications and the money went either to the charitable music festival itself or to related public charitable activities. The band does not need to create its own nonprofit corporation to accomplish this. Instead, the fiscal sponsor is the charity putting on the event, supported by the band. Only if this event grows into an ongoing business should the band create a separate public charity to operate the event and its related charitable activities. The fiscal sponsor can do much more than merely collect the charitable donations on behalf of the Con. The fiscal sponsor may provide budget and finance management, provide human resource policies and procedures, facilitate lower rates on insurance, and provide training on nonprofit management. These resources are very helpful for the start-up nonprofit. Fiscal sponsors typically charge a fee based on a percentage of the donations received. Others will offer the services on a fee-based schedule. Charities with ongoing ﬁscal agency programs will have operational guidelines that the sponsored organization must agree to follow. Both the fiscal sponsor and the sponsored entity remain responsible for careful ﬁnancial accounting and for compliance with all applicable tax laws. The fiscal sponsor remains in control over the use of any contributions to assure all funds are used properly and there is no private benefit derived from the fiscal sponsorship.

10. Financial Structure of the Con For the for-profit corporation or LLC, raising sufficient capital is usually the first concern in launching any business endeavor. The nonprofit corporation can seek charitable donations, but it is much less common for a for-profit company to receive donations. Instead, the sales of securities become the primary method of raising funds. In addition, both for-profit and nonprofit organizations can sometimes obtain loans to help with managing cash flow and leveraging growth over time. This chapter provides a brief introduction to the equity and debt financing alternatives available for the typical start-up Con, including the new resources available through crowd financing and crowdfunding.

A. Traditional Equity Financing For-Profits

The term “equity” refers to the ownership interests in a company or the value one owns in an asset. Stock refers to the shares or interests in a company. For an investor in a business, stock ownership and equity both refer to the investor’s ownership interest in the business. An LLC uses the term membership units in place of stock, but these terms have the same practical meaning. The historical assumption about financing a for-profit business was that the initial owners would provide personal funds, and in exchange own a proportionate share of the stock or the equity in that business. While this assumption remains true for many businesses today, the process and options have expanded greatly.

i. Valuation

For a start-up Con, the initial source of funds will come from the participants who wish to own and operate the Con. Each owner would contribute a specified amount of money, granting each investor ownership of a proportionate share of the organization. The Con organizers may choose to give a different proportion of voting interest or control over the con operations, depending on the other skills and attributes that each person brings to the venture. For example, if the Con needs $100,000 to rent the facility, rent equipment, pay staff, buy insurance, pay for marketing, and purchase supplies, then ten investors each providing $10,000 in equity would be sufficient to launch the business.

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Assume that instead of ten equal participants, the Con was organized by two individuals, each of whom could scrape together $5,000. They need an additional $90,000 to launch the Con. On the other hand, they have both worked for months on the project, invested many ideas using a great deal of personal knowledge, and without both of them, the Con would never be possible. Instead of offering new investors the same stock price the two founding Con organizers paid, the Con can choose to issue additional stock at a much higher price. For the founders, $10,000 was worth 1000 shares. For the subsequent investors, $90,000 was worth 900 shares. The value of the share went from $10.00 per share to $100.00 per share. This valuation guarantees that the founding Con organizers together have majority control of the Con ownership as well. Valuation is often arbitrary. It is not based on the value of the company today; rather, it is based on what the investor believes the opportunity to invest in the business is worth today. For start-ups in the arts community, like many Cons, the investor is also willing to put the money at risk because of the belief in the social good of the enterprise. Con investors, like investors in Broadway and independent films, usually understand that the investments are bad business but worthwhile for the social good they provide and the fun in helping the creative community. Without such investors, the world would be a far less colorful place. This stark change in valuation is not uncommon for start-ups. The early investors are investing in the value of the organization. As long as the ownership by the founders is fully disclosed, there is nothing wrong with the great difference in financing opportunities between the two situations.

ii. Introduction to Securities Regulation – Hire a Lawyer

The difference in valuation should help to explain, however, why both state and federal law regulate the sale of securities so closely. There are many opportunities for information to be hidden from investors or to otherwise take advantage of investors. The issuance of securities has very significant legal consequences as well as tax ramifications. This is the area of the business that requires the greatest amount of legal advice. This book will provide only a brief introduction because a Con organizer cannot issue securities without the help of an attorney familiar with both state laws and federal laws regarding the sale of securities.

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Each state has its own securities regulations, which are complemented by federal laws. The state laws generally focus on the fairness of the offering while the federal laws focus on the accuracy of the disclosure. Both sets of laws have exemptions from regulatory review for certain types of transactions. Under the federal securities laws, a person or entity that wishes to sell securities must first register with the Securities and Exchange Commission unless that seller qualifies for an exemption provided under the law. State laws vary significantly from federal law, and state laws vary considerably from state to state. What they have in common is that the exemptions are based on the number of people buying the securities, the relation of those people to the seller, and the sophistication of the buyers. For example, in broad terms, the issuance to the founders of a business who actively manage the business are likely exempt from both federal and state regulatory review because the managing founders are insiders with better access to information than anything the government can provide. These stock interests are also often issued very casually, so the government has less interest in regulating them. They are typically few in number, very close in relation to the seller, and have a sophistication based on their personal involvement. At the federal level, there are exemptions that leave the regulation to the states. To meet these exemptions, the issuing organization must operate carefully to meet all the regulatory definitions. One is an intra-state offering, where all stock is issued to residents residing entirely in the same state as the issuing entity. A second is an offering only to the senior leadership of the issuing entity. This exemption recognizes that the people receiving the stock are all in a position to know the company well and evaluate it based on their roles and responsibilities. (It is the basis for the example of the so-called founder’s exemption discussed previously.) Merely having a senior title is insufficient. Each individual must be personally involved in the operations of the company for this exemption to be available. A third group of exemptions apply to accredited investors. Among the definition of accredited investors are a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of

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the purchase, excluding the value of the primary residence of such person; and a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year….39 This exemption is available under rules 505 and 506 of Regulation D. The SEC provides a helpful summary of Rule 505: Rule 505 of Regulation D allows some companies offering their securities to have those securities exempted from the registration requirements of the federal securities laws. To qualify for this exemption, a company:  Can only offer and sell up to $5 million of its securities in any 12-month period;  May sell to an unlimited number of “accredited investors” and up to 35 other persons who do not need to satisfy the sophistication or wealth standards associated with other exemptions;  Must inform purchasers that they receive “restricted” securities, meaning that the securities cannot be sold for six months or longer without registering them; and  Cannot use general solicitation or advertising to sell the securities. Rule 505 allows companies to decide what information to give to accredited investors, so long as it does not violate the antifraud prohibitions of the federal securities laws. But companies must give non-accredited investors disclosure documents that generally are equivalent to those used in registered offerings.40 Put another way, if the issuer only sells to accredited investors, then there is no specified form of offering documents and the information

39 Office of Inv’r Educ. & Advocacy, Accredited Investors, U.S. SEC. & EXCH. COMM’N, http://www.sec.gov/answers/accred.htm (last modified Oct. 21, 2014).

40 Office of Inv’r Educ. & Advocacy, Rule 505 of Regulation D, U.S. SEC. & EXCH. COMM’N, http://www.sec.gov/answers/rule505.htm (last modified Oct. 27, 2014).

10. Financial Structure of the Con 121 provided to state and federal regulators is quite minimal. The Rule 505 exemption is based on the assumption that the accredited investor has sufficient money to risk and has proven to be economically sufficient to understand the risks associated with these investment opportunities or to hire the attorneys and accountants necessary to provide that protection. While this assumption is not necessarily true, the securities exemption is very helpful for the company seeking investors. None of these exemptions is simple, however, and the issuer or seller of securities must be very careful about every aspect of the process. The sale of securities should only be done with the assistance of attorneys sophisticated in the nature of the federal and relevant state laws. Even with the exemptions, there are usually requirements to file certain notices with the SEC and to file and pay fees at the state level. Therefore, all of the steps to issue the securities needed to sell the company require at least some attention to both the state and federal laws. As described in the next section, however, the new form of crowd financing may provide a low-cost alternative to issuing small amounts of stock. The use of crowd financing platforms may prove beneficial even for simple issuances to friends and family.

B. Crowdfunding, Crowdsourcing, and Crowd Financing

With the growth of social media on the Internet, a new phenomenon developed, connecting the public with causes, companies, and opportunities. The power of the crowd takes on many forms, and some of these resource opportunities can provide a great benefit to the financing and resourcing of the Con. These include Crowdfunding, Crowdsourcing, and Crowd Financing.

i. Crowdfunding

Crowdfunding provides an excellent method of financing the early stages of the Con. At its heart, crowdfunding allows members of the public to financially support a for-profit enterprise by either donating money to that business or buying the goods and services to be offered by that company well before those goods and services are available in the marketplace. Nonprofit organizations have always been able to benefit

122 Cons and Festivals from these types of public support, and the modern crowfunding platforms support both nonprofit and for-profit organizations equally well. The offers and exchanges are conducted through third-party platforms such as Kickstarter, Indiegogo, or one of many others. In a typical example, a band, film company or game company will put together a Kickstarter campaign explaining what the upcoming new project is likely to contain. The company will offer various premiums in exchange for the buyer’s willingness to buy the work in advance of its having been created. This pre-sale of the work helps the company fund the project without going into debt, assists in gauging audience interest in the project, and frees the company from traditional financing sources that are often more controlling of the company’s output. Crowdfunding for a new Con or to expand a Con can work extremely well. The campaign must provide the information about the Con and generate excitement about why the public should be interested in supporting the Con. The crowdfunding platform provides an excellent vehicle to reach out to potential vendors, attendees, artists, and local stakeholders. The premiums can include entry and special event passes, additional events open only to crowdfunding participants, merchandise, and potentially items donated by vendors planning to sell at the Con. All the proceeds from the crowdfunding are income. None of this form of funding impacts the equity ownership of the Con investors. The cash generated by the crowdfund helps establish that the Con has sufficient resources to seek bank loans such as those guaranteed by the Small Business Administration discussed below.

ii. Crowdsourcing

Crowdsourcing is the flip-side of crowdfunding. It is the use of a crowdfunding style platform or campaign to obtain the goods, services, and support needed to run a Con or event. At one level, it may be little more than a call for volunteers. At another level, however, it can be used to solicit donations of time and work by artists to create the poster art needed by the Con, or specialty skills needed to acquire artists, musicians, or other vendors to launch the Con. For example, if the Con is a comic book convention, then crowdsourcing could be used to solicit donations for a special edition comic book that can be used as a premium in the

10. Financial Structure of the Con 123 crowdfunding solicitation. If the Con is a folk festival, the crowdsourcing could be a special edition album of songs contributed by the artists supporting the festival as an additional premium to be used in the crowdfunding.

iii. Crowd Financing

Crowd financing is the most recent addition into the online world. It was formally recognized in the United States when signed into law by President Obama in 2012, but the reluctance of the SEC to provide the rules needed to make it operational delayed the start of crowd financing until 2015. Unlike crowdfunding, which generates revenue for the Con, crowd financing sells ownership interests in the Con to the public as a means of raising capital. Crowd financing allows a company to list itself on an approved web portal. The portal serves a function similar to that of a stock exchange. Any person meeting the eligibility criteria can purchase stock in the listed company and invest as an owner of the enterprise. Unlike the traditional stock exchange, however, these investments do not have an active market so they may not be as easy to sell. Still, for Cons and similar organizations, the registration on these crowd financing websites are far easier than traditional fundraising. Importantly, it also can be the platform for complying with state and federal securities laws, simplifying the process for issuing small amounts of stock. Nonetheless, there are many limitations, including limitations on the resale of the stock during the first year of ownership. These provisions highlight the primary opportunities and limitations on the issuer. A summary of the crowd financing SEC regulations is provided in the appendix. In order to rely on the Regulation Crowdfunding exemption, certain requirements must be met. a. Maximum Offering Amount of $1 Million – A company issuing securities in reliance on Regulation Crowdfunding (an “issuer”) is permitted to raise a maximum aggregate amount of $1 million in a 12-month period. In determining the amount that may be sold in a particular offering, an issuer should count:

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 the amount it has already sold (including amounts sold by entities controlled by, or under common control with, the issuer, as well as any amounts sold by any predecessor of the issuer) in reliance on Regulation Crowdfunding during the 12-month period preceding the expected date of sale, plus  the amount the issuer intends to raise in reliance on Regulation Crowdfunding in this offering.  An issuer does not aggregate amounts sold in other exempt (non-crowdfunding) offerings during the preceding 12-month period for purposes of determining the amount that may be sold in a particular Regulation Crowdfunding offering. b. Investors Subject to Limits – Individual investors are limited in the amounts they are allowed to invest in all Regulation Crowdfunding offerings over the course of a 12-month period:  If either of an investor’s annual income or net worth is less than $100,000, then the investor’s investment limit is the greater of:  $2,000 or  5 percent of the lesser of the investor’s annual income or net worth.  If both annual income and net worth are equal to or more than $100,000, then the investor’s limit is 10 percent of the lesser of their annual income or net worth. During the 12-month period, the aggregate amount of securities sold to an investor through all Regulation Crowdfunding offerings may not exceed $100,000, regardless of the investor’s annual income or net worth. Spouses are allowed to calculate their net worth and annual income jointly.41

41 U.S. SEC. & EXCH. COMM’N, Regulation Crowdfunding: A Small Entity Compliance Guide for Issuers, https://www.sec.gov/info/smallbus/secg/rccomplianceguide- 051316.htm (last modified July 5, 2016).

10. Financial Structure of the Con 125

C. Loans

In the typical launch of a new Con, the organizer’s personal funds are insufficient to launch the organization. As a result, the Con organizers must look outside their initial ownership group to find additional funds. Even if the equity provided by the investors is sufficient in the aggregate, the expenses for the Con are typically incurred in the weeks before the event begins and the revenue is generally earned during the Con itself. This means that short-term loans or lines of credit are needed to maintain the cash-flow essential to paying the bills and operating the event. The first option may be loans. Loans can come from banks, particularly using Small Business Administration loans. Loans can also come from friends and family. In addition, loans may be possible from some of the vendors who hope to make a profit selling comic books merchandise and other items at the Con.

i. SBA Guaranteed Loans

Small business and start-up business loans create additional levels of risk for banks, so the Small Business Administration (SBA) developed a loan guarantee program to help lenders assist small businesses raise needed financing. The best known of these programs in the SBA 7(a) Loan Program. For a company that stays within the size guidelines, the 7(a) Loan Program can provide up to $5 million in loans to help with the purchase of land, equipment, leasing of facilities, or similar capital and operational needs. In the case of a Small Business Administration loan, there are a number of documents that are required by the bank and the SBA in order to establish whether the start-up business is eligible to receive a loan. These documents include:  SBA Loan Application  Business Overview and History explaining why the SBA loan is needed and how it will help the business  Personal Background and Financial Statement  Statement of Personal History

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 Personal Financial Statement  Profit and Loss (P&L) Statement including supplementary schedules from the last three fiscal years  Projected Financial Statements, a detailed, one-year projection of income and finances with a written explanation as to how the business will achieve this projection  Ownership and Affiliations  Business Certificate/License – the original business license or certificate of doing business  Loan Application History  Income Tax Returns of both personal and business federal income tax returns of the business’ principals for previous three years  Résumés – Include personal résumés for each principal  Business Lease or note from your landlord, giving terms of proposed lease42 The SBA guaranteed loans are more sophisticated than loans from friends and family or from the vendors that will profit from the creation of the Con. For eligible businesses, however, these SBA guaranteed loans provide a great financing opportunity. There are both fixed rate and variable rate loans available. In addition, the questions posed by the SBA loan application provide an excellent outline of the many business questions the Con organizers should answer when preparing their company. In preparing the SBA loan application, the Con organizers are required to look carefully into the underlying financial structure of the Con, which will provide them a solid understanding of their goals as a business. For the SBA Loan, the Con organizers will be expected to have already invested some of their own money and have provided a sufficient amount

42 SMALL BUSINESS ADMINISTRATION, 7(a) Loan Application Checklist, https://www.sba.gov/loans-grants/see-what-sba-offers/sba-loan-programs/general- small-business-loans-7a/7a-loan-application-checklist (last visited April 23, 2017).

10. Financial Structure of the Con 127 of equity to make the ratio of loan funding and investment funding reasonable. If the for-profit Con has any form of membership, then the memberships must be available to the general public and not denied to any particular category of groups or individuals. Because of this structure, SBA loans may not be ideal for starting a Con, but they are an excellent source of funds for growing the event once it is established.

ii. Loans from Friends and Family

Loans from friends and family remain a very common method of funding a start-up business. While these relationships are often very informal, the informality can lead to confusion, hurt feelings, and potential lawsuits. Personal loans are generally “nothing more than oral agreements in which the parents of the entrepreneur provide some money in exchange for vague promises that ‘I’ll repay this as soon as I can.’ With family, these are often considered ‘gifts’ that the lender expects never to be repaid.”43 An agreement between a family member and one of the Con organizers can be derived from a mere letter. Ideally, the letter would be turned into a contract signed by both the lender and the company. Since the money is for the Con, it should be treated as a business loan rather than a loan to one of the Con organizers. This letter is closely adapted from Own It for use by the Con.

[Date] [Name] [Address]

Dear [Lending family member],

Thank you very much for the non-recourse loan of $5,000 last night, which the XXX Game Convention and Music Festival, Inc. (the “Con”) will use for working capital to operate the

43 See JON M. GARON, OWN IT – THE LAW & BUSINESS GUIDE TO LAUNCHING A NEW BUSINESS THROUGH INNOVATION, EXCLUSIVITY AND RELEVANCE (CAROLINA ACADEMIC PRESS 2007).

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festival next year. This letter will confirm the terms of that loan as we discussed them. As I said last night, all the money will be used for the business. Among other things, your loan will help it buy merchandise and begin advertising. Just as I explained when you provided the loan, the Con intends to repay you the entire amount of the loan plus 5% interest. We hope to repay you over the next three years – beginning the first payment a year from now, but if you need the money earlier, the Con will repay it within a month of your asking. As we discussed, this is not a personal loan to me, but rather a business loan to the Con. You will only be able to get repaid from funds available to the Con. If I misstated any of the terms of the loan, please let me know immediately. Your confidence in the Con means a great deal to me and to everyone involved. Thank you for your generosity and your faith. Love, [handwritten signature]

[typed name], [title] XXX Game Convention and Music Festival, Inc.

This letter represents my understanding of the terms of the loan described above.

Signed

______Signature

10. Financial Structure of the Con 129

The letter must be signed by the Con organizer accepting the loan. To be most effective, it should also be signed by the family member making the loan. The date should be included at the top of the letter to identify the timing of the understanding. The letter is written as a summary of the verbal agreement between the parties. While contracts that exclude any other oral evidence are easier to understand, simple transactions usually involve understandings agreed to orally. The letter should be provided to the lender at the same time the payment is made or as close to that time as possible. From a practical standpoint, this helps ensure that both parties understood the conversation the same way, and it also helps ensure that memories have not altered the understanding as often happens over time. The letter provides written confirmation of a few key points. First, it clarifies that the payment is made to the corporation rather than as a personal loan to one of the Con organizers. If instead, a Con organizer used a family loan to help buy stock in the Con, then that letter needs to make that strategy clear. Second, the letter makes clear that the payment is a loan at a particular fixed, annual interest rate. That assures there is no confusion that the money was used as a gift or as a purchase of business stock or membership interests. Both of those are alternative funding strategies and must be documented in a different manner. Third, the letter specifies the payment schedule and other terms of repayment. In the example, this includes the ability to call the loan on thirty days’ notice. This makes the loan a demand loan, which provides significant protection to the lender. The Con can change these terms by omitting the phrase “but if you need the money earlier I will repay it within a month of your asking.” Without that phrase, the statement in the letter regarding the payment schedule will control when the funds are due from the Con. Because the loan is to the Con rather than to the Con organizer, the only party liable to repay the loan is the Con itself. The letter makes this extra clear by including the sentence: “As we discussed, this is not a personal loan to me, but rather a business loan to the Con.” Since the letter summarizes the understanding of the parties, having this point clarified will help eliminate later claims by the lender that there was an expectation

130 Cons and Festivals that the Con organizer was going to make sure the loan was repaid, one way or the other. This letter is much simpler than any loan agreement offered by a bank or other business. It does not entirely replace the oral understanding between the parties. Still, it captures the most essential terms and greatly reduces the likelihood for conflict or confusion. If the parties do end up in a dispute over repayment, the letter will greatly minimize the scope of the conflict. Most importantly, it serves to memorialize both parties’ understandings and in doing so can help to eliminate the confusion that often develops over time as memories of conversations fade and new experiences reshape old memories. Finally, the letter serves as a checklist. The terms can be varied if the needs of the Con and the lender are different than the expectations described in this example. But the key terms listed in this simple letter should all be addressed among the parties every time there is a discussion about a loan.

iv. Microloans

For start-up Con organizations, a better first choice may be the SBA Microloan program. As explained by the SBA, “the Microloan program provides loans up to $50,000 to help small businesses and certain not-for- profit childcare centers start-up and expand. The average microloan is about $13,000.” The SBA reports that the interest rates tend to range between 8 and 13 percent. The Microloan funds are provided by the SBA to nonprofit community-based organizations. These organizations specialize in lending to small start-ups and community-based organizations which have a lot in common with the typical Con organization. Working with such a lender may have additional benefits in terms of mentoring and support in addition to the small amount of loan funding. The Microloan community nonprofit may also require certain training or business planning programs as a condition of participation in the program. These are generally very useful, and are an excellent resource for the start-up entrepreneur. These are excellent opportunities for the Con organizers to get it right. The requirements for the Microloan are similar in many ways to those listed earlier for the Section 7(a) SBA loans, but the demands by the lenders

10. Financial Structure of the Con 131 will be more flexible. Again, the Con organizers will need to have some equity ownership, and there may be the need for those owners to make personal guarantees regarding some or all of the funds loaned. Like the Section 7(a) SBA loan, the proceeds can be used for equipment, fixtures, and supplies as well as for working capital. The SBA microloan has additional limits in that it cannot be used to pay existing debts or to purchase real estate.

v. Other Lenders

There are a myriad of other lenders available for the start-up company today. If the Con is well funded and has the ability to guarantee repayment of the loan through the contributions of its organizers, then there may be commercial options at reasonable rates. If the lender demands a personal guarantee, then the Con organizers are in essence taking out personal loans. They are risking their personal wealth and resources to guarantee the funding of the Con. Other lenders may provide short-term lending at very high interest rates. The lower the interest rates, the more the funds can stay with the Con. This money becomes very expensive and puts the long-term survivability of the Con at stake. On the other hand, there may be other, affordable options. Credit unions, for example, provide banking services for their members. Credit unions often provide very competitive rates and are sometimes more flexible on lending terms. Under today’s banking regulations, the membership requirements are often very flexible. The key in any lending transaction is to understand the risks associated with the non-repayment and the costs associated with the terms and conditions. Provided the terms are reasonable, loans provide an excellent way to expand the funds available to the Con and cover the costs associated with the start-up expenses before the revenues begin.

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Part 2 – Special Considerations

11. Free Speech, the First Amendment, and the Comic Book Legal Defense Fund The First Amendment to the U.S. Constitution contains one of the most powerful and elegant restrictions of governmental power ever crafted by those who wield such power: Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances. Embedded in this single sentence are five or more discrete limitations on the power of the federal government. The Fourteenth Amendment to the U.S. Constitution had the additional effect to make these laws apply directly to the people rather than merely reserving these powers to state governments, which was the original purpose of the Bill of Rights. This chapter focuses only on the rights and protections derived from “abridging the freedom of speech, or of the press.” The rights of assembly, petition, religious free exercise, and religious establishment are beyond the scope of this book and rarely relevant for Con planning. Restrictions on speech and press used to be common under the laws of England, Europe, and much of the world. Such laws required every newspaper, printing house, and theater to receive and maintain an operating license approved by the government. Those licenses were subject to termination if the government did not approve of the content created under the license. In response, one of the earliest and clearest meanings of the free speech clauses of the First Amendment protected a newspaper from any attempt by a government to impose a license requirement, injunction, or other form of prior restraint on publishing. Since that time, the protection provided by the First Amendment has been interpreted much more broadly. First Amendment protection has expanded from protecting newspapers from prior restraint in 1931 to including motion pictures in 1952 and video games in 2011. According to the Supreme Court, no category of publisher or media content is outside of First Amendment protection.

133 134 Special Considerations

A. Basics of the First Amendment

The First Amendment prohibits any governmental body from regulating the content of speech unless that speech falls into one of a narrow list of disfavored forms of speech. There are two lists of types of disfavored speech. First, there is one short list of types of speech that are not protected by the First Amendment at all. Next, there is another list of speech that is protected, but more narrowly than general speech. All speech outside those two lists is considered general speech and receives the fullest protection of the First Amendment. The list of categories of speech that receives no First Amendment protection include child pornography and obscene (not merely pornographic) material; certain defamatory speech; fighting words, true threats, and incitement to commit imminent lawless action; perjury, blackmail, solicitation to commit crimes, fraud, and similar criminal acts committed through communication; and false commercial speech. Different experts will vary on how they construct this list, which highlights the complexity of understanding how the courts struggle to explain the nuances of First Amendment jurisprudence. Perhaps one of the most famous explanations on the limits of free speech comes from Justice Oliver Wendell Holmes in 1919. “The most stringent protection of free speech would not protect a man in falsely shouting fire in a theatre and causing a panic.”44 This example illustrates the type of harm that the law will not protect. Similarly, all child pornography is illegal because the act of creating the content is the source of the harm. In blackmail, the harm comes from the statement as much as the potential that the threat is carried out. As adjudicated by the Supreme Court, these harms outweigh the prohibition on regulating speech. Over the past century, the scope of First Amendment protection has grown and as a result, the list of categories of speech adjudicated as outside the scope of First Amendment protection has narrowed considerably. Moving past the speech that has no First Amendment protection, there is a second category of speech that falls into the category of limited First

44 Schenck v. United States, 249 U.S. 47, 52 (1919) (“It does not even protect a man from an injunction against uttering words that may have all the effect of force.”). The “clear and present danger test” derived from this case has since been superseded by the test of incitement to commit imminent lawless action.

11. Free Speech, First Amendment, and CBLDF 135

Amendment protection. Two examples of this are pornography and commercial speech, such as advertising. For both of these categories, the government can balance the potential for harm resulting from the speech against the speech rights of the publisher. As a result, municipalities can put limits on where adult movie theaters and bookstores are located, the government can require disclaimers in advertising, and the government can justify complex regulatory systems for television advertising under the FCC or disclosures of financial interests in social media under FTC regulations. In a similar manner, the laws governing copyright and trademark are designed to accommodate free speech interests through fair use and other rules, so there is rarely a direct clash between First Amendment interests and the protection of copyright and trademark interests. These situations do occur occasionally, however, and courts continue to struggle to find the correct balance between these complex systems of laws. For other categories of speech, the regulations must generally be content-neutral to be permitted, and they must be designed to have used the least restrictive means available to achieve the government’s goal. A content neutral law is one in which government has not adopted the law or regulation because it disagrees with the message being conveyed. Valid content-neutral regulations are generally known for their regulation of the time, place, or manner of the speech. They are permitted, but only to the extent they remain neutral regarding the content or viewpoint of the speech being regulated. Public parks, for example, must allow for all potential users to have the same opportunity to use the park for rallies and events. Closing hours, however, are a content-neutral restriction on speech that provide the ability to maintain park safety and assure that the neighbors are not disturbed by park events late at night. In public amphitheaters, municipal ordinances can set sound limits to protect the surrounding neighborhood, but they could not restrict the use of the facility to certain genres of music. The sound ordinance is content-neutral while the genre rules would value one type of speech over another.

136 Special Considerations

B. Defamation as an Example of the First Amendment’s Role on State Law

The law of defamation provides a good example of how state law and constitutional law interact with one another. An image, statement, or other publication is defamatory if “it tends so to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him.”45 Another, earlier articulation of defamation is that a publication is defamatory if it held one out for hatred, ridicule, or contempt. Laws of defamation are state laws and vary somewhat from state to state. For a statement to be defamatory it must be a false statement of fact, made regarding the person who is bringing the lawsuit, published to at least one third party (other than the subject of the statement), that causes serious harm to the person or to the person’s reputation. Defamation made through speech is called slander, while defamation in print or in a permanent form is called libel. These rules apply only to a living person. Once someone has died, statements made about the dead person cannot be brought by heirs or family members. In the landmark case of New York Times v. Sullivan, the Supreme Court stepped in to stop a defamed public official from winning a case worth millions of dollars against the New York Times. The Supreme Court found that for a state or federal court to award such damages, there had to be additional First Amendment protections, particularly when the statements were made about a public official. Under the decision, to be consistent with the First Amendment, a claim for defamation against a public official could only succeed where the plaintiff proved “actual malice,” a term meaning knowledge of falsehood or reckless disregard for the truth.46 The courts later extended this rule to public figures, individuals who are famous or otherwise in the public eye,

45 RESTATEMENT (SECOND) OF TORTS § 559 (AM. LAW INST. 1977). 46 N.Y. Times Co. v. Sullivan, 376 U.S. 254, 279–80 (1964) (“The constitutional guarantees require, we think, a federal rule that prohibits a public official from recovering damages for a defamatory falsehood relating to his official conduct unless he proves that the statement was made with ‘actual malice’—that is, with knowledge that it was false or with reckless disregard of whether it was false or not.”)

11. Free Speech, First Amendment, and CBLDF 137 or through their stature have the ability to use the media to refute falsehoods without resort to courts. By setting the minimum standards for legal disputes involving defamation, the Supreme Court interpreted the First Amendment to create a shield around speech when used by people to publish facts about others. False speech has little value, but to protect the speakers and avoid the risks of undue punishment, public figures and public officials can only recover if the publisher of the false speech was knowingly wrong or reckless in the publication. The Supreme Court further extended this principle to non-public figures as well. So long as the published information covers a matter of public concern, then the publisher of that information cannot be found to have committed defamation unless the publication was at least negligent. If the publisher took reasonable care to produce the information, then even wrong factual information published about someone will not support the claim of defamation. As long as the publisher exercised the degree of caution and concern an ordinarily reasonable person would use in similar circumstances, then the factual inaccuracies will not result in liability.

Both the concept of negligence and the concept of public concern are somewhat vague and fact specific. Matters of public concern are often described as those matters that are newsworthy. The Supreme Court “has said that speech is of public concern when it can ‘be fairly considered as relating to any matter of political, social, or other concern to the community.’”47 This is a very broad category that tends to exclude only truly personal information or private matters.

The constitutional framework surrounding defamation highlights that speech adjudicated as defamatory is unprotected speech. But the safeguards built into the legal system demonstrate a strong First Amendment preference under the law to promote speech about matters of public interest. Defamatory speech is a much narrower category than harmful speech. Speech about someone else remains subject to First

47 Snyder v. Phelps, 562 U.S. 443, 444 (2011) quoting San Diego v. Roe, 543 U.S. 77, 83–84 (2004).

138 Special Considerations

Amendment protections unless it meets the legal definition of defamation as that definition applies to the particular situation.

C. Inapplicability of the First Amendment to Private Activities

As noted above, the First Amendment constrains the government’s ability to regulate most types of speech. The constitutional limit applies to governments only. This limitation is often overlooked in the context of free speech debates. A movie theater can decide which movies to play and a dance club can select the music to perform. As private, non- governmental parties, they are not restricted in any manner by the First Amendment. Newspapers, cable systems, YouTube, Facebook, and Tumblr are all free to select which content to print, and they can be as open or restrictive as they choose in reprinting the content of their customers. The relationship between the private companies and their customers is governed primarily by contract. While certain laws protect members of the public from discrimination and require reasonable disability accommodation, these laws have nothing to do with the speech these individuals wish to promote. The Con organizer has wide discretion in what types of speech will be permitted at the Con. If the Con is an adults-only music festival, then there is little need for a dress code. On the other hand, if the Con is a family- oriented comic book convention, then the Con should likely have a dress code on its website and reserve the right to exclude costumes that are inappropriately revealing or offensive to the general public. A state-run park cannot bar the Ku Klux Klan from obtaining a marching permit, but a privately-operated Con can choose to bar that costume as offensive to the general public. Most Cons utilize a more common restriction on speech. They limit the distribution of flyers and the hanging of posters to those who have purchased tables to be vendors, presenters, or those who have received special permission to hang their signs or distribute literature. This enables the Con to manage the aesthetics of the event and assure its vendors that there are benefits to purchasing booths or advertising. A Con should consider the type of environment that it wants to maintain and develop policies to enforce those rules. As a non-

11. Free Speech, First Amendment, and CBLDF 139 governmental entity, it is free to establish those rules. It is rare that the Con will be required to use its policies to police conduct from attendees, but when such a situation arises, the early planning will greatly help defuse a difficult situation and assure the Con maintains the environment it promised its fans.

D. Application to the Con in Public Venues

A Con that chooses to operate at a public venue may find there are certain operations and restrictions that occur differently than in a privately- owned venue. The restrictions of the First Amendment should stop a municipal landlord from inquiring into the content of the Con. For example, if a theatrical producer wished to stage the musical Hair, a municipal theater could not refuse to rent out the facility based on the musical’s treatment of sex, masturbation, or rape. A private theater house, however, could choose whether or not it wanted to book such a show. As noted in the explanation of content-neutral regulations regarding time, place, and manner, a publicly-owned venue can enforce rules about nudity, noise levels, and commercial activities. If the Con has given permission for any professional filming of events at the Con, the filming rights may also trigger additional reviews that require a different filming permission process for the public venues than for private venues. Because public venues are concerned that all parties are treated equally, in a neutral manner, the issuance of a film permit for the on-sight documentary team may be treated as a film-permitting request rather than just an ancillary activity for the Con. Every venue is different, but Con organizers should plan ahead and provide sufficient time to address the additional concerns that may arise in a public venue.

E. Role of Cons in Promoting Free Speech

Although the Con is free to establish its own speech policies, the Con organizers may also wish to recognize the opportunity they have to promote free speech and public discourse. The many types of events covered in this book share that common attribute – they all promote speech and culture. Whether the event is about music, literature and publishing, comic books, games, or fantasy art, these events all have the literary world of music, art, and publishing as their essential driver. The

140 Special Considerations performers, vendors, and attendees all share this common interest in self- expression and communal gathering. Like pop-up universities, the Con creates a temporary world in which the shared experience and the empowerment of individual self-expression collide. As advocates of speech and creativity, the Con organizers have an opportunity to empower this activity while also assuring that it occurs in a safe, supportive environment. Like the time, place, and manner regulations adopted by municipalities to ensure that their public spaces operate fairly and efficiently, the Con organizers should consider the importance of the competing speech interests of the performers, vendors, and attendees when organizing the event. Fortunately, most of this is usually self-organizing. Attendees want to hear the speakers at panels or the artists on the stage. It does not take a large staff of ushers to handle most situations.

F. Comic Book Legal Defense Fund

Free speech has always had its critics. Justice Oliver Wendell Holmes’ famous quote about not shouting fire in a crowded theatre was used by the Supreme Court in affirming the conviction of a man who was merely leafletting to discourage soldiers from fighting in World War I.48 His Yiddish language pamphlets could be read by only a small portion of those in the line and there was no evidence he changed a single mind, yet the Supreme Court found his leaflet was enough like the person falsely yelling fire in a crowded theater to send him to prison. Although this particular rule has evolved since 1919, the First Amendment continues to come under attack. There are many organizations dedicated to protecting free speech. Since 1986, one of those organizations has been the Comic Book Legal Defense Fund (CBLDF). As CBLDF explains, it “is a nonprofit organization dedicated to the protection of the First Amendment rights of the comics art form and its community of retailers, creators, publishers, librarians, and readers.”49 The CBLDF is a resource for those who fear

48 Schenck v. United States, 249 U.S. 47 (1919). 49 Comic Book Legal Defense Fund, F.A.Q., http://cbldf.org/f-a-q/ (last visited Feb. 1, 2017).

11. Free Speech, First Amendment, and CBLDF 141 criminal or civil sanction for publishing, advocating or possessing content. “The CBLDF provides legal referrals, representation, advice, assistance, and education in furtherance of these goals.” The most inspiring sentence on the CBLDF website is their call to arms: “The CBLDF should be your first call in a First Amendment Emergency!” The organization provides advice and some direct representation, in appropriate cases. It is not as large as the American Civil Liberties Union or many of the other First Amendment legal services organizations, but it is an essential partner for the Con community.

142 Special Considerations

12. Copyright Protection for the Works at the Cons While the First Amendment is designed to protect all speakers, the constitutional right to copyright protection is designed to protect authors and creators of literary works. By providing these authors, inventors, and artists exclusive protection over their works, they invest their time and effort, expanding the scope of human knowledge and the breadth of our arts, literature, and culture. These values have received significant criticism in the past two decades and sometimes conflict with the technological benefits of easy access to content and information, but they are essential to maintain a vibrant society. A longer summary appears in my book Own It, and the Copyright Office has excellent handouts available at www.copyright.gov. This chapter provides a brief summary tailored to the Con organizer and the creators who often show their works at Cons.

A Copyright Attributes – Authorship, Scope, Duration, and Formalities

At its heart, copyright protects authors and artists by granting them a strong property interest in their works. The Copyright Office provides a helpful working definition of copyright as follows: [Copyright is a] form of protection provided by the laws of the United States for “original works of authorship” including literary, dramatic, musical, architectural, cartographic, choreographic, pantomimic, pictorial, graphic, sculptural, and audiovisual creations. “Copyright” literally means the right to copy, but has come to mean that body of exclusive rights granted by law to copyright owners for protection of their work.50 This summary captures three essential aspects of copyright: The role of the author and other owners in creating the work; the range or scope of the copyright; and the steps needed to secure and protect the copyright.

i. Authorship, Including Joint Authors

The term “author” is not actually defined in the Copyright Act. Instead, court decisions help explain that the author for copyright

50 17 U.S.C. § 101 (2012) (U.S. Copyright Definitions are also available at http://www.copyright.gov/help/faq/definitions.html).

143 144 Special Considerations purposes is the person who created the work. In most instances, authorship is self-evident. A novelist is the author of her novel, the playwright is the author of his play, the graphic artist who wrote and illustrated her comic book is the author of that comic book, and the musician who composed the music and wrote the lyrics to a song is the author of the song. In certain situations, one person may be the author and the person assisting is not credited as an author. For example, the film director is generally the author of the movie. Although the cinematographer helps choose camera and lighting angles, these tasks are done under the supervision and control of the director. Since the director has control over the subordinate staff, she remains the author for purposes of copyright. Similarly, a sculptor who has help in creating a mold and pouring bronze for a large sculpture remains the sole author of that work and no other parties are recognized as authors of that sculpture. In other situations, the law does recognize joint authors. A work by co-authors is “a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.”51 In many circuits, there is an express requirement that each of the contributions can itself be protected by copyright. Using the examples above, a team comprised of a composer and lyricist would be joint authors provided they wrote with the intention that the finished songs be interdependent parts of a single song. In contrast, ten different musicians each writing one song for an album would not likely be joint authors because the songs can be singles as well as part of the album. The album will be a considered compilation of songs rather than a unitary work. Short story authors in a magazine are part of a compilation, not joint authors in a larger, unified publication. If the contributions can be part of a unified or interdependent work, then the law will recognize the authors as joint authors if there is evidence establishing that the authors intended this result. If instead, the authors intended that their works remain separate, then their intent will govern as well. A written agreement is the most effective way to demonstrate this

51 17 U.S.C. §101.

12. Copyright Protection for the Works at the Cons 145 intent. In the absence of a signed, written agreement, intent can be inferred from the authors’ conduct and less formal correspondence. While there is no legal requirement that their understanding be put into a signed agreement, it is a very good idea to do so. Without an agreement, memories and events often change the parties’ recollection about their intent at the time the work was created. An agreement can also explain whether the authors intend to have equal interests regarding the authority over the copyright and the revenue from the new work or whether they plan to vary their ownership because their contributions or reputations require a different split. There is one additional form of authorship that affects many works used in the creative industries as well as in business more generally. This third category of authorship is known as “work for hire.” An employer will be the author of “work for hire” if the work is made by an employee within the scope of that employee’s employment. For example, the software written by the employees of a software company vests directly in the employer rather than in the hundreds of employees contributing to that software. Most of the comic books created during the post-war period were made as works for hire because the artists and authors fell within the definition of work for hire at that time. A second category of work for hire also is recognized by the Copyright Act. When a purchaser chooses to contract with the creators of a work as a “specially commissioned work,” then the purchaser will be treated like the employer, and earn the legal designation as the author of the work. Two conditions must be met. First, the commissioned work must fall into one of nine narrow categories of works that include motion pictures, translations, and collective works.52 Second, the work will only be treated

52 17 U.S.C. §101 A “work made for hire” is— (1) a work prepared by an employee within the scope of his or her employment; or (2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a

146 Special Considerations as a specially commissioned work for hire if both parties expressly agree to those conditions in a signed writing.

ii. Scope of Copyright

The Copyright Act provides a list for the categories of works covered by copyright: (a) Copyright protection subsists … in original works of authorship fixed in any tangible medium of expression, now known or later developed…. Works of authorship include the following categories: (1) literary works; (2) musical works, including any accompanying words; (3) dramatic works, including any accompanying music; (4) pantomimes and choreographic works; (5) pictorial, graphic, and sculptural works; (6) motion pictures and other audiovisual works; (7) sound recordings; and (8) architectural works.53 The categories of copyright protection are broadly defined. For example, software is protected by copyright under the category of literary

compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. For the purpose of the foregoing sentence, a “supplementary work” is a work prepared for publication as a secondary adjunct to a work by another author for the purpose of introducing, concluding, illustrating, explaining, revising, commenting upon, or assisting in the use of the other work, such as forewords, afterwords, pictorial illustrations, maps, charts, tables, editorial notes, musical arrangements, answer material for tests, bibliographies, appendixes, and indexes, and an “instructional text” is a literary, pictorial, or graphic work prepared for publication and with the purpose of use in systematic instructional activities. 53 17 U.S.C. §102.

12. Copyright Protection for the Works at the Cons 147 works. Before the law was amended to include motion pictures, films were still covered as compilations of pictorial works. The more important aspect of the definition are the two limitations on the categories of protected works. First, the work must be “fixed in a tangible form,” meaning that the work must be written or recorded in some permanent manner. Notation systems work for music and choreography. Taping a live lecture will provide the fixation for the content of the lecture. Without some form of authorized fixation, however, the work will be outside the scope of copyright. Second, copyright has limits. It only protects specific expression rather than ideas. It does not protect the facts or information behind the information, so no author can stop another from using a procedure or discovery using copyright. The functional aspects of a copyrighted work are excluded from copyright protection. There is no protection for “any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.”54 Patent law may apply in some of these situations, but copyright is not available. The law makes this limitation very specific and both the Copyright Office and the courts enforce this distinction aggressively. Although less clear from the law, the Copyright Office rules and court opinions also exclude “names, titles, short phrases, slogans, familiar symbols, mere variations of typographic ornamentation, lettering, coloring, and listings of contents or ingredients.”55 In some cases, these are excluded because there is not enough original authorship upon which to base copyright protection, in other cases, the rule is essentially historical in origin. For example, most street clothes are not protected by copyright because clothes are functional. In contrast, costumes are protected by copyright to the extent they go beyond typical clothing. Animal costumes, superhero costumes, and similar works are created for their aesthetic value rather than to wear to the grocery store, so these works will typically be protectable by copyright.

54 17 U.S.C. §102. 55 17 U.S.C. § 101 (U.S. Copyright Definitions are also available at http://www.copyright.gov/help/faq/definitions.html).

148 Special Considerations

iii. Securing and Protecting the Copyright

Under the modern copyright law, the protection of copyright begins as soon as a work is fixed in a tangible form. Merely saving to a computer file or snapping a photograph is sufficient to make a copyright-protected work. At that point, the work is fully protected by copyright, or “copyrighted.” (Note that the term is not “copywritten.”) A work does not need to be published in order to have protection. Similarly, there is no need to register any work with the Copyright Office. Still, there are three primary advantages to registration. First, copyright registration is generally required before a person can bring an infringement action in court. Second, the registration provides some evidence regarding the sufficiency of the copyrighted work. And third, there is a broader range of remedies available to the successful owner of a copyrighted work if the work was registered prior to the infringement.”56 When a person files a registration with the Copyright Office, the person must upload or mail the work being registered. Often, this version of the work is not the published version of the work. Separate from the opportunity to register the work is the legal obligation to provide the Library of Congress with two copies of the published edition of the work. If a dispute arises regarding the content that was protected by copyright, the material deposited with the Copyright Office should be available to establish this record. As an alternative, the Writers Guild of America West (https://www.wgawregistry.org/) has long maintained a legal system for registering a copy of the work in a secure manner that serves to prove precisely what content had been created by the owner at the time of the WGAW deposit. This is a very cost-effective and practical service that provides great benefit, particularly for those who are distributing unpublished manuscripts for possible comment or purchase.

56 Circular 50, Copyright Registration for Musical Compositions, Copyright Office, https://www.copyright.gov/circs/circ50.pdf.

12. Copyright Protection for the Works at the Cons 149

B. Copyright Ownership, Transfer, and Termination

i. Ownership

Copyright initially vests in the author of the work as the owner of the copyright. If there are two or more joint authors, then the joint authors are co-owners of the copyright. On the other hand, if the copyright was created as a work for hire, then the employer is the initial owner of the copyright and treated as the exclusive author of the work. The copyright owner is free to use the copyright or to transfer the copyright interests in whole or in part. In practice, this means that the rights in the copyright can be separated along a number of different lines.

ii. Transfers

First, transfers of copyright can be for very narrow aspects of the copyright. For example, the owner of the copyright in a comic book could license the reproduction and distribution rights of the comic to a comic book publisher and separately license the adaptation right to a motion picture company to make a film version of the comic book. That same author could separate the rights, so that a book publishing company is sold the rights to make a non-graphic novel out of the comic book story. The paperback book rights could be sold separately for English language publications, French publications, Spanish publications, and every other language. Each of the licensees would have the right to reproduce and distribute its particular market of the work, and none of the licensees would have permission to compete in the other markets. Similarly, the exclusive rights may be licensed for specific periods of time. A theater company may have the exclusive right to stage a play for six months. After that time, the owner of the play can license the exclusive right to stage that play to another company. Copyright interests can also be separated by geographic territory, at the country-by-country level or even by markets within the United States. Generally speaking, licenses are for a set duration that is shorter than the life of the copyright. In contrast, if the entire copyright is transferred, then that would be called an assignment of the copyright because no rights are retained by the original copyright owner.

150 Special Considerations

Secondly, transfers of the copyright may be either exclusive or non- exclusive. An exclusive transfer must be evidenced with a writing signed by the transferring party. The new owner has the power to enforce the copyright by bringing a court action to stop infringement or any other power that was held by the original copyright owners so long as the enforcement falls within the scope of the exclusive license. A non-exclusive license is less formal than an exclusive license and provides much less authority to the licensee. The non-exclusive license gives the licensee permission to use the work in the manner specified by the owner, but not the right to stop anyone else from using the work. The Con organizers, for example, may seek permission to reproduce comic book covers or band artwork to create posters and decorate the Con. To make these posters without permission would be a violation of the copyright in those works. If a band or comic book author (or the publisher) gives permission, such permission would not preclude the copyright owner from providing the same permission to any other Con or event. Similarly, when a play publisher licenses public performance rights in a play to high schools and community theaters, they license them on a non- exclusive basis so that in any given year there might be hundreds of productions of that play across the country. Unless there is an express agreement to make a copyright license exclusive, the license will be considered non-exclusive. A non-exclusive license can be established by a signed writing, by an oral agreement, or just by the conduct between the parties. For example, if the Con organizer sends an e-mail asking for a comic book cover to use on the Con posters and in the Con advertising, then the e-mail attaching such artwork will likely be understood to grant that permission even if there is no specific statement in the e-mail. Nonetheless, it is always the best practice to get permission to use another’s copyright in writing in order to avoid disputes in the future.

iii. Term and Termination

For works created after January 1, 1978, the copyright generally lasts for the life of the author plus 70 years. In the case of joint authors, the term is 70 years from the date of the last-surviving author’s death. “In the case of an anonymous work, a pseudonymous work, or a work made for hire, the copyright endures for a term of 95 years from the year of its first

12. Copyright Protection for the Works at the Cons 151 publication, or a term of 120 years from the year of its creation, whichever expires first.”57 For works created before January 1, 1978, the length of the copyright term is much harder to calculate. Works published in the United States prior to January 1, 1923, are in the public domain. Public domain works have no copyright protection and can be used for any purpose. Similarly, works that were published prior to January 1, 1978, without copyright notice and copyright registration are typically in the public domain. When looking at a particular work, however, it is important to realize that there may have been multiple versions published. Merely finding one version without the notice does not mean that the work has lost its copyright protection. Each such use must be investigated carefully. Any Work published after January 1, 1923, and before January 1, 1964, has a term of 95 years from the date of the work’s publication, provided the copyright in the work was renewed with the Copyright Office in the 28th year of the copyright. An untold number of movies, songs, books, comics, and other works were not renewed and are available in the public domain. One must be careful, however, not to rely just on the dates. Many works were not actually “published” as that term was defined under the Copyright Act.58 For example, a public performance of a work does not result in publishing that work. Given that the public exhibition of a film or play is a public performance rather than a publication of the work, even a widely distributed show will not have been published under the 1909 Copyright Act. In contrast, if the works were sold as DVDs or published scripts to the public, then the offers for sale would have triggered publication. Since the duty to renew a work does not apply to unpublished works, the implications of the 1909 definition of publication

57 17 U.S.C. §302(c). 58 17 U.S.C. §9 (1909) (superseded) SEC. 9. That any person entitled thereto by this Act may secure copyright for his work by publication thereof with the notice of copyright required by this Act; and such notice shall be affixed to each copy thereof published or offered for sale in the United States by authority of the copyright proprietor…

152 Special Considerations continue to matter for the protection of some works. The point is really that copyright is not as simple as it would appear. For works created after January 1, 1978, there is no longer any obligation to renew. To keep the structure of a two-term copyright, however, the law now allows for the original authors to terminate certain grants after 35 years. For the works which are not made as work for hire, the Copyright Act provides the original author a right to terminate licenses and assignments. The termination period runs from after the 35th year for a period of five years following the date of the license or assignment for most works.59 The mechanics of this law are quite technical and even experienced lawyers are struggling to follow the complex language and mechanical hoops in the law. For authors who created works that continue to have lasting value 35 years later, this has become a very generous reward under the law.

C. Copyright’s Limits, Including Fair Use

There are many limitations on the exclusive rights of copyright holders. Just as owners of real estate must give easements to public utilities and be subject to zoning and other use restrictions, intellectual property rights owners are subject to certain limitations over their exclusive rights in their works. These rules seek to balance the needs of the copyright holder to control the use of the work and to earn revenue from the effort with the public need to interact with the works in a common sense fashion.

i. The Range of Copyright Limitations

Copyright provides the exclusive rights to the owner of the copyrighted work, but the exclusive rights are subject to many statutory and other limitations. Sections 107-122 of the Copyright Act list a myriad of limitations that restrict the exclusive rights of the copyright owner. Here are just a few:  The “first sale doctrine,” which gives the owner of a particular copy of a work the right to resell, give-away, burn, or otherwise dispose of that copy, with some limits as the rule applies to digital files, music, and software.

59 17 U.S.C. §203.

12. Copyright Protection for the Works at the Cons 153

 Rights for libraries and archives to make back-up and restoration copies.  Rights of musicians to make cover recordings of previously released songs by paying a statutory license.  Rights to use certain materials in the classroom without needing a license.  Rights of religious organizations to perform music without needing a license.  Rights of charities to perform certain works without needing a license when done without charge.  Rights of software owners to make back-up copies.  Rights of small stores and restaurants to rebroadcast radio and television without obtaining a public performance license.

ii. Fair Use

The single most well-known and most powerful exception to copyright is the concept of fair use.60 Fair use is a highly flexible and constantly shifting doctrine. Initially developed by the courts and later codified in the Copyright Act, fair use rules tend to fall into two broad categories: consumer fair use and creative fair use. In the consumer fair use category, fair use provides consumers a greater latitude in what they do with the copies of the works to which they have access or they have purchased. In the category of creative fair use, the rule promotes commentary, criticism, parody, and cultural references essential as part of the general creative process. The distinction between consumer fair use and creative fair use is not based on any law or specific case. It serves as a useful framework, however, to understand the context for these two rather distinct groups of cases,

60 17 U.S.C. §107.

154 Special Considerations and explains a great deal about how fair use has evolved in the past thirty years. The Supreme Court embraced the concept of consumer fair use in the famous “Betamax” case of Sony Corp. v. Universal City Studios,61 where the decision embraced the concept that a consumer who had a lawful right to watch a television show must also have the ability to “time-shift” that show to temporary videocassette recording for later play-back and then erasure. Although the consumer was making a copy without permission, the consumer was assumed to be doing it for the temporary purpose of watching at a more convenient time. The concept of time shifting later extended to “space-shifting,” so that a consumer who owned a copy of a song could move that song from a CD onto their portable music player without being required to purchase a second copy of the song. The expansion of the digital economy has made this consumer exception increasingly important, and it has begun to extend well beyond its earlier origins. For example, without an exemption, making a back-up copy of software or data would require a separate license for each back-up copy. The law, instead, provides that a single back-up copy is permitted. Generally accepted practice suggests to utilize multiple back-up copies of all critical software and data, so the practice has created an exception to the interpretation of the law. Increasingly, fair use decisions that once permitted consumers to make broader use of their technology are now permitting companies such as Google to make these conveniences on behalf of the public. Google’s ability to scan millions of books into its database and then show large snippets of those works on its search results was permitted because of the significant consumer benefit derived from the database. The decision to label Google’s conduct fair use focused on the consumer use of the database rather than the massive scope of the unauthorized copying. Creative fair use is the older and more complex version of the rule. The cases often pit one creative artist against another and one publisher against another publisher. Since every quote or close paraphrase relies on fair use, authors and other creative artists rely on fair use regularly. Most

61 Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984).

12. Copyright Protection for the Works at the Cons 155 of these situations are taken for granted, but in other cases the line between fair use and copyright infringement is harder to determine. As the Copyright Act explains, “the fair use of a copyrighted work … for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.”62 This general statement is then interpreted through a broad, four-factor test that looks at the following:  the purpose and character to which the work was used by the unauthorized user;  the nature of the work, meaning the extent to which the work was a highly creative work or a more narrowly- protected factual work;  the quantitative and qualitative amount of the work taken; and  most importantly, the effect on the actual or potential marketplace for the work used without authorization.63 When analyzing the first factor, the Supreme Court has explained that the purpose to which the unauthorized user is making of the work has two different dimensions. One meaning of this question is the extent to which the unauthorized use is a commercial one, as contrasted with an educational use or a use for comment and criticism. The second meaning is the extent to which the use is transformative, making something substantially new or different than that made by the copyright owner. These are hard questions to answer and the determination is often subjective in close calls. The second factor regarding the nature of the work is much simpler. Copyright gives very thin protection to works that are highly factual, since

62 17 U.S.C. §107. 63 17 U.S.C. §107. The book provides a paraphrase of the four factors from the actual test, which are: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.

156 Special Considerations copyright does not protect the facts and instead only protects the expression about the facts. Highly expressive works are granted more fulsome copyright protection, so the nature of the copyright owner’s work will impact the scope of the protection. The third factor goes to the amount actually taken. The court decisions often recite that a person relying on fair use should take no more than is necessary to achieve the purpose of the copying, such as comment, criticism or parody. A book review can include short passages to illustrate the review, but it cannot copy whole chapters because copying on such a grand scale is not needed for the review. In the consumer setting, copying whole works is permitted, but in the creative fair use context, this is much less common and generally permitted only where the work is too small to be subdivided. The fourth factor focuses on the effect on the market for the original work. If the unauthorized copy can replace the copyright owner’s work in the marketplace, then that market should be left to the original owner. On the other hand, if the unauthorized use does not provide a substitute, then there is little actual harm in letting the second person build upon the work of the first author. This same rule works, with a bit more interpretation, for the potential market as well. An unauthorized adaptation of an author’s novel into a movie does not directly substitute for the novel, but the opportunity to adapt the book into the novel is an expected part of the adaptation right of the original author, so an unauthorized movie of this kind would be an infringement of the potential market. This is a very pragmatic analysis of the harm caused by the fair use, so this factor often has the most sway. If the use causes harm, it probably should not be allowed. If there is no harm in the copying, then the court is much less likely to stop it. In practice, most fair use cases are not as difficult as the court opinions suggest. This makes sense, because only the most difficult cases need to go to trial. Using passages from published books to write reviews is fair use. Showing short clips from movies to provide movie reviews is fair use. Showing the entire movie is not fair use, even if the person exhibiting the movie then provides an extensive critique. Reproducing copyright protected artwork on T-shirts, mugs, and posters is not fair use. Changing the medium to a lunchbox or other commercial product does not transform the work. But a comic book mash-

12. Copyright Protection for the Works at the Cons 157 up of characters from various literary works could be a fair use, provided the amount taken from any work was kept to a reasonable amount (which may be somewhat more than the minimum necessary to achieve the purpose of the new work). It is worth noting, however, that many commercial parodies and mash- ups do not rely on fair use. Instead, permission is sought in advance. The reason for this is quite practical – the legal costs to defend fair use can be very high, so the safer choice is to get a license. This is particularly true for commercial projects that tend to have a high visibility. Highly visible commercial projects also tend to have a greater marketplace impact, so the fourth factor is less helpful to the author seeking to utilize fair use.

iii. Limiting Secondary Liability

Although the general rules of copyright protections and copyright liability apply to the Con and to all the Con vendors and participants, the rules on secondary liability apply specifically to the Con itself. Under copyright law, a company may be liable for the copyright infringement of its employees or its vendors in certain circumstances. The doctrine is known as secondary liability. Although it is not codified in the statute, secondary liability has been recognized by the courts for over a century. Secondary liability case law provides that when a party is responsible for the infringing activities of another party, the responsible party can be held liable in addition to the person who actually committed the copyright infringement. There are a variety of explanations regarding the scope of this potential liability. One category of secondary liability is called vicarious liability. Vicarious liability rules hold the employer responsible for the copyright violations of its employee if the employer has the right and ability to control the conduct of the employee and the employer has a direct financial benefit in the conduct. For example, if an employer operates a music or gaming store and those employees regularly make unauthorized copies of the CDs and games which they sell on behalf of the employer, then the employer is responsible for the copyright liability. The rule is appropriate here because the employer had the ability and obligation to supervise its employees and the employer also increased its revenue as a result of the illegal copying. In contrast, if the illegally sold goods were sold under the table and the

158 Special Considerations employees kept all the income, then the employees are hurting both the copyright owners and the employer and the employer would not be responsible for the copyright infringement. Another category of secondary liability is called contributory infringement. In this category, the non-infringing party can be held responsible along with the infringing party if the person had knowledge of the copyright infringement and took affirmative steps to help in the infringement.64 The rule is very similar to the concepts of conspiracy, with the non-infringing party providing material support to the act of infringement. The U.S. Supreme Court updated and reaffirmed this rule in MGM Studios Inc. v. Grokster, Ltd.65 In this case, the Supreme Court focused on the Grokster music sharing platform. The company was actively aware of the copyright infringement by the users of its platform and developed the technology to promote such use. Here, the Supreme Court incorporated patent law doctrine into the copyright law by borrowing the concept of inducement. The Court held that “one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”66 The language of the Supreme Court simplifies the evidence required to prove contributory infringement in those cases where the object of the party’s conduct is to promote infringement, because the plaintiff no longer needs to focus on the specific nature of the defendant’s knowledge. Where the material participation or affirmative steps are less overt, then the more specific knowledge of infringement may become a critical factor to establish liability.

64 Gershwin Pub. Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971) (“one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a "contributory" infringer.”). See also MGM Studios Inc. v. Grokster, Ltd. 545 U.S. 913, 936-37 (2005) (“the inducement rule, too, is a sensible one for copyright. … [O]ne who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”). 65 MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 936-37 (2005). 66 Id.

12. Copyright Protection for the Works at the Cons 159

For Cons, the rules of secondary liability create some additional duties in running the event. In California, courts have upheld liability against flea markets that sell bootleg music and branded merchandise under both the vicarious liability and contributory infringement rules.67 For vicarious liability, the Con’s contractual rental agreement with the exhibitors is sufficient to provide the right and ability to control the behavior of the vendor. The Con’s benefit from audience traffic, admission sales and other revenue may be sufficient to support the direct financial benefit requirement under the test. This application of the rule has been the subject of much criticism, and many courts are no longer interpreting the rule so broadly. As a result, the application of this rule may depend on the interpretation of the law in the location of the Con. The potential liability will also increase if the scope of the copyright infringement is a very significant part of the Con’s exhibit hall. Cons may also be responsible under the contributory infringement theory. The Con is promoting the sales for all its exhibitor booths, including those booths that may be selling bootleg products. If a Con has specific knowledge of an exhibitor selling bootleg products, a court may consider the Con organizer’s efforts to promote the Con and the exhibitors sufficient to find contributory infringement. Of course, Cons do not generally operate with the objective of promoting copyright infringement. Nonetheless, some of the vendors renting exhibit hall space may be showing products that are obvious bootleg products. Equally importantly, the Con will have vicarious liability if any of its employees are making bootlegs of copyrighted works and selling those on behalf of the Con. As a result, the Con has a duty to police both its exhibitors and its employees from selling bootleg materials. The best way to show that the Con is not responsible for the copyright infringement of its exhibitors is to demonstrate that it takes affirmative steps to stop copyright infringement. The Con can do this by including a provision in the exhibitor agreement that prohibits copyright infringement. The provision must be sufficient to allow the Con to remove an exhibitor if the Con determines that the exhibitor is participating in copyright

67 Fonovisa, Inc. v. Cherry Auction, Inc., 76 F. 3d 259 (9th Cir. 1996) (finding flea market may be liable under both vicarious liability and contributory infringement theories).

160 Special Considerations infringement. As discussed above, the Con should be sure to recognize the importance of fair use and the accepted practices of fan fiction and cosplay. The contractual provision is likely to be most effective if it is focused on commercial bootleg activities. Having a strong contractual right to enforce copyright is insufficient without active enforcement of the provision. Con staff should be trained to watch for illegal bootleg sales and to report those sales immediately. In most instances, the copyright owners will be more than satisfied by evidence of meaningful efforts to stop bootlegging and will be allies in the effort to promote the Con and the lawful sales of copyrighted works. In those instances where the copyright owner takes an aggressive position against the Con, the evidence of anti-bootlegging policing will be very persuasive that the Con is not attempting to induce copyright infringement.

13. Fandom and CreativityIncluding Fan Art, Fan Fiction, and Cosplay The Con community owes its existence to the energy and enthusiasm of the genres the Cons celebrate. Science fiction fan clubs and interest groups began to emerge in the 1920s, and by the 1930s they were joined by SF fanzines.68 The Sherlock Holmes fan club, the Baker Street Irregulars, formed in 1933 in New York. In what has been nearly a century of growth, these communities have grown in importance to the American culture and economy. At the same time, these communities tend to operate with their own rules and within their own expectations. Fandom has grown into a sufficiently important cultural phenomenon that it has engendered a number of scholarly journals, books, and conferences. As with any academic discipline, there are a multitude of theories and schools of thought on the cultural significance and motivating structure of these communities. These studies tend to focus on the complex relationship between the fan community and the producers of the creative works. While the theoretical understanding of this dynamic tension is worthy of study, the focus of this chapter is primarily on the practical implications of these phenomena and the Con organizer’s ability to foster these relationships.

A. Fan Culture

In 1967, Marshall McLuhan noted that societies are shaped more “by the nature of the media by which men communicate than by the content of the communication. … It is impossible to understand social and cultural changes without a knowledge of the workings of media.”69 Fandom is perhaps the most expressive fulfillment of this observation. Although there are many competing definitions, one working definition of fandom describes it as the community of people who share significant time and resources to participate with each other in experiences related to a

68 See CHAD DELL, THE REVENGE OF HATPIN MARY: WOMEN, PROFESSIONAL WRESTLING AND FAN CULTURE IN THE 1950S, 88 (PETER LANG INC., INTERNATIONAL ACADEMIC PUBLISHERS, 2006).

69 MARSHALL MCLUHAN, THE MEDIUM IS THE MASSAGE: AN INVENTORY OF EFFECTS 8 (Gingko Press 2001 ed.) (1967).

161 162 Special Considerations particular artistic or literary work or group of works. This definition is overly broad, but from the legal and business perspective, groups that share this characteristic are similar enough to preclude the need for any narrower a definition. This definition does not address the nature of the relationship between the community and the literary work. Different researchers have posited a variety of assumptions regarding this relationship. Many, such as Henry Jenkins, look at the publisher’s ownership of the literary work as an innate conflict with the need of the community to engage with the material as part of the fan’s own creative process. In a well-recognized book on the topic, Jenkins explained the relationship between the fan and the literature as follows: Far from syncopathic, fans actively assert their mastery over the mass-produced texts which provide the raw materials for their own cultural productions and the basis for their social interactions. In the process, fans cease to be simply an audience for popular texts; instead, they become active participants in the construction and circulation of textual meanings.70 This is certainly an accurate depiction of the fans’ assertion of control over the text, but it ignores the far more pragmatic and interdependent relationship between the content and the audience. Throughout all literary and creative history, there has been a tension between the creator of the work and the audience of the work. One need only consider the audience of the July 25, 1965, Newport Folk Festival booing Bob Dylan for his use of an electric guitar to understand that the audience shapes the performer and the performer shapes the audience. Fandom has sometimes been characterized as an extreme form of audience participation, but the suggestion that fandom equates with fanatic has been rejected within the studies of fan culture. What the Con organizer must appreciate is that the relationship must be understood as both symbiotic and tension-filled. The symbiosis between producer and fan is axiomatic: A producer cannot mass-produce a work unless there is a mass of people to consume the work. But there cannot be a mass of people to celebrate a work unless

70 HENRY JENKINS, TEXTUAL POACHERS: TELEVISION FANS & PARTICIPATORY CULTURE 24 (Routledge 1992).

13. Fandom and Creativity: Fan Art, Fiction, and Cosplay 163 the work is produced and distributed. The relationship is a self-reinforcing circle, requiring presence of both fan and creator in order to remain sustainable. While it is theoretically possible for a fan culture to emerge around an entirely fan-created body of works, such a community has yet to emerge. This may be because an essential element of an effective body of works relies on a canon of literature that remains internally consistent. Indeed, it is the violation of canonical rules that most often triggers battles between the producer of the work and the fan community. A fully fan- created body of works would tend to fork into inconsistent and conflicting strains of the work. Fan-created worlds do exist. They tend, however, to be built by overlapping, mixing, or mashing up preexisting popular sources. In this category, there is a relationship to the canon of each source, so that any inconsistencies often serve as intentional commentary rather than mere lack of coherence. A fan-created world, by definition, is not the creation of an individual author or even a small editorial team. If one person were to write the project, that person would fall into the category of author and those that follow would be the fans. For the work to be fan-created in this sense, the original plot and characters would need to be collectively introduced on a mass scale. This could certainly be done in a hackathon setting, but it would not spontaneously develop. One can also imagine a Wiki-styled, open source literary world managed by volunteer editors but not owned by any commercial producer. These will inevitably develop, but the model will occur only rarely because of the investment necessary by the public. For fandom to embrace a work without a producer is more likely to occur with a work that has fallen into the public domain, making it free from the constraints of the original producer. Both the fan-created works and the public domain works can serve as the basis for a fan community. The literary character of Sherlock Holmes has recently moved into the public domain. Alice in Wonderland is another excellent example of a work revered within fan communities. The difference between these and the Harry Potter, Star Wars, Star Trek, or Marvel universes is the structured support and investment provided by the producer. Fans may bristle at the producer’s ownership demands, but they appreciate new movies, licensed products, and top actors participating in the extensions of these works.

164 Special Considerations

With rare exceptions, the fans generally need the producers. Similarly, the producers need the fans. The tension between the fandom and the producer takes on three aspects. At the simplest, the tension occurs when the producer makes artistic choices that challenge the fandom’s understanding of the canon with the works or otherwise challenges the expectations of the fan base. The second area involves the appropriation and exploitation of the legally- protected works by the fans through fan fiction or other creative works. The third category is the use of the legally-protected works to extend, study, or extrapolate the content.

B. Upsetting the Fans

Studio executives understand that a small minority of the ticket-buying audience are “whales,” or oversized purchasers of the tickets. They generally recognize the influence of opinion makers and the fans who operate as nodes connecting the broader audiences together. Today more than ever, the producers also understand the impact of a social media environment that enables the fans to talk directly to each other and to speak loudly back to the producers about their likes and dislikes over the direction a project takes. While the relationship is symbiotic, that does not mean it is not without tension. The fans, or vocal segments within a particular fan base, may desire a particular curatorial approach to a body of work that is at odds with the author or producer. Casting choices, script choices, the life and death of particular characters, issues of ethnicity, gender, and culture are often points of contention. This tension, however, is not unique to the relationship between fans and producers. Similar tensions exist throughout the creative process. Authors fight with editors; producers conflict with directors; actors challenge each other as well as all the craft departments; bands break up; and even illustrators fight with their comic book authors. The same can be true with music fans. While Bob Dylan’s break with acoustic folk music may be the most famous divorce between an artist and his audience, it is certainly not the only one. Band break-ups, choice of touring musicians, genre selection on albums, concerns over cultural

13. Fandom and Creativity: Fan Art, Fiction, and Cosplay 165 appropriation, and even tour locations can lead to tensions between musicians and their fans. Every creative and commercial element of the literary or musical process is rooted in conflict as ideas challenge one another for ascendency. In his book Playing Fans, Paul Booth recognizes this creative and economic reality. As he notes, “fans are now becoming crucial members of twenty- first-century media.”71 The fans’ cacophony of opinions are omnipresent throughout the creative process. At the same time, fans are a collective. No individual fan is in a position to apply a veto. As a result, the process remains necessarily messy. Fortunately, this is part of the magic.

C. Media Appropriation, Fan Fiction, and Fan Art

The terms media appropriation and fan fiction reflect two very different consequential interpretations of the same creative process. Since the origins of the Baker Street Irregulars, fans of creative works have undertaken to create pastiches, fan-authored new works featuring the characters, settings, tone, and signature elements of the canonical works. Sherlock Holmes is joined by Ellery Queen and Nero Wolf from mystery fiction as characters often featured in works written by fans for other fans. Star Wars and Star Trek feature prominently in science fiction. Fantasy stories abound with characters and locations from Hogwarts, Middle- earth, Narnia, Dreamlands, Oz, and Wonderland. E. L. James originally wrote the erotic bestseller Fifty Shades of Grey as fan fiction for Stephenie Meyer’s Twilight series, which she posted to FanFiction.net. Dreamlands, Oz, and Wonderland are from books in the public domain. All writers are free to do anything with them. However, fans currently use Hogwarts and the Harry Potter fantasy world more than any other, according to FanFiction.net, a website devoted to fan-created works. The public domain material is just not as compelling for fans. FanFiction.net is not alone. There are many other sites which also support

71 PAUL BOOTH, PLAYING FANS: NEGOTIATING FANDOM AND MEDIA IN THE DIGITAL Age 24 (Univ. of Iowa Press 2015).

166 Special Considerations these works. Among them, DeviantArt is particularly important for visual arts works. When a fan creates a pastiche of a copyright-protected story, however, the law characterizes that story as an unauthorized adaptation of the source material. From a legal standpoint, the author is committing a copyright infringement of the original material unless the work constitutes a fair use of the original work. Chapter 12 discusses copyright more fully. If instead of being based on a copyrighted work, the work is a fictional exploration of a living person’s life, then that work has the potential to be defamatory. As a practical matter, in each of these categories, there are two questions to answer. First, does the copyright owner or celebrity care? If the copyright owner or celebrity cares, then second, is the use by the fan fiction author an infringement of the copyright author’s work or a defamatory use of the celebrity’s identity? As a practical matter, copyright infringement of popular works is primarily an economic harm. Copyright owners will typically make an economic assessment of the harms and the costs of enforcement. In contrast, exploitation of a celebrity’s life story is a personal injury. In some of these cases, the need to stop the perceived harm will vastly exceed any economic assessment of the costs involved. Fan fiction authors, therefore, should be aware of the very different calculations made by celebrities and copyright owners. Copyrighted works and potentially defaming works are addressed separately.

i. Fair Use for Fan Fiction

As demonstrated by the sheer volume of content on the various fan fiction websites, there are very few copyright owners that are seriously policing the free publishing of these works by fans. Instead, the network of fan fiction continues to grow robustly. In the earlier days of the Internet, greater care was taken by copyright owners to protect characters from highly violent or erotic reimaginings. It is likely that the attitude towards policing these works has evolved as the media marketplace has changed. Nonetheless, copyright owners are as diverse a group as the fans themselves. Some owners will care much more than others. For example, the owners of a new work will be much more protective than the owners of a work that has been fully exploited in the market. A work five years old

13. Fandom and Creativity: Fan Art, Fiction, and Cosplay 167 will garner much less enforcement than a work that has only been available to the public for a few days. Similarly, a work which is the subject of new licensing activity will be much more actively protected than a work that is no longer part of new licensing negotiations. Both of these situations assume that the protection is triggered, at least in part, on the owner’s fear that the fan fiction will impact the work in the market. Assuming there is a copyright owner who plans to aggressively protect a copyright interest, the copyright owner can sue to stop or to seek damages from an unauthorized user of the copyrighted work. First, the copyright owner must establish it has valid ownership of a work protected by copyright. Second, the copyright owner must establish the defendant’s work was substantially similar to the copyright owner’s work and that the similarity is not excused by fair use. The ownership of the copyright is very easy to establish for modern works. Either the author or the current, exclusive licensee of the work has the right to bring the suit. For older materials, the question is much more complex. Ownership of H.P. Lovecraft’s Cthulhu storylines, for example, is quite unclear. Some of the works have fallen into the public domain, while other works are within the timeframe for continued copyright protection. Works published prior to 1964 were required to be renewed or else the copyright lapsed. Short stories published in magazines should generally have been renewed by the authors who retained the renewal rights rather than the magazines which only acquired first-publication rights. But the actual contracts used may have varied from publisher to publisher or from year to year. Finally, the ownership in the copyright may have been transferred by sale or devised by inheritance or will, so there can be ambiguity in the present ownership of the copyright. An owner of a valid copyright must establish that the defendant’s work is substantially similar to the copyright owner’s work. Where characters, settings, dialog, and other elements are copied, this test can easily be met. If instead, more abstract aspects of the work are copied, then it is harder to meet this test. For fan fiction, there tends to be ample evidence of this copying. The third step is to determine whether the copying is nonetheless outside of copyright infringement because the copying amounts to fair use.

168 Special Considerations

Fan fiction is not a category of use that is presumptively protected by fair use. Instead, fair use is generally limited to comment, criticism, or educational uses. (In Chapter 12, this book also addresses a second group of fair use situations involving consumer protection, but those cases do not apply to fan fiction.) Parody has long been recognized as a form of comment or criticism. Fan fiction often takes on a parody-like tone, so the fair use test is reasonably applicable to fan fiction. In a lawsuit over fair use, the focus of the litigation would be how transformative the fan fiction is regarding the source materials, how much is copied, and what is the impact for the source materials on the marketplace. For example, a work that is set in a fictional world but that uses original characters and dialogue to tell a new story is much more transformative than a retelling of a scene from the book retold from the perspective of another character. Even in the latter case, however, the material may be sufficiently transformative. These are questions of fact that a judge or jury must decide. The impact on the market also strongly favors a finding of fair use. The volume of fan fiction on the Internet suggests that an additional fan fiction work posted to a free online site is likely to have a negligible impact. Given the thousands of Harry Potter stories, one more is unlikely to impact the marketplace. On the other hand, if a fan fiction work is suddenly being shipped through Barnes & Noble, then there is a greater likelihood of market harm to the copyright owner.

ii. Defamation and Invasion of Privacy in Fan Fiction

There is a different legal analysis for fan fiction based on living celebrities than for works protected by copyright. As discussed in Chapter 11, such works have the potential to be defamatory if they harm the reputation of the celebrities through false statements of fact embedded in the work. A novel or movie “based on a true story” often blurs truth and fiction. When living persons are featured in these works, they can create the public impression that the identified living persons committed crimes or immoral acts. If these works fictionalized the objectionable conduct, then this may give rise to claims of defamation. While these stories tend to focus on celebrities, the protection applies to all living persons, so there is the potential to defame individuals who are not famous, merely supporting characters in the story. The lawyer,

13. Fandom and Creativity: Fan Art, Fiction, and Cosplay 169 accountant, masseuse, nanny, doctor, driver, roadie, hair dresser, Little League coach, and receptionist for any given celebrity is each real person. If a work claims to be based on a true story and has one or more of these individuals committing immoral acts, then the story has sufficiently identified that person and falsely painted the person as acting unprofessionally or immorally in a way that will be defamatory. The individual need not be named. It is sufficient that a reasonable person would be able to identify that the character refers to the victim of the defamation. For a public figure, such as a celebrity, to win a lawsuit for defamation, the celebrity will need to prove the falsity was published intentionally or with reckless disregard of the truth. The non-public figure, in contrast, will merely need to show that the publication was negligent. In this case, negligent means the publication was made without the reasonable care expected of an author writing about a real person. To the extent the fan fiction is entirely speculative fiction that makes clear there is no intention to identify any living persons, that helps negate the implied assertions of fact essential for defamation. Avoiding any statements that the work is based on a true story and disclaiming any similarity to living persons can help reduce the likelihood of defamation, but these steps will not provide immunity for such claims. In addition to claims of defamation, there are a variety of related claims to invasion of privacy and infliction of emotional distress that turn more on the unwelcome nature of the attention than on the falsity of the content. In this area of law, state laws vary considerably. What these claims share in common is a claim by the celebrity that the published work is highly objectionable, intrusive and emotionally harmful. As one important summary explained, “liability has been found only where the conduct has been so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community.”72 Works that are particularly vulgar, sexually deviant, or violent are more likely to fall into this category, but the definition is not limited to these categories.

72 RESTATEMENT (SECOND) OF TORTS § 46 cmt. d (AM. LAW INST. 1965).

170 Special Considerations

In the social media age, the law has the potential to look at the cumulative effect of fan fiction as well as the content of individual stories to find the outrageousness and extreme nature of the material. Both the nature of the fictional works and the cumulative volume of such works could be part of such a claim.

D. Fan Enthusiasm – Extending, Studying, or Marketing Works

Until the moment Warner Bros. Entertainment sued RDR Books for preparing to publish The Harry Potter Lexicon, J.K. Rowling was a tremendous fan of Steven Vander Ark’s “The Harry Potter Lexicon” website. She is quoted in the court proceeding as writing “[t]his is such a great site that I have been known to sneak into an internet café while out writing and check a fact rather than go into a bookshop and buy a copy of Harry Potter (which is embarrassing). A website for the dangerously obsessive; my natural home.”73 The litigation highlights the tension between the engagement and support provided by fans and the economic and creative control demanded by publisher and producers. Far from either a David-and-Goliath story or a Bambi-meets-Godzilla story, the lawsuit highlights the evolving relationship between producers and their fans. This was not a case of fan fiction. Instead, The Harry Potter Lexicon website was a heavily trafficked, advertising-supported undertaking. Importantly, the existence of the website and its advertising did not trigger the lawsuit. Instead, the lawsuit occurred because RDR Books sought to publish a print edition of the book. In moving from website to print edition, the publisher significantly changed the impact on the potential market. Warner Bros. Entertainment was very interested in utilizing the print publishing marketplace and had already created two short companion works to complement the seven Harry Potter novels. Warner Bros. sued only to stop the print edition of the book. The lawsuit had a mixed outcome for the parties. Ultimately, the court determined that parts of the lexicon copied too much content directly from the Harry Potter novels. But the nature of the lexicon, as a traditional form of commentary and education, was found to be a fair use mode of

73 Warner Bros. Entertainment Inc. v. RDR Books, 575 F. Supp.2d 513, 521 (S.D.N.Y. 2008).

13. Fandom and Creativity: Fan Art, Fiction, and Cosplay 171 publishing. The book had to be revised to reduce its reliance on J.K. Rowling’s own writing, but was otherwise allowed to proceed. A similar situation occurred with a claim made by 20th Century Fox regarding the raggedy yellow-and-orange hat worn by the character Jayne Cobb (portrayed by Adam Baldwin) in the fan favorite television series, Firefly. Firefly has a tremendous fan following which continues to grow despite the short lifespan of the original series. Fans began to sell homemade versions of the hats on Etsy and other sites. Fox eventually began to license the Firefly name and other aspects of the show to manufacturer Ripple Junction. Once Fox had a trademark license in place, it likely had a legal obligation to police the marketplace from unauthorized uses of its trademarks. In furtherance of this obligation, Fox sent cease and desist letters to Etsy sellers of the hats. Confusing the situation was the nature of the rights at stake. Fox’s letter was reported to be very vague regarding the basis of its ownership claims. The distinction between copyright and trademark is important to the assertion of rights because copyright law does not apply to clothing and the “Jayne Hat” is a simple design that should not be protected by copyright law. Instead, Fox was likely relying on its ownership in the trademarks for the television show name Firefly and the character name, Jayne, along with similar marks. Making and selling the hats depicted in the series is entirely without legal restrictions. But marketing them as Jayne Hats arguably exploits the trademark asserted by Fox. From a trademark law analysis, Fox was well within its rights to police its trademarks on Etsy. Trademark owners have an affirmative duty to police their marks and protect the public from unauthorized users. Fox would have been smarter to send an educational letter that explained to Etsy crafters how to sell the hats without violating the trademark. This is particularly true because it is not clear that Fox had undertaken the steps needed to acquire a trademark interest in the name of the Jayne Hats or to establish that there was any likelihood of confusion between the Etsy hats and products licensed by Fox. In this regard, it is the ability of the intellectual property owner to assert rights and use economic clout to win disputes that often upsets fans. Fox never had to prove its trademark rights were violated. The assertion was

172 Special Considerations sufficient to trigger a take-down by Etsy. This tension is unlikely to be resolved. Today, the point of greatest conflict may be the much larger fan-based projects. Paramount Pictures and CBS successfully brought a lawsuit to block Axanar Productions Inc. from creating a feature length motion picture entitled Axanar that is set in the Star Trek universe. The film had a budget of $1.1 million but the Kickstarter crowdfunding enables the movie to be released for free as a noncommercial project. The work is also based on a character only briefly mentioned in the original Star Trek television series, so the use of the characters is minor. The filmmakers initially asserted the movie should be fair use. Following a preliminary ruling on fair use by the judge in case, however, the producers were forced to concede. Axanar Production acknowledged that they “were not approved by Paramount or CBS, and that both works crossed boundaries acceptable to CBS and Paramount relating to copyright law.”74 The hedging in the language of the statement highlights the ongoing tension over fair use between production companies and fan-created works. Nonetheless, the economic stakes are high for both parties. As often occurs, this litigation was ultimately settled before the jury trial could start. The production company claimed victory as well, in part because it was not economically devastated by the outcome and, in part, because Paramount was somewhat more generous to Axanar Productions than it provides in the general fan film guidelines. A number of concerns make this a much harder case to establish fair use. First, although the character use is minor, a film uses many more protected elements than a book. Axanar Productions has released the trailer for the film. Based on this preliminary work, Axanar does an excellent job of replicating locations, craft, logos, and other aspects of the Star Trek franchise. Paramount also asserts copyright in the fictional Klingon language, which was used in Axanar’s films. The court here seemed to go further than necessary, suggesting that everything about the Klingon and Vulcan race fell within copyright protection. But even

74 Andrew Liptak, Axanar has settled its lawsuit with Paramount over its Star Trek fan film, THE VERGE, Jan. 20, 2017 4:03 p.m, http://www.theverge.com/2017/1/20/14340666/axanar-productions-settled-lawsuit- paramount-star-trek-fanfilm.

13. Fandom and Creativity: Fan Art, Fiction, and Cosplay 173 without this generous interpretation, there was a great deal of copyright- protected material at use in the film. Second, the scale of the project and its budget may also impact the market for the work. Since the company raised the $1.1 million based on the promise to exploit the copyrighted works of Paramount, the company had a much more difficult establishing the fan film has had no impact on the potential market for authorized films. Third, and likely most important, was the ability to promote and distribute the film. In the ruling on the question of fair use, the district court highlighted that the movie was made with a professional crew including cast members that had appeared in Paramount’s Star Trek productions, and promoted the movie as “the best Star Trek movie script ever!,” and was seeking to place the movie on Netflix. These aggressive steps make the fan-based move much more a market substitute for Paramount’s productions and greatly undermined the claim of fair use. Since YouTube and other online distributors often serve as a platform for both commercial and noncommercial content, the separation between professional productions and fan fiction continues to blur. The fair use test’s fourth factoreffect on the marketplaceremains the litmus test for most fair use cases. If the fan fiction can substitute for the copyright holder’s work or satisfy the desire for a sequel or similar work, then it is much likely to be fair use. These three examples all emphasize the fundamental limit that the producers of content seek to place on fandom, namely the need to retain the for-profit, commercial aspects of the marketplace. In the case of The Harry Potter Lexicon, the commercial publication of a book challenged Warner Bros. to restrain the publication. Warner Bros. was only partially successful because copyright law favors comment and criticism, but Warner Bros.’ willingness to bring the lawsuit highlights the line-drawing at the heart of the case. The actions by Fox and Paramount follow similar analysis. Use of trademarks or copyrights in a commercial marketplace will receive a much stronger reaction than use of creative content in a noncommercial setting. Etsy may be the commercial site for homemade products, but it remains a commercial site. A feature film with a professional cast and seven-figure budget will be considered commercial by anyone in the motion picture

174 Special Considerations industry and the free distribution model is unlikely to change that perception. In the case of the Jayne Hats, no litigation occurred. Sophisticated sellers could have avoided the Fox trademark claims and continue to sell the public domain hats. In the case of Paramount v. Axanar, the case highlighted the challenges of commercial exploitation in the context of crowdfunding. The settlement likely emboldened the studios to defend their intellectual property aggressively. The guidelines limit the fundraising to $50,000 and the length to 30-minutes in total. Paramount’s guidelines for productions are narrow and appear to highlight an internal frustration with the professional cast members who worked with Axanar. The new guidelines specifically prohibit former crewmembers with the following limitation: 5. The fan production must be a real “fan” production, i.e., creators, actors and all other participants must be amateurs, cannot be compensated for their services, and cannot be currently or previously employed on any Star Trek series, films, production of DVDs or with any of CBS or Paramount Pictures’ licensees.75 Fan authors should recognize that the self-published guidelines are not coextensive with fair use. A court may provide much greater flexibility than the terms provided in the guidelines, so they serve as a floor on acceptable appropriation. Indeed, Paramount recognizes this by describing the list as “Guidelines for Avoiding Objections.”76 The phrasing by Paramount is a healthy indication that the company understands the benefits of fan fiction even as it has clearly demonstrated that some types of fan fiction will not be tolerated. Despite these examples, the limits on fandom are tenuous and the growth of fandom continues largely unabated. Against the backdrop of millions of participants in fan communities and an untold body of works, websites, and products in the marketplace, these limitations serve merely as border posts in a wide-open landscape.

75 Star Trek Fan Films, http://www.startrek.com/fan-films#sthash.ybf6EIZS.dpuf (last visited May 1, 2017). 76 Id.

13. Fandom and Creativity: Fan Art, Fiction, and Cosplay 175

E. Cosplay

The ultimate expression of fandom can often be captured in the process of creating and displaying an originally-crafted costume that replicates the original designs from the literary work. The term cosplay is a contraction for “costume play,” highlighting the steps of the fan’s interaction. A cosplayer is expected to create the costume and props rather than purchase the products commercially and then to wear the costume at the Con, often in character. Many Cons have extensive competitions for the best costume or costume grouping. As with the example of the Jayne Hat, producers generally promote cosplay at the Cons while discouraging the commercial reproduction of such items. Many costumes are protected by copyright, trademark, or both. The producers are very quick to enforce these rights. At the same time, cosplay is strongly supported within the Cons. Despite the cultural expectation that costumes should be crafted by the participant, there are a number of retail outlets for costumes that extends the Halloween market into a year-round enterprise. Some of these are retailers providing licensed costume and prop products, while others are marketplaces enabling individual fans to sell their own creations. Still other sellers are exploiting unlicensed knock-off and bootleg versions of the costumes. Producers focus their efforts to stop unauthorized sales on the unlicensed knock-offs, particularly the sellers that produce their products in volume. As with the Jayne Hats, however, these efforts sometimes impact the homemade craft markets as well. From a legal perspective, fair use provides a generous protection to the individual cosplay costume and prop. It may be, however, that fair use is not even necessary. The partnership between the producers and the Cons have created a permissive, implied license to create and publicly display these works in the context of the Cons and the social media websites that publish the images from these events. Ultimately, by moving from fair use to licensed partnership, the relationship between the producers and the fans will continue to transition to a more explicit symbiosis rather than one filled with tension. For both fans and producers, this reality has helped grow Cons to the economic heights it now reaches.

176 Special Considerations

14. Gambling, Raffles, Door Prizes, and Competitions At many Cons, event organizers or nearby hobby stores run Magic: The Gathering, Pokémon, or Yu-Gi-Oh! drafts and game competitions for prizes large and small. In the draft formats, participants pay to play. In exchange, they receive a set of sealed card packages to use during the tournament and to keep upon its completion. The formats vary, but after the cards are distributed, the players compete against each other for additional packs of cards and potentially other prizes. Although paying for the chance to win additional card packs would be considered a form of gambling, the skill-based competition needed to win the prizes typically exempts the game from state and local gambling regulations. Games of chance are highly regulated activities, whereas bona fide competitions are generally left unregulated. Both are big businesses. Competitions, drafts, and other events help support the popularity of trading card games. Many nonprofit organizations take advantage of their charitable status to raise funds through various indirect strategies, including raffles, bingo, games of chance, and competitions. For the games of chance, it often comes as a surprise to nonprofit volunteers that these activities are highly regulated under state law and IRS rules. Many of the common practices used by charities are illegal, and it is only the high public regard for the charity that keeps the organization from facing fines or criminal penalties. This chapter provides a brief overview of the categories of games of skill, games of chance, raffles, and similar activities. It identifies strategies to keep the Con operating in a legal manner while enabling the Con to use those games lawfully in their state. More than any other area of law, however, the laws governing competition vary dramatically from state to state and even city to city. No overview can summarize the wide range of different laws and regulations. Con organizers should consult with local attorneys or licensed third-party gaming companies to be sure they are in compliance with local laws.

A. Chance or Skill

While some states regulate both games of skill and games of chance, the vast majority of states permit games of skill to proceed without

177 178 Special Considerations significant license requirements while restricting gambling and other games of chance. A game of chance has three basic elements:  The player pays to participate, either directly or indirectly;  The player can win a prize if the player is successful; and  The outcome of the competition is determined by chance to some degree. The purchase to participate element can be satisfied with either a direct payment or through indirect and bundled payments. If the Con or any of the vendors charge for a raffle ticket, it will satisfy this test. Even a “free” door prize will be sufficient, since the door prize was included in the cost to the purchase of the attendance. In contrast, a vendor who holds hourly raffles for anyone stopping by the vendor’s booth is not likely to be considered to have charged customers for participating in the raffle since the vendor did not charge for the opportunity to participate in the giveaway. The Con charged the entrance fee rather than the vendor so there was no payment to the vendor. In contrast, if the vendor required attendees to be paying customers to have their names included in the raffle, then the raffle would satisfy the test that the raffle was initiated with a purchase to participate. Sweepstakes that are free to play with no purchase necessary are therefore exempt from the gambling laws. Even here, however, there are Federal Trade Commission and other rules put in place to assure the public that free to play means what it says. National sweepstakes are highly regulated, but using giveaways to entice building a customer mailing list is generally ignored. The second element of the gambling test is whether there is a prize to be won. The law makes satisfaction of the prize element also quite easy to satisfy. The prize need not be cash. It can include products and merchandise, seats at events, or anything else of value. Because the participation fee and the prize are both so easily satisfied under the law, the practical distinction between illegal gambling and legal competition turns on whether there is a sufficient degree of skill necessary to make the activity a competition.

14. Gambling, Raffles, Door Prizes, and Competitions 179

The most common test used among the states is the “dominant factor” test. An Alaskan court has provided a comprehensive explanation of the test: 1. Participants must have a distinct possibility of exercising skill and must have sufficient data upon which to calculate an informed judgment. The test is that without skill it would be absolutely impossible to win the game. 2. Participants must have the opportunity to exercise the skill, and the general class of participants must possess the skill. Where the contest is aimed at the capacity of the general public, the average person must have the skill, but not every person need have the skill. It is irrelevant that participants may exercise varying degrees of skill. The scheme cannot be limited or aimed at a specific skill which only a few possess. Whether chance or skill was the determining factor in the contest must depend upon the capacity of the general public – not experts – to solve the problems presented. 3. Skill or the competitors’ efforts must sufficiently govern the result. Skill must control the final result, not just one part of the larger scheme. Where chance enters into the solution of another lesser part of the problems and thereby proximately influences the final result, the scheme is a lottery. Where skill does not destroy the dominant effect of chance, the scheme is a lottery. 4. The standard of skill must be known to the participants, and this standard must govern the result. The language used in promoting the scheme must sufficiently inform the participants of the criteria to be used in determining the results of the winners. The winners must be determined objectively.77 Under the dominant factor test, games such as Magic: The Gathering drafts easily fall within the definition of skills, making those draft events legal under states using the test. Players must know the characteristics of

77 Morrow v. State, 511 P.2d 127, 129–30 (Alaska 1973). See also Sweepstakes, Promotions & Marketing Laws: Comprehension & Compliance in a Digital/Mobile Environment, N.Y.C. B., CITY B. CTR. FOR CLE PROGRAMS (May 13, 2016), http://www.nycbar.org/cle-offerings/sweepstakes-promotions-marketing-laws- comprehension-compliance-in-a-digitalmobile-environment-3/.

180 Special Considerations the individual playing cards, the interaction of cards, complex rules of engagement, strategies on how to build a deck, and keen observation regarding the other players’ cards and strategies. There remains, however, a significant degree of luck because the ability to select a particular card at a particular time depends on which is the next card in the deck. A minority of states use one of two stricter tests. The “material element” test determines that a game is gambling if chance is a material element in the outcome of the game. The reliance on a deck of cards to establish the player’s hand adds a significant element of chance into the game play. In addition, even the difference between the sealed packs could be sufficient to make chance a material element of the game. In those states using the material element test, draft events may not be permitted under the gaming laws. This is the purpose of the rule. In those states, the material element test is designed to include a much larger group of activities within the definition of gambling, so the test is broad. Broader still is the standard known as the “any chance” test under which any chance placed in the game will make the game one of gambling rather than skill. All card games would fall into the category of gambling under this test, assuming that the other two elements of the test were also satisfied. Even a game such as chess, which has no chance involved in the game play, could be considered suspect. In chess, there is a potentially random decision as to who goes first. If competition organizers had a pay- to-play chess tournament with prizes, the organizers could be required to assure that each contestant played an even number of games. In this way, each competitor has an equal number of opportunities to go first in order to eliminate even this element of chance. The online game platform Skillz has developed its business model around the distinctions between these three categories of gambling tests.78 Skillz has limited its platform to 38 states that rely on versions of the dominant purpose test.79 It chose to stay out of the states using the material purpose test in addition to those states that essentially prohibit all games through the any chance test. Con organizers may wish to consider a similar

78 See Will Yakowicz, The Booming Business of Cash Prize Gaming, INC.COM (May 28, 2014), http://www.inc.com/will-yakowicz/skillz-cash-prize-video-game-platform.html.

79 The Legality of Skill Gaming, SKILLZ (Jan. 19, 2017, 14:02), https://skillz.zendesk.com/hc/en-us/articles/200620348-The-Legality-of-Skill- Gaming.

14. Gambling, Raffles, Door Prizes, and Competitions 181 strategy and utilize games of skill much more cautiously in those states that do not rely on the dominant factor test.

B. Providing Giveaways rather than Games of Chance

As noted above, there are three elements to make a game into regulated gambling, namely payment to participate, prizes, and an element of chance. The Con organizers who wish to avoid entanglements with gaming regulations need to be sure that the activities do not involve all three of these elements. For the Con itself, it can avoid the element of chance entirely if any giveaways are based on attendance rather than chance. For example, if there are T-shirts for attendees, then everyone who purchases a ticket should get the same T-shirt. If there are multiple gifts, then each attendee should be able to select among them. At the same time, some common sense can apply. This rule does not need to be taken to an extreme. The Con can purchase a certain number of posters and a certain number of T- shirts. The attendee’s choice of gift can be limited to what remains at the time the person picks up their prize. But the rules cannot be manipulated. Regulators look to substance over form. The Con cannot have one grand- prize with a drawing to determine who is the lucky individual to go first in line. The duty to reinforce these rules goes beyond the Con itself to those vendors and exhibitors participating in the Con. While truly free giveaways are permissible, the Con should include in its vendor agreement a simple statement that the vendor is responsible to comply with all laws, including those related to gambling. The Con management should be aware of the potential for vendors to run giveaways and be sure that there is no payment of any kind given in exchange for these activities unless they are true games of skill as discussed above.

C. Charitable Gambling

For Cons organized as nonprofit organizations, there are a number of legal exemptions to the gambling laws that allow for the charities to offer games of chance. While these rules vary significantly from state to state,

182 Special Considerations these laws enable charities to host fundraiser events that can generate significant funds for the charity. These games can include casino nights, auctions, raffles, and similar events. The nonprofit often receives donated prizes as well as funds from the participants so the overall benefit can quickly grow. To comply with these laws, the charity must usually obtain a license from the state. Occasionally, the municipality will also have a licensure requirement as well. Most states do allow a limited opportunity for charities to conduct these games of chance as fundraisers, but the rules vary considerably from jurisdiction to jurisdiction. In two states, for example, all use of playing cards is prohibited. In many other states, the size of the winnings must be limited. And in all states that permit these games to be used, the charity is required to obtain a license in advance of the event. The New York City Games of Chance Licensing Law provides an excellent example. § 20-434 Legislative intent. The council hereby declares that the raising of funds for the promotion of bona fide charitable, educational, scientific, health, religious, and patriotic causes and undertakings, where the beneficiaries are undetermined, is in the public interest. It hereby finds that, as conducted prior to the enactment of this subchapter, games of chance were the subject of exploitation by professional gamblers, promoters and commercial interests. It is hereby declared to be the policy of the council that all phases of supervision, licensing and regulation of games of chance and the conduct of games of chance should be closely controlled and that the local laws and regulations pertaining thereto should be strictly construed and rigidly enforced; that the conduct of the games and all attendant activities should be so regulated and adequate controls so instituted as to discourage commercialization in all its forms, including the rental of commercial premises for games of chance, and to ensure a maximum availability of the net proceeds of games of chance exclusively for application to the worthy causes and undertakings specified herein ….80

80 N.Y.C., N.Y. ADMIN. CODE §§ 20-433 to -451 (2016).

14. Gambling, Raffles, Door Prizes, and Competitions 183

By identifying the risk of illegal gambling and exploitation by commercial vendors as reasons to limit these games and events, the city can closely monitor all aspects of these fundraisers. For Con organizers, understanding these laws is very important because there may be a significant difference in how a city enforces these laws against a well- established church or hospital and how these rules are enforced against a start-up Con. Looking at the practice among older nonprofits may not provide the guidance needed to avoid liability. In most states, for example, bingo is governed under a separate set of laws. By law, bingo is not limited to churches. Potentially, if a Con wishes to create a Superhero Bingo Competition, then it needs to follow local bingo laws – and the IRS bingo income disclosure rules – rather than general gaming ordinances. The National Council of Nonprofits lists some other specialized rules:  Income from games of chance may be considered unrelated business income and therefore the charitable nonprofit may owe tax on the income, and winners may owe taxes that the nonprofit is required to withhold.  In some states, proceeds from games of chance have to be kept in a special bank account (e.g., Pennsylvania).  Games of chance might trigger the requirement to conduct criminal background checks on the CEO or other staff of the nonprofit that is hosting the games.  State or federal law may require the nonprofit to maintain special records and file certain reports about the games/winners.  The nonprofit may be subject to Gaming Excise taxes.  A nonprofit hosting an event such as a charity casino night, where alcohol is served, may need a separate alcohol license.  How the nonprofit uses net proceeds from games of chance may be limited in some way. For example, in North Carolina the law states: “None of the net proceeds of the raffle may be used to pay any person to conduct

184 Special Considerations

the raffle, or to rent a building where the tickets are received or sold or the drawing is conducted.”81 Despite the difficulty of knowing how these rules work across the country, there is help. Most local nonprofits can find helpful guidance within their town hall, and there are often organizations that assist charities conduct charitable gaming events in compliance with the local regulations. The key is to understand the very specific rules that apply to each city. As a Con grows, for example, it may move from a suburb to a larger convention center in the downtown area. This move could also mean a change in city and that will trigger a different set of rules regarding charitable activities involving gambling. If a Con has the opportunity to plan its event in New York versus New Jersey, Minneapolis versus St. Paul, Miami versus Miami Beach, or Kansas City, Kansas versus Kansas City, Missouri, then the organizers may wish to consider the benefits of the gaming regulations in addition to the issues of convenience, parking, and taxes.

81 Games of Chance, Raffles, and Charity Auctions, NATIONAL COUNCIL OF NONPROFITS, https://www.councilofnonprofits.org/tools-resources/games-of-chance- raffles-and-charity-auctions (last visited Feb. 1, 2017).

15. Cons as Social Action Within the wide variety of Cons, there has long been a group of events that are primarily driven by a social or political purpose. This intersection of political organization, social movement, and art festival can find its modern roots in the history of the San Francisco Mime Troupe. Other events focus on the educational and cultural activities that take place within the event itself. Cons have the potential to teach, train, educate, and motivate in addition to the ability to fundraise for worthy causes. This chapter provides a brief look into the power of Cons to affect social change or provide the mechanism for cultural movements.

A. The Benefit Concert

In l965, the San Francisco Mime Troupe produced a controversial show entitled “A Minstrel Show, or Civil Rights in a Cracker Barrel,” using the intentionally racist blackface format “to attack racism in both its redneck and liberal varieties. The Student Non-Violent Coordinating Committee (SNCC) sponsored performances around the country.”82 As the performing company began to tour, they were met with arrests, show closures, and other forms of censorship. To pay for the costs of bail and litigation, the young business manager of the troupe, Bill Graham, staged his first rock benefit concert at the Fillmore Auditorium. The fundraising event launched Bill Graham’s career as one of rock’s leading producers. As part of his philanthropic efforts, Graham went on to stage many additional musical events as fundraisers for free community medical services and other causes. In 1985, he produced the U.S. leg of Live Aid at JFK Stadium in Philadelphia, which was then the largest global fundraising concert in history. Events such as Live Aid can raise public awareness and needed funds for particular causes. Spurred on by Bob Dylan’s comments at Live Aid suggesting some of the money should be made available to American farmers losing their farms to mortgage debt, Willie Nelson and other musicians organized Farm Aid later that year to provide relief and public

82 History, THE S.F. MIME TROUPE, http://www.sfmt.org/company/history.php (last visited Feb. 1, 2017).

185 186 Special Considerations awareness for this public concern. Farm Aid has continued with over thirty concerts since it first began in 1985. Wikipedia currently lists pages for 86 different benefit concerts.83 These benefit concerts typically bring highly respected musicians together to support a common social cause, drawing media interest and providing a platform to showcase the need to support the cause. Disaster relief following Hurricane Katrina and Hurricane Sandy, AIDS benefits, and the Concert for Bangladesh are just a few of the many examples of these events. To be successful, these concerts need to attract high-quality talent. They typically take place in the largest public venues and often have live broadcasts associated with the event. If arrangements can be made to produce a live-concert album to accompany the event, the financial success can be that much greater. Realistically, however, beyond the attention these events bring to particular social needs, the concerts do little to forward social agendas. The audience is gathered for the music far more than the political agenda. Of course, all the funds raised for the charity have a very direct benefit to help fund the cause. Moreover, there is also a short-term improvement in awareness of the topic. Nonetheless, the broader educational and social impact is less demonstrable. This is why the events are most effective as a form of financial relief.

B. Educating Through the Con Format – Teach-Ins

In addition to Cons serving to raise funds and awareness, Cons can be organized around social action principles. Weekend events that help educate, train, and motivate as well as entertain can be used to encourage the political base of a movement and build infrastructure and leadership for that thought community. Organizing such a Con is not significantly different than organizing a traditional comic book convention or book fair. Panels, entertainment, and events will be booked. Sessions will include opportunities for training and

83 Category: Benefit Concerts, WIKIPEDIA, https://en.wikipedia.org/wiki/Category:Benefit_concerts (last modified on Jan. 16, 2016, 8:00 PM).

15. Cons as Social Action 187 education in addition to mere entertainment. These events can bring very different groups of people together to address common issues such as homelessness, inequality, or education reform. Alternatively, these events can be designed to bring committed activists together or to create interactions between factions that would not otherwise interact. One particular form of programing event has been successful in combining the episodic organizational structure of the Con with a more robust educational agenda. Known as the “teach-in,” these events typically have a very specific political or educational agenda, but in many other ways, they have the same attributes as Cons. The first teach-in was held at the University of Michigan, Ann Arbor, on March 24, 1965, as part of an anti-war protest by faculty and students. History.com reports that 200 faculty participated in the first event, cancelling regular classes and operating rallies and speeches for twelve hours.84 The term teach-in is sometimes used to contrast with a sit-in. A sit-in protest is defined by an unauthorized occupation of a facility by protesters. In contrast, teach-in events are generally planned and use their facilities with permission. Still, many social action groups use the term to reflect events like that at the University of Michigan, which are less about teaching than about social protest. A true teach-in should be distinguished from an unplanned sit-in, emphasizing the engagement and interaction between the instructors and the students. Like all of modern education, the event should strive to present information in an active learning environment where students explore and discover information rather than listen passively to lectures and receive preconceived wisdom. In almost all other respects, the structural steps of a teach-in directly follow those of every Con. The organizers will have the same needs for facilities, signage, sound systems, food, marketing, and business structure as are required for similar music festivals and science fiction conventions

84 See 1965: First Teach-in Conducted, HISTORY.COM: THIS DAY IN HISTORY, http://www.history.com/this-day-in-history/first-teach-in-conducted (last visited Feb. 1, 2017).

188 Special Considerations of the same size. The logistics and operational considerations will also be largely the same as well. Most teach-in events focus very specifically on discrete topics and end with a call-to-action for their participants. For example, a teach-in focusing on environmental protection will typically conclude with a clean-up project of a neighboring beach, park, or public space. A teach-in to reduce sexual assault on campus may often include both direct education for the participants and petition drives to update university policies. Utilizing a direct call-to-action gives the educational component an effective immediacy that supports the investment of time and energy surrounding the event itself, and the call to action provides a powerful incentive for participants to remain engaged.

C. Fandom as Political Action Group

Originally, scholars of fan culture tended to discount the similarities between fan communities and political organizations. While some scholars dismissed the relationship entirely, others see at least an analogy between the political movement and the cultural movement. Increasingly, scholars are now beginning to recognize that fan communities hold substantial cultural capital that can be utilized for certain types of events and activities.85 As a result, more recent studies recognize the ability of these communities to organize, build consensus, and coordinate on social action parameters. Professor Ashley Hinck has highlighted this emerging social role through her studies on the Harry Potter Alliance. As noted elsewhere, the Harry Potter fandom is likely the largest and most active in world history. It emerged in parallel with social media as a dominant form of cultural engagement, so the immense popularity of the works has combined with the greatest set of many-to-many communications to create a uniquely

85 See LIESBET VAN ZOONEN, ENTERTAINING THE CITIZEN: WHEN POLITICS AND POPULAR CULTURE CONVERGE, 60–61 (2005); Ashley Hinck, Theorizing a Public Engagement Keystone: Seeing Fandom’s Integral Connection to Civic Engagement Through the Case of the Harry Potter Alliance, TRANSFORMATIVE WORKS AND CULTURES (2012), http://journal.transformativeworks.org/index.php/twc/article/view/311 [doi:10.3983/twc.2012.0311].

15. Cons as Social Action 189 powerful network. There is little surprise, then, that the Harry Potter fandom would include a set of the most active participants. Hinck documents the effectiveness of the Harry Potter Alliance in organizing to fundraise for Darfur and to protest the genocide that was taking place in the region. The activities of the Harry Potter Alliance arguably go one step beyond the fundraising and awareness raising goals of Live Aid and similar music festivals. The Harry Potter Alliance incorporated the fan fiction styled integration of real world concerns as mediated by the literary world of Harry Potter. For example, there were concrete efforts to incorporate the societal issues of genocide as a “Horcrux” or death spell as described within the novels. These efforts to contextualize real-world issues as directly parallel to the politics of the novel then imbues the participants with other moral and political choices within fandom. A more general example is far less specific to fandom, but perhaps has equal resonance. Star Trek’s “Prime Directive” posits that it is a violation of intergalactic law for the Starfleet personnel to interfere with the development of alien civilizations. The intentional or negligent violations of the Prime Directive are the source of many plot points throughout the various permutations of the series. The ethics of the Prime Directive have been acculturated into much of the American ethos of Twenty-First Century politics and stands at political odds with the Manifest Destiny ethic of the European, imperialistic march towards conquest. This change in ideology may be reflected by the popularity of the Star Trek universe, but it is also reasonable to speculate that it was the pervasive adoption of this ethical stance within Star Trek that informed the politics of the generation raised on the popular entertainment. This example may bridge the perceived difference between the Harry Potter Alliance and yet another example, that of the Ayn Rand Society. Although the formal Ayn Rand Society is a professional organization rather than a fan culture society, it is still a group of individuals who come together to celebrate the writings of a particular author and her fictional world. The Ayn Rand Society embraces an economic, philosophical, and political agenda that is clearly focused, emphasizing the need for limited government and celebrating the power of the individual.

190 Special Considerations

The difference between the various groups is the direct, political agenda of the source material. Harry Potter, the Lord of the Rings, and similar works are morality plays of good versus evil, but they are not politically organized into more specific themes. So long as fandom is defined to focus on apolitical texts, the fans will have low levels of political affiliation. To the extent the nature of these communities includes political communities that also come together in the same way, the power of these groups will be much more obvious. Assumptions can be made that folk music tends to be followed by social democrats and country music by social conservatives, but these are broad generalities and may not be particularly accurate or relevant. Based on the political systems of the source material, one could assume that Star Trek’s reliance on an entirely democratic system would lead its fans to be more open to big government. The Star Wars universe represents a political system that incorporates both elements of an imperial dictatorship with rather ineffective democratic elements, so one might presume that Star Wars fans tend to distrust governmental agencies. Such distinctions would likely overstate the importance of these canonical distinctions and misunderstand the relationship between fans and their source material. Although such a theory might be intriguing, there is little empirical evidence to support a causal link Rather than attempting to assess the social or political potential of a general fan base, the question for Con organizers is whether they are focused in attracting a fandom predicated on some common political beliefs. There is no reason to believe that an event with an explicit political agenda would not be successful in attracting an audience of individuals dedicated to that agenda. The difference is that the agenda must be organic to the source material and explicit in the organizing of the Con.

D. Cons Addressing the Demands of the Fandom or Cultural Community

As with almost every aspect of American life, the proliferation of Cons has created a competitive market in which one Con is competing with another Con for attendees, vendors, and cultural legitimacy. The demand for cultural legitimacy and community recognition may not seem as grandiose as saving rainforests, reducing global climate change, or fixing the U.S. educational system, but these can be heartfelt issues to the participants.

15. Cons as Social Action 191

At its simplest, the competition among Cons may turn on the subject matter that gets top billing at an event. If a community has a long tradition of holding an annual comic book convention, then a convention focusing on video or board games may be seen as part of an entirely discrete market, or it may be understood as an effort to redefine the audience through the competition. Con organizers need to understand the messages they are sending, whether intended or not. Other events are created specifically to send a public message. A Gay Pride festival has a very specific message of inclusion, pride, and community building. Such events focus on public awareness as well as their role within the community of participants and vendors. As such, the event organizers must plan carefully to address the role of the media in establishing the event’s messaging to be sure the intended message is carried to the general public. From time to time, otherwise apolitical events can take on a strongly divided tone. For example, in 2002, a book fair organized by the University of Guadalajara was allegedly taken over by pro-Cuban, Castro supporters. The Castro supporters politicized the programming and supplemented the readings and panels with political speeches. The politicized programming led to altercations among attendees. These situations can arise where a strongly organized group of activists seize leadership from a volunteer or professional staff unaware or unprepared for the politicization of their event. Conversely, organizers may wish to inject explicitly political dynamics into their programming, but if this is the goal, then the Con organizers must communicate this clearly with their staff, volunteers, vendors, and the public. Such events can be very effective, but they should not be managed in an underhanded or disingenuous manner. To do this will destroy working relationships and may potentially give rise to claims of contractual fraud. Of course, events also evolve over time. There may be an event or fair that has more and more programming and vendor interest in one particular area over all the others. At some point, the event reaches a tipping point, and “suddenly” the event is about that particular interest and the others feel excluded. Such a tension can occur between comics and gaming, between country and folk music, between community pride and gay pride,

192 Special Considerations or any other number of programs. For management, the key is to recognize these shifting priorities and make any decisions about those priorities explicit throughout the programming process. It may be appropriate to split the program into two events. It may also be reasonable to rebalance the activities so both are better represented. As a third option, it may be necessary to rebrand and message the event to recognize publicly the shift that has taken place in the programming and participation. All three options work, provided the Con leadership engages their constituency and makes these decisions in a thoughtful and timely manner.

16. When Things Go Wrong All events run into difficulties, and Cons without a proven track record are going to be far less predictable than those that have years of planning and experience. This chapter identifies the aspects of the Con most likely to pose difficulty and help create a process for a “Plan B” that can be implemented to minimize the situation and help the show to go on.

A. Attendance Planning

Predicting attendance at a Con is essential for budgeting, logistics, staffing, and all other planning. If the Con organizers plan an event with the capacity for 10,000 attendees, the Con will be financially ruined by a paid attendance of only 1,000 and the facility will likely be overrun if the crowd tops 20,000 patrons. As a consequence, accurate prediction is essential for a successful event. If the Con has an established history, then prior events or similar activities often serve as a benchmark for the upcoming program. Because of this, it is important to keep accurate records of the number of people who purchased tickets or RSVP’d for an event as well as the actual attendance. Since the RSVP count and the actual attendance frequently vary a great deal, retaining both numbers becomes very helpful for future predictions. If the Con is new or if there is not a context for estimating the crowd, the challenge becomes much greater. The San Diego Special Event Guidelines provide this advice on the importance of predicting attendance but not on any strategies to do so: Providing the estimated attendance or number of participants for your event helps in the review of your event plans with emphasis on public safety, venue occupancy, staffing, and impact to the surrounding neighborhood. … The estimated number of participants should be based on the total number of people you anticipate will participate in the event or provide support services to the event. Examples include the total number of people walking or running in an athletic event, marching in a parade,

193 194 Special Considerations

providing vendor support at a festival, or serving guests at a gala.86 As noted, the estimate of people attending should include the attendees, the staff, and all volunteers. If there are limits on parking and other facilities, neglecting to include the volunteers can dramatically impact the anticipated number count, changing the availability of resources. Open events are much harder to predict than ticketed events. There have been many news reports of public Easter Egg Hunts that are overrun by adults fighting for the eggs, triggered by too many attendees and an insufficient number of eggs. Some communities have started to require tickets, while others have banned adults from assisting in the hunts except in designated toddler sections. Requiring tickets, whether sold or provided free, enables the Con organizers to anticipate the size of the crowd. Requiring tickets also has a psychological benefit of making the attendee commit in advance to coming to the Con. Introducing this planning step in the public’s behavior may also help in promoting attendance and the value of the experience. While there may be walk-ins and at-the-door sales, the ticket presale will provide a strong predictor of the overall expectations. In addition, requiring tickets enables the Con organizers to cut off ticket sales in the event the crowd grows too large. As discussed below, it is much more manageable to turn people away at the ticket line than to overcrowd stages or exceed fire limits in closed rooms. Ticket sales provide an important tool to manage crowd flow and help in planning.

B. Budget Concerns

Closely tied to the issue of attendance planning is the management of the budget. The basics of budget management are discussed in Chapter 3. Scaling the budget to the size of the audience allows Cons of all sizes to be successful. Financial planning takes on a very important second function when the initial plans start to go awry.

86 OSE 1.10.1, SPECIAL EVENT GUIDELINES: EVENT DATE, LOCATION, ATTENDANCE AND ADMISSION, CITY OF SAN DIEGO, https://www.sandiego.gov/sites/default/files/legacy/specialevents/pdf/EventDateLo cationAttendanceAdmission.pdf.

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Budgets are only useful if they are monitored closely. As the planning proceeds, the milestones of the planning should be matched to the expectations in the budget. Vendors should have deadlines for when their contracts and payments are delivered. If fewer vendors are participating, then adjustments to the facility and adjustments to the spending accounts need to be made. If ticket sales are lagging, then expenses need to be cut. Conversely, if the ticket sales are soaring, then additional space and programming content may need to be added. The Con organizers can use the updates to adjust the plans and make the event continue to be successful. Sometimes, these small adjustments are not enough. In the event that the ticket sales fail to emerge, the Con organizers should reach out to their suppliers as early as possible to reduce orders and to cancel unneeded services. Regardless of the terms in the contracts between the Con and the facility or between the Con and the other vendors, the terms are much more likely to be renegotiable before the event rather than after it. For example, if the Con planned an event for 20,000 attendees and the presale of the event has only sold 500 tickets, then it is unlikely that the at- the-door ticket sales will jump to the levels needed. The venue facility may be able to work with the Con to reduce the size of the rented floorplan and save some money. Even if the money cannot be saved on the rent, fewer staff members will be needed for a smaller event. Similarly, redesigning the floorplan so the event does not appear empty and cavernous may permit the Con organizers to learn from the event and return the following year. Otherwise, 500 attendees wandering a space designed for 20,000 will signal a disastrous event. By explaining the difficult financial situation, many companies will work with the Con to adjust the shipment of goods and services in order to reduce the financial harm that could otherwise take place. No one wants to push a company into bankruptcy, so many companies will voluntarily renegotiate terms even if there are provisions in the contracts that restrict cancellations and similar adjustments. Instead, if the Con organizers wait until after the event is over to try returning goods, it will be more costly and more difficult to recover from their financial hardship.

196 Special Considerations

The same strategies apply if the problem is success rather than failure. If a Con is planned with a budget of $10,000 and ticket presales suggest the expenses could grow to twice that size, then a great deal of additional improvisation and planning is required. Hopefully, the ticket sales from the presale will provide the funds needed to expand the scope of the Con. If not, this is the moment that short-term loans and the use of personal credit cards may be necessary to bring in the resources needed to work with the crowd. In such circumstances, the Con organizers should work with the venue space to see if it has portions of the venue that were not part of the original rental. There may also be nearby facilities that can work as overflow staging areas for aspects of the event. If there are no additional spaces available, then the Con organizers should look carefully at the schedule and timing of the events, spacing out the most popular programs and extending the hours by opening earlier and closing later. By implementing a longer schedule, the crowd will stretch out throughout the day, so that the crush will be abated to some extent. Of course, at some point the Con organizers will need to stop the sale of tickets and declare the event sold out. This is a great moment for the Con, so it is more typically considered an event success rather than a planning failure. Money always has a time value. For event planning, this means that it is much more expensive to get supplies when there is little time to do so. As a result, the costs of goods, materials, volunteers, T-shirts, and all aspects of the event will be much cheaper if those resources are ordered early. All last-minute items come at an additional cost. The budget should therefore reflect this premium for last-minute items as well.

C. From Dead Batteries to Acts of God

As the event nears, there will be a myriad of problems that can emerge and some of them will be unsolvable. Every Con organizer should have a car filled with duct tape, permanent markers, wire hangers, extension cords (both polarized and three-prong), batteries, flashlights, water, and first-aid kits. Even if nothing is ever removed from the car, the list serves as a constant reminder that the organizing team must be ready for all kinds of emergencies. Planning for the unpredictable is an essential part of event planning. This begins with an operational chain of command. The person in charge

16. When Things Go Wrong 197 on the days of the event may not be the CEO or executive director. Instead, there is likely an event manager (or production manager) who knows the logistics of the space, the vendors, and the programming at a level of detail that is much more helpful than that of the chief executive. In most organizations, the executive leadership must defer to the event manager for the day-of operational authority. If the executive leadership wants to retain control, it should be for only the most significant of issues such as evacuations and cancellations. The chain of command must be clear, and those who are technically senior to the event manager must understand their role is to support and implement the decisions of the event manager when on the ground. The clear chain of command only works if it is supported by an effective means of communications. Wi-Fi and mobile service is often spotty in convention centers, so commercial walkie-talkies are usually a safer alternative. The use of earpieces will allow the team to hear each other, especially when ringers are turned off at critical moments during the operations. If the organizational team is relying on smartphones, then working mobile numbers, communications apps, or other technologies must be tested and everyone needs to have everyone else’s correct contact information. Regardless of the technology, remember that venues can become extremely loud, so the communications strategy should not rely merely on calling each other. Using a central command center helps coordinate communications. Minor issues such as equipment-related emergencies should be addressed by storing batteries for wireless microphones and other equipment there. Speaker lists and back-up panelist contact information should also be available to manage scheduling snafus. Large issues such as weather emergencies should be coordinated from the command center so that a few minutes of reflection are used to make the most significant of go/no go decisions. One member of the command structure should be responsible for public communication, which includes a plan to communicate with the attendees, vendors, volunteers, and patrons, as well as a plan to communicate with the press and general public. Both the internal and external plan should be developed in advance and used in the case of large- scale situations.

198 Special Considerations

Managing the communications also includes management of the independent contractors. It is important to work closely with any professional security company, but the relationship between that company and the event manager must be very clear and set out in advance. Other service companies must also be brought into the communications plan and placed under the clear authority of the event manager. Those professionals may have risk assessments to share, but they are not in a position to make independent decisions on behalf of the Con organizers.

D. Crowd Management and Crowd Control

As an event grows in size and scope, crowd control becomes one of the greatest challenges to the Con organizers and to the public. If the Con is heavily oversold, then every line takes too long, seats at interesting programs become too difficult to obtain, and the vendors run out of stock. These concerns, however, are much smaller than the public safety concerns that arise when crowds become too large or otherwise get out of hand. Anticipating and solving these concerns is part of crowd management. It involves training, planning, and strategizing to make the experience optimal for the attendees and safe for everyone. “Crowd management and crowd control are two distinct but interrelated concepts. The former includes the facilitation, employment, and movement of crowds, while the latter comprises steps taken once a crowd (or sections of it) has begun to behave in a disorderly or dangerous manner.”87 Crowd control is needed when the orderly expectations of the crowd begin to break down. Most importantly, crowd control is not about planning for the unexpected, it is planning for the unwanted. Sometimes things go wrong:  Patrons collapse from drug use, dehydration, or illness  Fights break out among fans  Fans carry and brandish illegal weapons  Fans get drunk

87 Je’Anna Lanza Abbott & Morgan W. Geddie, Event and Venue Management: Minimizing Liability Through Effective Crowd Management Techniques, 6 EVENT MGMT., 259 (2001), http://www.popcenter.org/problems/spectator_violence/PDFs/Abbott.pdf.

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 Crowds rush exits or stairs, fall, and begin trampling patrons  Sexual assaults take place in low-trafficked locations within a venue  Unauthorized filming, recording, and photography takes place  Equipment breaks and collapses  Bomb threats are called in  Lightning, blizzards, earthquakes, or other weather events cause panic  Doors become locked or blocked illegally  Pyrotechnics go awry and fires ignite Each of these hazards is both unwanted and predictable. Each has happened somewhere. Good management is important to minimize these potential risks. Effective control is essential to intervene to minimize the panic and disruption when these events occur. It is never enough to check a venue once. All staff must be trained to recognize warning signs and to intervene at the earliest practical time. For example, boxes and equipment are stacked in front of emergency exit doors all too frequently. Each staff member should be trained to be sensitive to this risk and alert the facilities and security team when someone forgets and leaves an exit blocked. Crowd management is highly preferable to crowd control. The event manger and staff must coordinate to limit attendance at potentially overly popular events. Use of lines, active line management, and signage will help keep crowds responsible and under control. Crowd management must be handled in a professional and diplomatic manner so that the efforts to keep the crowd orderly do not become the triggers for the crowd to get out of control. Fortunately, most people attend events to have a good time, so in most cases the crowd is supportive of the organizers. Nonetheless, because any of the unfortunate incidents could occur, there must be a control center with professional staff trained and prepared to address the emergency. The staff and volunteer shirts help patrons

200 Special Considerations identify those in charge, and anyone acting to control the crowd should identify themselves in that role. Many Cons take place in dimly lit venues. Turning on room lights or house lights can improve a situation and can help tame a restive crowd. In contrast, pulling the plug on a performer will tend to further rile an excited crowd. Similarly, turning off the lights is never a good idea. The situation should be contained to the extent possible. If there is a collapse, immediately call paramedics and then announce that the call for paramedics has been made while inviting any doctors or nurses to come render aid. Tell the crowd that the event will resume in a few minutes and assure the crowd regarding the situation. Gossip and rumor can lead to panic, so calm announcements are helpful and can be productive. If the situation involves the need for any potential force, call the police and have them respond to the situation. An untrained attempt to diffuse a volatile situation can escalate the situation, making it more dangerous for the patrons and the police. The need to actually close the event and evacuate the facility is fortunately a rare occurrence. Once the decision has been made, however, the organizers must commit to their plan. They should alert parking and external facilities personnel as well because the crush of people exiting and the flight to their vehicles can trigger a subsequent panic or disruptive crowd elsewhere. Once the crowd is moving en masse out of the facility, it is too dangerous to reverse course and reopen. That reopening has the potential to create two contrasting and confused crowds moving against each other like waves crashing upon a shore. In addition to the article by Je’Anna Lanza Abbott and Morgan W. Geddie, quoted earlier, another excellent resource is published by the United Kingdom’s Health and Safety Executive. This free, online book, entitled “Managing Crowds Safely, A Guide for Organisers at Events and Venues”88 has a detailed list of management techniques to assist with both the crowd management and the crowd control aspects of facilitating a safe event.

88 HEALTH AND SAFETY EXECUTIVE, HSG154, MANAGING CROWDS SAFELY: A GUIDE FOR ORGANISERS AT EVENTS AND VENUES (2d ed. 2000), http://www.hse.gov.uk/pUbns/priced/hsg154.pdf.

16. When Things Go Wrong 201

E. Free Speech, Hecklers, and Censorship

The famous Chinese curse, “may you live in interesting times,” highlights some of the challenges facing Con organizers. Great programming sometimes attracts unwanted attention. The attention can come from hecklers in the audience, protesters outside the venue, or unhappy government officials seeking to shut down the program on either a legitimate or pretextual basis. Free speech and security planning begin outside the venue. If there are likely to be aggressive protests, then a comprehensive plan should be followed. Con organizers should work with the venue, local law enforcement, the public safety company hired by the Con, and legal counsel to prepare such a plan. “Local laws and ordinances, and even recent Supreme Court rulings on free speech issues should be reviewed.”89 The protesters have a First Amendment right to speak in the public space outside the venue, but they do not have the right to disrupt the event, block traffic, or break the law. Law enforcement must work with event organizers to ensure that neither party triggers an escalation of the situation from a protest to a physical altercation between police and protesters. Inside the venue, there is ample opportunity for hecklers to try and disrupt speakers, performers, and similar events. Most hecklers want to have their say. Many hecklers are simply opportunistic jerks and any escalation of the situation is really triggered by a presenter who cannot manage the audience feedback. Columns by Olivia Mitchell and Denise Graveline provide very similar advice from two different perspectives on how to manage hecklers. Mitchell lays out the initial steps for the presenter to control the situation: 1. Manage your own emotional state – This is the first prerequisite to be able to handle a heckler with dignity. If you believe that a person who interrupts you is rude … that’s going

89 Richard Morman, What to Expect When Presidential Candidates Come to Campus, CAMPUS SAFETY MAG. (Aug. 28, 2012), http://www.campussafetymagazine.com/article/what-to-expect-when-presidential- candidates-come-to-campus/P2 (authored by the deputy chief of police at the Ohio State University).

202 Special Considerations

to come through in your response and make it difficult for you to handle a heckler calmly. … It takes a genuine deep-seated belief that different points of view can be valid to overcome your natural defensive/aggressive reaction to the heckler. 2. Let the heckler have their say – The first time somebody interrupts let them go for a bit. … If you interrupt them the first time they try and speak, they’ll be like a jack-in-the-box for the rest of your session. The best way to prevent this is to let them go on – just a little bit too long. They’re less likely to interrupt again. 3. Use reflective listening before you respond – Reflect back to the heckler what they said. This means expressing in your own words your understanding of what they’ve said. … Responding thoroughly and fairly to the heckler the first time means it’s more likely to be the only time they interrupt. 4. Respond – Respond if it’s appropriate to do so. Address your response to the whole audience, not just the heckler … then smoothly segue back into your prepared presentation.90 Graveline illustrated how the steps described by Mitchell worked in practice for two different first ladies. Her article related how Lady Bird Johnson handled hecklers regarding the passage of the Civil Rights Act: First Lady Lady Bird Johnson, faced down hecklers on a 1964 whistle-stop tour in her husband’s campaign. At every stop, people angered by the president's signing of the civil rights law called her and her daughters “nigger lovers” and more. Johnson would let them say their piece, then counter with “This is a country of many viewpoints. I respect your right to express your own. Now is my turn to express mine.” It was a dignified, non- anxious response that let her get back to her topic.91

90 Olivia Mitchell, How to Handle a Heckler, SPEAKINGABOUTPRESENTING.COM (February 26, 2010), http://www.speakingaboutpresenting.com/audience/handle-a- heckler/.

91 Denise Graveline, 5 Tips from Michelle Obama on Handling Hecklers, RAGAN.COM (June 7, 2013), http://www.ragan.com/Main/Articles/5_tips_from_Michelle_Obama_on_handling_h ecklers_46810.aspx.

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Both articles suggest the speaker can rely on the audience to stop the unruly heckler. First lady Michelle Obama was heckled by a protester … and did what many speakers dream of doing by confronting the heckler directly. She approached the heckler and said: You can keep on speaking, but if you take the mic, I’m leaving. She left the choice up to the audience, which began chanting to get her to stay. The heckler was ushered out, and the speech was finished to loud applause.92 This was the advice provided in both columns: 5. Fall back on the audience. The heckler is one against many, so appeal to the crowd as Obama did: "You all decide. You have one choice." Trust me, if you're horrified at the heckler's behavior, others in your audience (particularly those expensive ticket holders) are, too.93 As was noted in the incident with Michelle Obama, it was not enough that the crowd rallied to First Lady Obama’s support. This was accompanied by staff ushering out the heckler. Some hecklers will shut up and give the stage back to the speaker. Those who attend only to protest need to be removed once they have made their point. Returning to the first piece of advice, letting the protestor have a few seconds to state their position will make it much easier to get the person to leave. The staff escort can remind the heckler that “the whole crowd heard what you had to say,” or other comments to diffuse the situation. If the heckling begins to turn into a broader, physical confrontation, however, then the police will need to be involved and the speaker will need to work with security to let the police manage the situation. In most instances, the police will be there to support the free speech rights of the Con and its speakers as well as to support the free speech rights of lawful protesters. They will be helpful to manage the aggressive protestors and the disruptive heckler who tries to shut down the presentation. This is usually the situation.

92 Id. 93 Id.

204 Special Considerations

But not always. As was noted in Chapter 15, Bill Graham’s musical producing career was launched because the San Francisco Mime Troupe was harassed and arrested for their social protest theatrical programs. He produced the initial Fillmore Theatre concerts to raise bail money. Lenny Bruce was famously arrested for his stand-up routines and 2 Live Crew was arrested for its song lyrics. The police and local elected officials will not always be fans of the Con’s programming, its invited guests, or its content. Nonetheless, the First Amendment says, “the show must go on!” Con organizers must work to achieve this goal with a minimum of disruption and the avoidance of all violence. The Con organizers must fully understand the local ordinances and the various non-speech laws that regulate the event. The Con must not provide the city any pretext to withdraw any permits or the police any excuses to make arrests by understanding the various fire, health, safety, and other regulations so that the event is not closed on a technicality. The Con organizers should also be working with local attorneys in advance. Having lawyers waiting to identify police and city misconduct will often create an incentive for the government to back down. Experienced attorneys will have strategies to assure the Con is operating within the law and to hold the government accountable when it does not. First Amendment attorneys may also have political influence, enabling them to reach out to more helpful government officials. By finding the right people within the government, the attorney may be able to reduce the tension and get the city or the police to rethink their critical stance. Nonetheless, the Con organizers must treat antagonistic law enforcement as another form of heckler by letting them have their say, controlling any emotional response, responding to the whole crowd, and diffusing the situation rather than escalating the confrontation. In such a confrontation, the winner will be the party that acted responsibly and then gets public support in the press for weeks or months to come. If either party becomes provoked and lashes out physically, then that will be the party to lose all public respect and support.

17. Cons and Transformation of Media Distribution Social media has become a dominant force in the landscape of modern communication, fundamentally disrupting the way in which communications takes place.94 The communications model changed with the advent of social media. In the latter half of the past century, media relied on an economic model under which only a few speakers had access to both content and the means of content distribution. To contrast from commercial media, social media analysis tends to focus on user generated content. The user generated content can range from entire fan-fiction novels to a single click of a “like” or “dislike” button. Social media includes each unique piece of content as well as the aggregate pattern of the content comment on commercial media. Any person with access to a networked computer, tablet, or smartphone has the ability to communicate with potentially billions of people. For example, the social video distribution site YouTube reports that 1 billion unique visitors view six billion hours of video monthly. When coupled with almost ubiquitous access to technology, the many-to-many model of media distribution flips the earlier assumptions about media dominance on their head. Scarcity is eliminated from broadcast. Newspapers and print magazines are struggling to maintain audience, relevance, and market-share. Print advertising revenue has been disintermediated by online search ads, which reduces the funding for newspapers but does not render them scarce in any economic sense.

A. Marketing and Promotion Strategies

The rise of social media has relegated mass media to a secondary role throughout society. Today, the public consumes its news, commentary, promotions, and advertising mediated through social media. Local newspapers are nearly a thing of the past and even national newspapers have an increasingly small influence on the public. Television continues to provide a broader impact for media events and campaigns reaching tens of

94 This chapter is largely adapted from Jon M. Garon, SOCIAL MEDIA IN THE WORKPLACE, KY. BAR ASS’N ANNUAL CONVENTION (June 18, 2014), http://c.ymcdn.com/sites/kybar.site- ym.com/resource/resmgr/2014_Convention_Images/17_ac2014.pdf. Internal citations and quotations omitted.

205 206 Special Considerations millions of viewers. Even here, however, the television content is just as likely to be viewed on a mobile device as on an actual television. This means that television production continues to be relevant, but increasingly, the role of local broadcast stations is dropping as well. Competing with the national network broadcasters are the social media platforms of Facebook, Google/YouTube, Twitter, Tumblr, and similar media distribution systems. To the extent that these platforms play an editorial role in promoting some content over other content, these platforms directly impact the marketing strategies utilized by the Con. Search Engine Optimization (SEO) has been used by marketing companies for more than the past decade to maximize the potential for user-created advertising and media content to be featured more prominently than its competition. SEO strategies improve the “organic search” of the promoter’s content when a user is looking for information on the general topic. SEO strategies must vary from platform to platform and from year to year as the algorithms used by the various platforms adjust to market conditions. At one time, for example, the quantity of content on a page drove that page’s rankings. Later that changed to the number of links back to that content. At another time, the algorithms began to evaluate the quality of the links back to the content in addition to the quantity of those link-backs. Variations on SEO strategies apply to all content created by the Con and promoted through media channels, whether traditional media or online platforms. The Con organizers are looking to promote the story of the Con to the newspapers, local television stations, and through published online material to followers on various sites, to news aggregators, and in all other media distribution platforms. By understanding the new media market, more time will be spent promoting social media platforms and less on local news stories. If there is a local news story in the paper, then the Con needs to aggressively promote the story using its own social media strategy rather than rely on the story to have a large readership. The Con can create video clips to promote the event. Having a clip aired by a local television station is helpful, but the Con is also in a position to create and distribute its own video content to promote. In addition, the Con can reach its audience directly through newsletters and sign-up systems so that interested attendees can find out information

17. Cons and Transformation of Media Distribution 207 directly from the Con without the need of any third-party intervention. Although the typical attendee requires a multitude of reminders from a variety of sources, the newsletter subscription remains one of the most effective.

B. Production of Advertising

In addition to marketing and promoting the Con, the Con organizers should have a budget for paid advertising. The traditional tools of mail, radio, and newspaper advertising will undoubtedly be supplemented by heavy reliance on online advertising tools. Physical mail and e-mail are together one of the most important tools for reaching vendors. The vendor packet will include the rate sheets for the exhibition stalls, signage, sponsorships, and all other opportunities for the vendors to financially support the Con. These should be mailed out months before the date of the Con so that the vendors can plan their own schedules and budgets effectively. For retail advertising, the size of the budget will help determine the most efficient platform for advertising. Mass media reaches a broader audience at a lower cost per impression, but the advertiser is far less accurate in selecting a target audience. The cost per impression is significantly higher for many online platforms, but the person seeing the advertisement is likely much more interested in attendance. The Con organizers should always remember that its advertising may be directed at the general public, but the messages are also reinforcing its value to its vendors throughout the process. As a result, some advertising is money well spent, even for a Con that is sold out. The advertising reinforces the value of the Con to the public and improves the value proposition for the attendees. While it may not impact their decision to attend, it will reinforce the value they place on being able to do so.

C. Regulation of Advertising

There are important rules about advertising and marketing in the social media environment that Con organizers must follow. Under Section 5 of the Federal Trade Commission Act, the Federal Trade Commission (FTC)

208 Special Considerations is obligated to prevent businesses “from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.”95 Because deceptive commercial speech has little First Amendment protection, government regulations can continue to ban it and to fine those companies that use unfair or deceptive trade practices. For social media, the FTC’s role has been particularly influential, because the FTC has amended advertising and endorsement guidelines specifically to address the potential for unfair trade practices.96 Applying broadly across the Internet, the regulations require “the honest opinions, findings, beliefs, or experience of the endorser.”97 They prohibit false commercial speech, declaring that “an endorsement may not convey any express or implied representation that would be deceptive if made directly by the advertiser.”98 Under the FTC endorsement guidelines, an endorsement means any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser. The party whose opinions, beliefs, findings, or experience the message appears to reflect will be called the endorser and may be an individual, group, or institution.99 When a person blogs, tweets, or otherwise promotes a product, the statement may constitute an endorsement. If the communication is made

95 15 U.S.C. § 45 (a)(2) (2006). 96 FTC Endorsement Guidelines, 74 Fed. Reg. 53,124, 53,125 (Oct. 15, 2009) (to be codified at 16 C.F.R. pt. 255) (Guides Concerning the Use of Endorsements and Testimonials in Advertising). 97 16 C.F.R. § 255.1(a) (2011). 98 Id. at § 255.1(b). 99 Id. at § 255.0.

17. Cons and Transformation of Media Distribution 209 upon receipt of consideration, that consideration must be disclosed. Simply put, this means that if the Con is giving money or something of value such as a free stall to a blogger, then the blogger must disclose that the blog posts are being provided in exchange for the consideration. For Twitter, this may mean hashtags such as #ad or #sponsored. Attendees at the Con can promote on social media as much as they want, but those who are receiving something from the vendors or from the Con itself are obligated to disclose it. The Con is not responsible for the endorsements promoted by the vendors, but it is responsible for any endorsements it arranges. The FTC also requires that the information promoted is the truth. “Advertisers are subject to liability for false or unsubstantiated statements made through endorsements, or for failing to disclose material connections between themselves and their endorsers. Endorsers also may be liable for statements made in the course of their endorsements.”100 If a video game reviewer was giving a title only 2 out of 10 in its rating, but then allowed the game company to use a quote “best game ever” in the advertising, the falsity of the statement could make both the game company and the reviewer liable for false advertising. People who commercially endorse products must like those products and use those products. Another of the false advertising rules applies to astroturfing. Astroturfing is a falsified grass-roots groundswell of support. For example, if a Con was having difficulty obtaining a city permit to hold an event, then the Con might reach out to the public for letters of support and a social media campaign to change the municipality’s position. If thousands of responses were to come from the public or from unpaid volunteers, that would be a legitimate public response. If instead, most of the responses were from paid employees, then the public response would be a false and deceptive practice. Applying these rules, if the Con organizer was to ask employees to pose as members of the general public and make positive statements about the employer’s goods or services, both the employer and the employees would be liable for violating the FTC rules. If this was done on behalf of a third-party advertiser such as a major vendor of the Con,

100 Id. at § 255.1 (citing §255.5).

210 Special Considerations then the advertiser would also be liable for the false advertising even though it never was aware of the misconduct. It is not difficult to comply with the FTC guidelines for social media advertising, and it is very important to do so. In addition to the risk of FTC fines, the practices prohibited are those that harm the public. Adopting any of these techniques would undermine the Con and the public’s trust in the event.

D. Regulation of Con Content Created at the Event

In addition to the direct advertising of the Con, there is often a great deal of content produced during the event itself. The ability of the attendees to tweet, blog, and share images, videos, and writings about the Con is discussed more generally in Chapter 12 on copyright. The Con itself will also be interested in creating this kind of content. Because the material shared by the Con often takes the form of advertising and promotion, it is subject to some special considerations. The content created by the Con falls into two very different categories. There is the news and press information about the event, and then there is the advertising and promotion for the Con. Although these two categories are easy to label, within the new media landscape, a particular piece of information may be hard to categorize. The reason the distinction matters is that the use of a person’s name or identity to sell a product or service requires their permission. Similarly, the use of a trademarked name or logo to sell a product or service typically requires the permission of the trademark owner. No such permission, however, is needed for a news story. Publicity rights is the general term for the property interest a person has in one’s name or identity. Under the laws of most states, an advertiser cannot use a person’s publicity rights to sell a product or service or to advertise a product or service without the permission of the person. To comply with the law, an advertiser needs to obtain the permission of the person depicted or otherwise exploited in any manner. These laws vary somewhat from state to state, but generally there is a distinction between the merchandizing and the use of a person’s identity as part of news or entertainment. Section 47 of the Restatement (Third) of Unfair Competition helps explain the scope of publicity rights:

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The name, likeness, and other indicia of a person’s identity are used “for purposes of trade” … if they are used in advertising the user’s goods or services, or are placed on merchandise marketed by the user, or are used in connection with services rendered by the user. However, use “for purposes of trade” does not ordinarily include the use of a person’s identity in news reporting, commentary, entertainment, works of fiction or nonfiction, or in advertising that is incidental to such uses.101 For example, in one such dispute, a model was professionally photographed wearing a designer jacket. The agreement with the model permitted the advertising agency to use the photograph for one year. Shortly after the agreement had expired, the jacket manufacturer gave a copy of the picture to a magazine for use as an illustration of an article about the clothing. In this case, because the magazine was running an article that was not purchased by the manufacturer, the article was not advertising. The use of the photograph to illustrate the story was not advertising either, so the model was not entitled to any compensation for the use of his image. Had the photograph been used for a paid ad in the magazine, then the model would have a cause of action against the advertising agency and the jacket manufacturer for the use of his image without his permission. The new media of cyberspace does not have the neat distinctions between content and advertising that have been established in traditional media. As a general matter, if content is used by third parties such as newspapers and blog sites without any payment by the Con, then that will be treated as news content. If the Con pays for placement of the content, then that will be treated as advertising. The third case is the most difficult: If the Con has direct control over the placement of the content, it could be treated as either news or advertising, depending on the context. For states that follow the Restatement limit listed above, having a live camera feed from the Con on its website would likely be considered a form of news reporting and entertainment rather than advertising of the Con. The Con is well advised, however, to include signs at the entrance and on the tickets that say that filming, photography, and audio recording will take

101 RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 47 (AM. LAW INST. 1995).

212 Special Considerations place during the Con and each attendee consents to their identity being used for the purposes of promoting the Con. Such language would also enable the Con to use crowd shots for future advertising and promotion. The Con should also be sensitive to the use of copyrights and trademarks owned by third parties in its own advertising and promoting. Crowd shots may capture T-shirts with many copyrighted and trademarked images. The incidental capture of these images in live videos from the event is likely incidental and either copyright fair use or non-commercial trademark use. Using trademarked or copyrighted images in paid advertising requires more planning. Generally, trademark owners do not mind if their marks are used in ads that accurately reflect the products being sold by that vendor. For example, a picture that shows “DC Comics,” “Dark Horse Comics,” or “Marvel Comics” in the background will generally not trigger any trademark dispute with the owners of those marks since the photo is accurate and the company was a vendor at the event. Some advertisers take an additional step and add a disclaimer stating something along these lines: “All product names, logos, and brands are property of their respective owners and used for identification purposes only. Use of these names, logos, and brands does not imply endorsement.” Whether such a statement helps remains unclear, but the disclaimer also serves as a reminder to the Con organizers that any use of another company’s intellectual property should be done cautiously.

Part 3Resources and References

18. Crafting a Legal System in a Fictional Work Although a book on law and business related to the commerce of fiction and media does not necessarily need to answer this question, this book creates an opportunity to address the legal and business environment in which fictional worlds operate. Just as the well-operated Con operates on the level of an interactive game, the fictional worlds underlying the need for many Cons require an accurate legal regime.102 There are some interesting examples including Lois McMaster Bujold’s Miles Vorkosigan series, Harry Harrison’s Stainless Steel Rat, Jim Butcher’s series, The Dresden Files and others.103 Star Trek’s two-part episode, The Menagerie, deftly utilized a military court martial as the bridge to tie the original pilot into the canonical storyline.104 Still, fantasy and science fiction genres do very little to understand the legal or economic systems in which their characters operate. This chapter seeks to provide a simple taxonomy of systems as a method for authors to better explore the potential ramifications of the systems in which their creations must exist.

102 See Robert M. Jarvis and Paul R Joseph (eds), PRIME TIME LAW: FICTIONAL TELEVISION AS LEGAL NARRATIVE (CAROLINA ACADEMIC PRESS, 1998). 103 Eugene Volokh, Law and Fantasy (and Science Fiction), Volokh Conspiracy, http://volokh.com/posts/1179774041.shtml, May 21, 2007 3:00 p.m., (last visited April 23, 2017) (incorporating links and recommendations by Christine Corcos and Stephen Bainbridge). 104 Star Trek has generated the largest body of scholarly work. See Robert H. Chaires and Bradley Chilton, STAR TREK VISIONS OF LAW AND JUSTICE (UNIVERSITY OF NORTH TEXAS PRESS, 2004); Roy Balleste, The Earth Alliance Constitution: International Human Rights Law and Babylon 5, FL. COASTAL L. REV. 33 (2008); Michael P. Scharf & Lawrence D. Roberts, The Interstellar Relations of the Federation: International Law and Star Trek: The Next Generation, 25 U. TOL. L. REV. 577 (1994).; Paul Joseph and Sharon Carton, The Law of the Federation: Images of Law, Lawyers, and the Legal System in "Star Trek: The Next Generation", 24 U. TOL. L. REV. 43 (1992).

213 214 Resources and References

A. Lessons from a Mouse

E.B. White was a brilliant author of both adult and children’s stories, writing in both fiction and nonfiction settings. He used Stuart Little to explore complex themes that he was addressing simultaneously in his adult works. Written at the end of World War II, White uses Stuart Little to investigate the potential new legal structure for the post-war globe. While serving as a substitute teacher, Stuart starts a conversation with his class on the future of the legal system: “[L]et’s talk about the King of the World.” [Stuart] looked all around the room hopefully to see how the children liked that idea. “There isn’t any King of the World,” said Harry Jamieson in disgust. “What’s the diff?” said Stuart. “There ought to be one.” “Kings are old-fashioned,” said Harry. “Well, all right then, let’s talk about the Chairman of the World. The world gets into a lot of trouble because it has no chairman. I would like to be Chairman of the World myself.” “You’re too small,” said Mary Bendix. “Oh fish feathers!” said Stuart. “Size has nothing to do with it. It’s temperament and ability that count. The Chairman has to have ability and he must know what’s important. How many of you know what’s important?” Up went all the hands. “Very good,” said Stuart, cocking one leg across the other and shoving his hands in the pockets of his jacket. … “Well now, if I’m going to be Chairman of the World this morning, we’ve got to have some rules, otherwise it will be too confusing, with everyone running every which way and helping himself to things and nobody behaving. We’ve got to have some laws if we’re going to play this game. Can anybody suggest any good laws for the world?” Albert Fernstrom raised his hand. “Don’t eat mushrooms, they might be toadstools,” suggested Albert.

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“That’s not a law,” said Stuart, “that’s merely a bit of friendly advice. Very good advice, Albert, but advice and law are not the same. Law is much more solemn than advice. Law is extremely solemn. Anybody else think of a law for the world?” “Nix on swiping things,” suggested John Poldowski, solemnly. “Very good,” said Stuart. “Good Law.” “Never poison anything but rats,” said Anthony Brendisi. “That’s no good,” said Stuart. “It’s unfair to rats. A law has to be fair to everybody.” Anthony looked sulky. “But rats are unfair to us,” he said. “Rats are objectionable.” “I know they are,” said Stuart. “But from a rat’s point of view, poison is objectionable. A Chairman has to see all sides to a problem.” … Agnes Beretska raised her hand. “There ought to be a law against fighting.” “Impractical,” said Stuart. “Men like to fight. But you’re getting warm, Agnes.” “No scrapping?” asked Agnes, timidly. Stuart shook his head. “Absolutely no being mean,” suggested Mildred Hoffenstein. “Very fine law,” said Stuart. “When I am Chairman, anybody who is mean to anybody else is going to catch it.” “That won’t work,” remarked Herbert Prendergast. “Some people are just naturally mean. Albert Fernstrom is always being mean to me.” “I’m not saying it’ll work,” said Stuart. “It’s a good law and we’ll give it a try. We’ll give it a try right here and now. Somebody do something mean to somebody. Harry Jamieson, you be mean to Katharine Stableford.” [After Harry steals a pillow from Katharine, Stuart consults the newly created laws of the world.]

216 Resources and References

“Here we are. Page 492. ‘Absolutely no being mean.’ Page 560. ‘Nix on swiping anything.’” … “There,” Stuart declares, “it worked pretty well. No being mean is a perfectly good law.”105 In creating a new world order, Stuart first identifies the source of sovereign power, which he tries to select as the King of the World. Kings and emperors traditionally are inherited titles that give the holder absolute right to rule for life and to devise the right to one’s identified heir. Following the end of World War II, such an inherited right was disappearing from society. Declared “old-fashioned” by the children, Stuart instead agreed to be Chairman of the World. Aside from the gender-specific nature of Chairman, the term implies that the supreme world leader is selected from a board of leaders on which the chair sits and presides. The chairperson is more likely to be elected rather than appointed, and there is nothing to suggest hereditary succession. Such a supreme leader is not yet democratic, but Constitutional architect James Madison and other political leaders were quite wary of a sovereign selected directly by the people. Instead, the U.S. republic is based, in part, on the election of members of the Electoral College who can then select their chairperson, in the form of the President and Vice President of the United States. Subsequent Amendments to the Constitution and political history have nearly eliminated the independence of the Electoral College members to operate as a body that can select their candidates independently, but the model of a chairperson was well within the concept when the U.S. Constitution was drafted. Stuart next distinguishes between a law and “advice.” Many laws do overlap with advice, and large bodies of regulation are nothing more than advice as well. A law must compel a person to act or refrain from acting to protect the public or other parties. Advice, as characterized here, is to protect from harming oneself. A jurisdiction could pass a law banning the sale of poisonous toadstools, but passing a law on eating toadstools would have no beneficial effect. The person who ate the toadstool would be punished just by eating it, and no one else is affected by the toadstool. The distinction helps clarify the role laws play in governing behavior. Are state helmet and seatbelt laws the same as laws about eating mushrooms? This question raises interesting philosophical questions

105 E.B. WHITE, STUART LITTLE 92-95 (HarperCollins 1945).

18. Crafting a Legal System in a Fictional Work 217 about the nature of harm and individual autonomy. From a libertarian perspective, such as those associated with Ayn Rand, the choice to live with greater risk while driving or riding a motorcycle is a personal one, no different than risking the occasional toadstool for the choice to dine on mushrooms. Economic socialist thought would suggest that the costs to society for caring for those injured in motorcycle and automobile accidents are carried by society in general and the other parties to any accident in particular. State governments often pay for hospitals, doctors, police officers and first responders. Driving laws that place responsibility on the more negligent driver shift the cost of recovery to the driver at fault. If a motorcyclist is left in a coma following an accident with a car, the non-injured party may still be economically harmed. If the motorcyclist was at fault, the motorcyclist is less able to compensate the driver of the car. If the car driver is at fault, the care needed for the motorcyclist injured when not wearing a helmet is much greater than for a driver wearing safety equipment. Both these economic theories are correct. Ultimately the balance made by each state is a compromise between the value of the autonomy for the citizen and the social costs affecting third parties and the policy. Extreme versions of both models make for good speculative fiction. E.B. White’s third example, “nix on swiping things,” is an age- appropriate reflection on the laws of the Ten Commandments, positive legal prohibitions that exist in most legal systems. “Don’t murder,” “don’t steal,” “don’t commit adultery,” and “don’t bear false witness” are all powerful prohibitions against conduct which harms society and its members. The First Commandment (as counted according to some religious traditions) of “I am the Lord your G-d” may also be understood to be reflected in Stuart’s need to be recognized as King or Chairman before creating any other laws. The power to create laws exists only in the sovereign, so the Lord must first declare that sovereignty to create any additional laws. The Ten Commandments operate as a form of a self- executing treaty, establishing the parties and the source of sovereignty in the first clause. Taken in this light, the final law espoused by Stuart’s class, that there is “absolutely no being mean” suggests a law that is also a value judgment

218 Resources and References on attitude or state of mind. Both the rule “no being mean” and the Commandments not to covet a neighbor’s house, not to covet a neighbor’s wife, and not to covet a neighbor’s servants, animals, or anything else are all rules that reflect state of mind as the basis for culpability. Stuart suggests, correctly, that such a law might not work but that it is a good law. In practice, such a state of mind rule can rarely be enforced in a fair and equitable manner. Instead, fair systems of justice focus on specific acts where the violation constitutes behavior that demonstrates a failure to meet the loftier goal of the law. In this way, the combination of don’t steal and don’t commit adultery covers many of the behaviors that could violate the various Commandments regarding the neighbor’s wife, house, servant, animals, and other possessions. Covetous impulses, however, may lead to behaviors other than theft. The jealousy triggered by these feelings could result in destruction of the neighbor’s property without any benefit to the covetous person. Arson and murder are crimes that might flow from violation of these Commandments. Hate crimes constitute another example of state of mind crimes. U.S. law struggles to criminalize state of mind without evidence of conduct. Assuming an omniscient deity, a legal system based on the truth that lies in the heart of an individual can overcome the inability to punish mere thought. Less just societies may make a presumption that the State can make this determination. In other situations, certain conduct creates a presumption that certain conduct proves the existence of the offending mental state. Finally, some fictional works also posit the ability to see into the thoughts of a person through magic or technology. White also identifies another axiom of a just legal system: “It must be fair to everybody.” This rule is facially simple, but in fact is probably the most intractable of tensions in the legal system. Many laws and rules treat every person in exactly the same manner on paper, but have very disparate impacts in practice. As Anatole France famously noted, “in its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets and steal loaves of bread.” So a law singling out rats violates the rules of fairness. But a law could be written to make it a crime to eat scraps from the street and live inside the subways. (In fact, such laws exist throughout the U.S. – though not directed at the rats.) White notes the importance of fairness without juxtaposing fairness in the written text with fairness of the law as applied.

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White does admonish his readers not to make laws that are impractical. A law against fighting is not bad because it impinges on autonomy, but rather because it goes against the nature of men. The U.S. experiment with prohibition represents the most famous failed law of this kind. People like to drink alcohol. Laws protecting the public from the consequences of drinking are tolerated, but bans and prohibitions fail. Today, society is slowly coming to grips with similar prohibitions on other conduct that flourishes illegally because the laws prohibiting the conduct simply will not be followed. The five lessons taught by Stuart Little to the class of the Number Seven School provide a powerful introduction to understanding any legal system and its potential to work effectively. These lessons may help to explain the practical limitations on creating a legal system and provide insight into understanding its application.

B. Sources of Sovereignty

As highlighted by White’s conversation on the need for a King or Chairman of the World or by the Judeo-Christian Ten Commandments, all legal systems begin with an assertion of sovereignty. The United States shifted the source of sovereignty to that of “The People” with the Declaration of Independence in 1776 and the U.S. Constitution in 1787. The Declaration of Independence is among the most sophisticated depictions of the source of sovereignty ever drafted: When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation. We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. – That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed ….

220 Resources and References

Through these two paragraphs, the British Colonies recognized the religious basis and natural law basis of sovereignty of the British monarch and then shifted that power to a consent of the people that, with just cause, could be withheld or reassigned. In the second paragraph, the Declaration then strips the sovereignty from a religious basis and instead posits that “Men” are the source of governments. This statement is placed in the U.S. Constitution as the preamble, instituting that “We the People…” are the source of the United States government. In addition to the power of God to bestow sovereignty or of the People to collectively consent to a government, there are some other possible systems that have been explored either in human history or in fiction. Land ownership has often played an important role in sovereignty. The landed estates may give rise to houses, baronies or other structures, and this land ownership creates a body from which a sovereign may be crowned. Such land owners also have duties to rule in their estates and may be treated as mini-sovereigns in their territory. Governorships are an extension of sovereignty from one jurisdiction to another. Democracies often withhold democratic rights to conquered territories or economic extensions, so the foreign power will control the territory through an appointed governor. A variation of the governorship management of a territory is the commercial contract. The territory is operated as a for-profit business with the residents treated as a form of employment or indentured servitude. The authority was granted to the management by the employee or servant at least originally, but the authority of the company often then extends over the descendants more like a colonial governorship rather than a commercial relationship. This is often the basis for governance in science fiction based multi-generational interstellar travel. Another variation is dependent on citizenship. Throughout world history, states were rarely sovereign over all their land. The modern state did not fully arise until the eighteenth century. Instead, portions of the land were within the State and other communities were treated as foreign populations governed through treaty. German towns in Norway and Jewish communities throughout Europe were recognized as subject to their internal laws and the treaties or direct supervision by the Monarch. Pre-legal societies can operate without any law other than the will of the sovereign. The tribal chief who makes all decisions may once have been

18. Crafting a Legal System in a Fictional Work 221 very common. The modern notion that all persons should be treated in the same manner simply did not exist in pre-legal societies. Even today, many societies continue to treat different classes of persons (based on gender, race, color, national origin, sexual orientation, etc.) with different rights, and some societies have laws assuring equal rights to all persons while operating with practices that treat some groups quite differently than others. Other pre-legal societies operated on the primitive law of vengeance. Every person had the right to protect himself and punish those who caused harm. Power was the only law. Private vengeance tends, however, to leave the society eyeless and toothless, so such systems tend to only work in sparsely populated areas.

C. Civil Codes, Common Law, and Regulatory Regimes

While the sovereign system is responsible for developing and enforcing the legal structure, the U.S. legal system operates with three primary systems of laws and adjudication – civil codes, common law decisions, and regulatory regimes. The most common system across the globe is the civil code system. The civil code system provides a comprehensive, written, and highly detailed taxonomy of laws, rules and decisions. If a matter needs to go to court, the judge in the matter weighs the facts and determines which specific, written rule best applies to those facts. Often, the judge has no power to interpret the meaning of the written code. Prior decisions are not used for future outcomes, because only the text of the civil code determines the meaning of the code rather than its history or application. The civil code system is common in Europe and has been adopted by countries such as Russia and Japan as part of the modernization efforts at various times in history. The common law system is based on an uncodified series of precedents in which each decision aggregates to infer a body of rules and examples. Rather than codifying the rules, written decisions (typically at the appellate level) create a complex body of information that judges rely upon in making their decisions. Common law judges have much broader discretion to make rulings. The accuracy of the summaries of these

222 Resources and References decisions can greatly impact the development of the law. The British and U.S. legal systems rely primarily on the common law system. Throughout world history, these two traditions have competed and sometimes coexisted. The British system, for example, operated with a writ system under the King’s courts that were extremely structured and specific. Many cases could not be addressed with a pre-existing writ, and through a quirk of history, Britain chose not to update the writ system, but to instead create a parallel court system in the office of the King’s Chancellor. These Chancery courts applied laws of equity (or fairness) to address matters not covered at law under the writ system. The competing judicial systems further added to the complexity of the legal systems and the difficulty for unsophisticated parties to obtain justice. In the U.S., John Adams derived and expanded on the earlier work De l’esprit des lois, by Charles de Secondat, Baron de Montesquieu, to propose fully separate and equally powerful executive, legislative, and judicial branches of government. Each branch of government was subject to various checks and balances by the other two branches, but none was entirely superior to the other two. In 1776, Adams wrote Thoughts on Government, which described this principal and later drafted the Massachusetts constitution to fully embody its precepts. The constitutional separation of powers as adopted at the state and federal level throughout the U.S. vests the legislative branch of the government with creating and repealing laws while giving the judicial branch of the government the exclusive power to interpret those laws. The Constitution further balances these powers by giving the executive branch of government the power to veto laws and to appoint judges, subject to legislative consent and legislative overrides of vetoes. In many ways, the U.S. system continues to be a common law system; however, in important respects the U.S. has adopted some practices very much like civil law. Through the enactment of state and federal statutes, the U.S. has replaced much of the common law basis for the legal system with a hierarchical, systematic, and expressly stated code system. In some areas of law, the statutory system supplements these common law rules while in other areas, the statutes explicitly replace the common law system that preceded it. The vast majority of laws today are part of a statutory system rather than being understood exclusively through the common law.

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The U.S. statutory system differs from the European civil law system because of the common law tradition that enables judges to look at the legislative history, precedential cases, and other tools to interpret the statutes. These decisions then become part of the common law interpretation of the statutes, so even with legislative enactments, the courts continue to play an important role in developing the law. As a result, even with the modern statutory scheme, the U.S. law continues to be based on common law traditions and practices. Finally, although not formally recognized as a third legal system, the regulatory state has nonetheless grown to create a third source of jurisprudence. Under U.S. law, federal and state legislatures often create administrative agencies that operate within the executive branch of the government. These executive agencies have the power to enact regulations, hold hearings, and operate systems of justice that do nearly everything the court systems can do other than order felony incarcerations. Similar regulatory systems have developed in countries throughout the world. Much like the British courts of Chancery and Law, the twin roles of administrative agencies and judicial processes often create a parallel adjudicatory structure. While this tension is the source of great tension within the political and economic systems, it rarely is incorporated into the narrative for fictional works. In addition to these three governmental bodies, most countries allow or support religious or communal bodies to operate within the shadow of the legal system. Conflict over religious decisions such as marriage and divorce may have religious body tribunals that are independent of government bodies. Conflict over arranged marriages and dowries cannot be decided by U.S. state courts, but the parties may turn to community elders or other tribunals. In the U.S., for example, the law allows for parties to participate in arbitration proceedings, which are voluntary dispute resolution mechanisms. Although arbitration laws are primarily written to settle commercial disputes, religious tribunals or tribunals of community elders can adapt to fall within the state arbitration laws and as a result have some aspects of their decisions become enforceable in state courts.

224 Resources and References

D. Crime, Punishment, Restoration, and Investigation

The feudal alternative to criminal justice was the trial by ordeal. Ordeals were different from trial by combat. The ordeal system assumed that a god or gods would help answer the pleas of the innocent through the demonstration of the trial’s outcome. The system relied on divine intervention to identify the innocent. In practice, the ordeal essentially gave the prosecutor unlimited discretion to determine the outcome of a trial. Drowning, poisons, burning, and torture devices were all employed to help the religious court or civil court determine the status of the criminal. Most importantly to note, these tools were employed merely to determine the culpability of the individual and did not serve as the ultimate punishment for the crime. The fact-finder could use any of a broad range of techniques. This discretion afforded the fact-finder the opportunity to subject someone to light ordeals and then find the person innocent as well as to select fatal and near-fatal tools. In ordinary day-to-day situations, this probably served as a one-stop adjudication and punishment system. During periods like the Inquisition, it became the formula for mass-murder. The unfettered discretion provided to the fact-finder in a trial by ordeal eliminated any credible, modern claim of justice in the trials. As the modern state system emerged and sovereignty took on affirmative obligations to protect and serve the people within the state, these trials by ordeals were replaced with investigative trials based on truth- seeking, juries of peers, and due process. The modern, European legal systems separate law into two categories, public law and private law. Public law includes constitutional law, criminal law, tax law, administrative law, and most other bodies of law that position the individual against the state. Private law, such as contract law and tort law, covers those areas of the law where one person is bringing a claim against another. This model places the state in the center of the legal system for most purposes. The U.S. legal systems separate the adjudicatory process into three distinct categories – criminal, civil, and administrative. Constitutional law is both criminal and civil in nature; tax law is primarily administrative. The construct of public law is not used.

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Criminal law involves crimes and misdemeanors, meaning actions that can be punished with incarceration, or in rare cases, with death. A crime has been defined as “any act or omission (of an act) in violation of a public law forbidding or commanding it.” The structure of U.S. criminal law has been famously promoted by Dick Wolf’s Law & Order. “In the Criminal Justice System, the people are represented by two separate, yet equally important groups. The police who investigate crime and the district attorneys who prosecute the offenders. These are their stories.” The people sue the defendant through the office of the district attorney. The district attorney must establish all elements of the crime, meaning that all conditions necessary for the action to be a crime must be established. Most crimes include a mental state (Latin: mens rea) element, but as explored by E.B. White, such a mental state is generally established by the conduct of the defendant rather than through any direct method of interviewing or studying the defendant’s mind. In contrast, the European civil law model puts the judge or magistrate into an inquisitorial mode. The state has the power to both investigate and adjudicate the crime. Judges will directly cross examine witnesses rather than rely on the prosecuting attorney. The professional judiciary will determine the outcome for most cases, but assign the case to a different judge for an adversarial trial for the most heinous of crimes. U.S. constitutional law affords defendants the right to a trial by jury in almost all cases. The judge will be responsible for the operation of the trial, evidentiary admissibility rulings, and interpretations of the law. The jury will make all factual determinations. A defendant may waive this right and ask for a bench trial instead. In a bench trial, the judge will make the determinations of fact in addition to any legal rulings. Following the initial trial, the criminal defendant has the right to appeal the outcome based on any legal deficiencies of the trial. The appellate court is typically a three-person panel that looks at the legal issues but generally does not reevaluate the factual determinations made by the jury (or judge) unless the evidence is “clearly erroneous,” the lower court “abused its discretion,” or the appellate court finds that the weight of the evidence does not support the verdict. These various standards generally require substantially more than that the appellate court would have made a different decision. Instead, great deference is given to the trial court and

226 Resources and References the jury as the finders of fact, so only if the appellate court believes that the outcome is an aberration on the spectrum of possible decisions will the conviction be overturned. Appellate courts are not deferential when it comes to mistakes of law. The appellate court is in at least as good a position as the trial court to address questions of law, so the appellate court does not generally offer the lower court as much deference to interpretations of law as to characterizations of facts. The civil court system is dedicated to resolving conflicts between private parties, whether persons or legal entities. These conflicts generally fall into litigation involving breaches of contract or claims for damages as a result of tortious conduct (the legal wrongs discussed in Chapter 8). In most cases, the government is not involved on either side of this litigation. Instead, each party presents its case or defense, depending on whether the party is bringing the lawsuit – the plaintiff, or defending the lawsuit – the defendant. The appeal process is very similar for civil lawsuits as that described for criminal lawsuits. The goal of the civil court system is restoration of rights between the parties. Generally speaking, the law dislikes civil penalties. When claims are truly between two private parties, the legal goal is to restore the parties to the position they were in before the tort or breach of contract occurred. The court will determine the degree of fault for the tort or accident and then determine the costs necessary to restore that individual to the former position. In practice, it does not necessarily work as simply as the goal suggests. Juries sometimes get carried away. They can award millions of dollars for a case that seems like the injury was minor. Judges often reduce these verdicts, but the nature of a jury-based system with a great deal of jury discretion invariably creates a high level of inconsistency from case to case. Another area in which the civil system adds damages that seem more like punishments are those civil cases where the statute sets out a range of damages or allows trebling (tripling) of damages for certain types of conduct. Treble damages are awarded from some types of anti-trust violations, so a company harmed by the conspiratorial conduct of its competitors can earn a windfall of damages. Treble damages create a strong incentive not to risk violating the law and the damages also reflect the difficulty of capturing the true extent of the harm caused by the illicit conduct.

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Civil copyright infringement laws provide a statutory range of damages, so the copying of a single movie might trigger $75,000 in statutory damages rather than $20 in actual damages. In these situations, Congress wanted to deter conduct that was both illegal and harmful using a range of penalties that were significantly less severe than jail but much stronger than mere restoration of funds. Since each party typically pays for the legal fees, many cases are too expensive to bring. By increasing the damages, Congress creates an economic incentive for the public to police the actions of others. The administrative system is more diverse. Administrative offices may investigate locations, such as health and safety departments, issue permits, and inspect projects. Some administrative agencies have administrative law judges who conduct hearings. Unless a public benefit is involved, these hearings typically do not include the right to have counsel appointed for indigent persons. As such, administrative hearings are much more difficult to navigate for people with modest resources. Although these are not criminal procedures, the penalties can include forfeiture of assets, seizure of goods, deportation, and other very significant losses of rights or property. Some administrative agencies closely model themselves after the criminal or civil courts and provide protections to the person being accused of violating agency regulations. Others, however, provide many fewer procedural or substantive safeguards.

E. Economic and Finance Systems

Financial systems also tend to be ignored in most speculative fiction. Some science fiction posits a world where there is little need for money, so it is largely ignored. The semi-utopian worlds of the Federation in Star Trek have largely solved problems of energy, water, and food resources, so the underlying scarcity that serves the reason for an economic exchange are largely lacking. On some planets, of course, there are much greater needs, but the story-lines rarely addressed these concerns. Trial by combat was typically reserved for private disputes between the parties. It was part of the economic system more than the justice system. These involved disputes over the ownership of land, contractual disputes,

228 Resources and References or family honor. The state did not have to risk losing a case by putting its claim into the hands of a combatant. Fantasy tends to focus on barter economies, using precious metals and gems as means of exchange. Some such fiction uses coinage, but without any underlying analysis of what parties have the power to mint coins and the political ramifications of using the minted coins. Even fewer have paper money or other items of exchange that do not have their own value. Game of Thrones is something of an exception. It alludes to a central banking power, but the narrative does not use more than the foundational notion that houses in a position to lend money have power over their creditors. In fact, the story shows that the creditors have little sway over the debtors and the role of finance is largely lost in the story. The power of the state (or sovereign) to coin money can be the source of great conflict among characters and background tension that enlivens the narrative. The act of printing or coining money is itself a statement of sovereignty that could be used for colonial worlds or regions to demonstrate independence from their home world or empirical oppressor. Robert Graves’ classic historical novel, I, Claudius, uses the financial struggles as much as the political struggles of Rome to develop his powerful historical narrative. The novel addressed issues of graft and corruption, which are primarily economic failings more than political failings. While the need for petty bribes is a very common trope across fiction (and throughout the world), the consequences of such problems are a potential source for great conflict within narratives. Beyond the source of finance and the structure of payment systems, there is also an opportunity to look at the underlying value propositions of economic justice in terms of financial mobility, equality of pay, valuation systems, and many of society’s other uses and misuses of resources. Frank Herbert’s science fiction opus, Dune, is a great example of the use of spice and water as the source of wealth, power, and control. Scarcity always generates tension and struggles among peoples and among individuals, so it serves as a great part of the broad narrative. Control for land has historically not been focused on territory. Instead, most struggles are over resources. Governments will lay claim to distant regions, but they will invest troops and resources to take and hold productive property. Access to ports, productive farmlands, oil fields,

18. Crafting a Legal System in a Fictional Work 229 mines, and other producing regions generate the tools for a state to operate, finance its military, support its social system, and dictate its strength. Dune illustrated these on a fictional world that resembled the economic clash of the twentieth century. Alastair Reynolds has created similar themes throughout many of his novels. For high-quality narrative, the use of the financial system as a source of tension, and the legal system as a source of conflict management create the opportunity for the author to develop a more nuanced and well- defined environment for the characters and conflict at the heart of the story.

F. Primogeniture and Inheritance

Many fantasy and science fiction narratives turn on the issue of inheritance, either of the sovereign power or of the land, titles, and authority of various characters. The law of inheritance defines the basis by which a child or children inherit the property and titles from a parent. Primogeniture establishes that the legitimate, firstborn son has sole claim to inherit his parent’s entire or main estate. This excludes all sisters and younger brothers as well as other relatives. Primogeniture differs significantly from modern laws of inheritance, but still has some significant role in the laws and customs governing monarchies throughout the world. For fictional narratives, the difference between the laws of inheritance and the customs controlling titles and offices can be a source of interesting conflict and narrative development. The reason for a single heir is primarily an economic choice. The preference to keep a land-based estate whole has the benefit of sustaining the influence and control of the family. Parcels of land that could easily be divided and sold tended to weaken the economic influence of the owners. Laws that discouraged property division tended to lock ownership and power into the hands of an established class of nobles. Laws disinheriting the younger children helped make these classes of nobles much more sustainable from generation to generation. At the same time, this approach is economically inefficient, leading to nonproductive use of the land and potential destitution for the non-firstborn sons. Daughters were married off to other landowners. Non-firstborn sons tended to find careers in military service, the clergy, or as employees of their older brothers.

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Primogeniture is identified early in the Old Testament, which extends through the Jewish, Christian, and Islamic worlds. It is alluded to in the tension and murder of Abel by Cain. A few chapters later, Abraham’s grandson and Isaac’s second son Jacob buys his elder brother’s birthright. Although Esau and Jacob are twins, the timing of their birth establishes the primogeniture. In the same story Jacob tricks Isaac into delivering his father’s blessing of his firstborn to Jacob rather than Esau. Although the trick is quickly uncovered, the blessing of the firstborn cannot be reclaimed, and again Esau is forced to settle for a lesser share. Pure primogeniture fully disinherits all but the oldest, surviving son and skips daughters in favor of nephews and cousins. Systems have varied by region throughout history. The Old Testament includes a chapter limiting pure primogeniture to extend the right to inherit to sisters who have no male siblings. The Basque region of Spain had inheritance laws that included both sons and daughters, giving preference by birth order but not by sex. England allowed female monarchs if there were no male heirs. Inheritance laws in the west have largely eliminated the rules and presumptions of primogeniture, though vestiges still linger. A simple reversal of the laws of primogeniture based on sex or changes to these presumptions for the younger siblings would result in very different cultures, and may prove to be an interesting tool for writers seeking to explore social and cultural norms.

G. How to Write an Economic and Legal System for the Narrative

The economic system in place for a story establishes many of the relationships between the characters and the relations of the characters to their political and legal environment. In many cases, these assumptions may not be of particular importance to the story, but in other cases, there may be much more depth available. In the genre of the Vampire story, for example, there is some great opportunity to explore how wealth has been acquired and transferred over the centuries of the Vampire’s rise to power. Since these stories are pseudo-historical in nature, these issues could include more than just the need to finesse the long-lived nature of the vampire. They can include the Communist revolutions in Russia, China, and Cuba, the westward expansion of the United States, the complex rise of the state in Europe or other similar historical issues.

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The scarcity or sudden abundance of resources changes society dramatically, and this triggers conflict for characters. Reasonable leaders, doing what is best for their own people at the expense of their neighbors will often be more interesting than megalomaniacs and sociopathic antagonists. Of course, a good nut-case can also propel a story, but the goal here is to provide the author a broader array of options when writing. Even if the economic system or financial structure plays little role in the narrative, it creates an opportunity for pacing and minor conflict in the greater narrative. Every obstacle in the path of the protagonist’s quest creates tension and an opportunity to explore character. Running out of credits and being unable to hail a ride creates a moment of panic for our hero. Finance plays a tremendously large part in our daily lives, so it creates immediacy for the reader and excellent tools for the author. From a creative writing perspective, the opportunity to describe a legal system can fall into two general perspectives. In those stories where adjudication is the background for an unrelated narrative, the choices and structure of the legal system can be used to expand the reader’s understanding of the fictional society and its participants. For those stories that emphasize the adjudicatory power of the society, then understanding these systems can help the author create a system that is somewhat (or extremely) at odds with what is normatively accepted by the readers. Since legal systems are “fair” or “equitable,” these judgment-laden labels essentially mean that the system is normatively valid. The majority of Americans once accepted slavery such that black people were property (even if their parentage might include a white, slave-owning father). Many Europeans accepted that Jews, Gypsies, and homosexuals were of an inferior race that could be exterminated. In many countries, the divinity of the religion can select the sovereign authority, who in some cases is infallible on Earth. Even within modern democracies, rights considered fundamental in one country are limited because of rights deemed equally fundamental in another country. The role of the press is much more restricted in those countries that have strong laws protecting privacy. States that protect religious freedom often punish speech that may be deemed blasphemous. In creating a fictional legal regime, the author must expose the reader to the normative beliefs of the fictional world. If those beliefs are out of

232 Resources and References sync with the beliefs of the author and her protagonist, then the writer should establish the tension between the protagonist and the world surrounding her. It is not enough that the protagonist espouses the legal views of the reader. The author must demonstrate why these are the relevant views for that character and why the society should change. Perhaps a more interesting exercise is to create a protagonist with strong beliefs in a just and equitable legal system that is nonetheless based on systems at odds with the normative values of the author’s audience. Marvel series such as X-Men and Agents of S.H.I.E.L.D. have undertaken this fear of superpowers as a metaphor for exploration of ethnicity and class. These works have not, however, explored the structures of the state other than to portray it as either evil or fearful. Works that challenge the audience to recognize a system that is fundamentally different while retaining the tenants of fairness, practicality, autonomy, and meaningful limits will enliven the fictional world for authors and readers alike. The outline of the legal system provides a blueprint for where in the system the author may wish to explore these concepts. The role of the sovereign is a common topic in medieval fantasy. The absurdism of the administrative state is sometimes identified in dystopian farces such as Time Bandits. Rogue judges and inquisitors have sometimes been the focus of powerful drama, including classics like Victor Hugo’s The Hunchback of Notre Dame or the comic book series Judge Dredd. Opportunities exist to look at the civil forfeiture systems and punishment systems which are often identified but rarely explored in depth. Each of these points in the legal system creates an excellent opportunity to develop a strong narrative.

19. Boilerplate – Key Terms of the Standard Agreement

Reproduced From Jon M. Garon, The Independent Filmmaker’s Law & Business Guide to Financing, Shooting, and Distributing Independent and Digital Films, (A Cappella Books/Chicago Review Press, 2d Ed. 2010) (as adapted).

Boilerplate: Understanding the Rest of the Contract In almost every contract, the significant terms are followed by a series of similar provisions that control most of the rules for enforcing the contract and operating under the contract. These provisionsoften referred to as boilerplateare quite similar, regardless of the key, negotiated terms of the agreement. Boilerplate provisions are used in every contract, from manufacturing cars to selling cable service, and apply to the thousands of different contracts the Con will enter during the production. The following provides an example of these terms and their meaning. In these examples, “Company” represents the Con enterprise; “Seller” represents an author or illustrator working with the Con; “Agreement” is defined to mean the contract being described; “Property” is the literary work, such as a comic book, which is the subject of the contract. 1. Term and Renewal The term provision governs the length of the contract. Unless there is another provision allowing for the contract to continue after that date, the contract itself ends, and the future relationships are governed by a new agreement, whether in writing or by oral understanding. The term of this agreement (“Agreement”) shall commence as of the date hereof and continue for a period of one year; and provided neither party shall not be then in breach of or in default under any term or provision hereof, this Agreement shall automatically renew for additional one (1) year periods thereafter, unless either party gives written notice of its election to terminate this Agreement not less than sixty (60) days prior to the expiration of the term or any renewal thereof.

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This provision provides that the contract starts beginning with the date on the top of the page, which is preferable to having two possibly conflicting dates accompanying the signature lines of the parties. Second, the contract has a one-year term, but that term automatically extends each year unless either party decides to terminate the contract. This automatic renewal is quite typical for ongoing relationships. For project work, the event should be specified. For example, the contract may terminate upon the completion of principal photography. Termination provisions can also allow that some provisions of the contracts survive termination. For example, if an agreement provides for financing the comic convention or music festival, the contract may automatically terminate if insufficient funds are pledged by a specified date. Notwithstanding the termination of the contract because that date passes, the contract may provide that the provisions relating to nondisclosure of the confidential plans will survive for an additional period of years. 2. Warranties and Representations of the Parties The representations and warranties are the basic promises that serve as the basis for the agreement. They generally go to the ability of the parties to enter into the agreement, but may become very specific depending on the nature of the agreement. Each party to this Agreement hereby represents and warrants that it has the right and authority to enter into this Agreement and that it is not subject to any contract, agreement, judgment, statute, regulation or disability which might interfere with its full performance of all of the covenants and conditions hereunder. Because of this, it is common that the representations and warranties for the two parties to the agreement to be somewhat different from each other. An example of the representations and warranties of the comic book author or illustrator will include the following additional issues: The Seller [of the comic book story, comic book illustrations, game or other literary work] hereby represents and warrants as follows: Except as specifically listed on Appendix A, the Property has been authored solely by and is original with Seller; neither the Property nor any element thereof infringes upon the copyright,

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publicity rights, trademarks, story rights or other interests of any other literary property. The Property is wholly fictional, no portion of the Property has been taken from any other source (other than the public domain), and the Property does not constitute defamation against any person or violate any rights in any person, including without limitation, rights of privacy, publicity, copyright (whether common law or statutory, throughout the universe), trademark, publication or performance rights, or rights in any other property, and any rights to consultation regarding the Property or any element thereof. The Property has not previously been exploited in any medium except the following [identify what rights have been used], and no rights have been granted to any third party to do so. In addition, for some projects it is important that nothing interfere with the ability to market the personality involved in the project. Neither party has committed, and throughout the term of this Agreement neither party shall commit, any act or omission which constitutes a felony or could be deemed an act of moral turpitude. Any breach of this paragraph shall be deemed a material breach. In such a situation, the representations and warranties need to include a morality clause, guaranteeing good, honorable behavior both before and throughout the term of the contract. The most important aspect of this provision is that it allows the employer to revoke the contract if the misconduct of the employee makes that choice appropriate. 3. Indemnification Indemnification is the legal obligation to pay for compensation for damage, loss, or injury suffered as a result of a breach of the contract or any duties that arise under it to the other party to the agreement. For example, an author will be required to indemnify the publisher for any material copied from other sources in violation of copyright law and the representations made by the author in the contract. It is not sufficient that each party promises to abide by the promises made in the contract. Each party runs the risk that third parties may make claims against that party as a result of what it has done. For example, if the

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Con commissions a comic book for exclusive sale at the event, the Con wants to be protected from anyone claiming the author improperly copied another person’s story. To provide such protection, the screenwriter must agree to defend the Con, meaning the writer must provide a legal defense for the benefit of the Con. The author must also indemnify the Con, meaning he must agree to pay any damages if the author is found to have violated some other person’s rights. Seller hereby indemnifies and holds harmless Company and its employees, independent contractors, agents, and assigns against any loss or damage (including reasonable attorneys’ fees) incurred by reason of any claim based upon any breach of the representations and warranties of Seller contained in this Agreement and any documents contemplated hereby. The term “person” as used herein shall mean any person, firm, corporation or other entity. The Con has a similar obligation to protect the author from liability for any other issues that might arise during the event that are not part of the author’s duties. Company hereby indemnifies Seller against any loss or damage (including reasonable attorneys’ fees) incurred by reason of any claim based upon its exploitation of the Property which does not involve the acts or omissions of Seller. Finally, a general statement that each will protect the other for any actions that it caused serves as a very simple, but effective provision. Each party agrees to indemnify the other and to hold the other harmless from and against any and all claims, action, cause of action, liabilities, damages, judgments, decrees, losses, costs and expenses, including reasonable attorneys’ fees, arising out of any breach or alleged breach of any representations, warranties or agreements made by it hereunder. The difficult issue – which of the two actually created the situation that allowed a third party to be able to bring a lawsuit – is often highly contentious, with the result that the two parties to the contract often end up suing each other to determine which has the obligation to pay for the litigation and any damages caused by the lawsuit.

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These sample clauses do not also include the requirement that the party also defend the lawsuit. Defense language is also common and can readily be added to these paragraphs merely by inserting the term “and defend” after the word “indemnify” wherever applicable. 4. Resolution of Disputes Due to the costs and delays involved in litigation, many people prefer to use some alternative, including arbitration or mediation. Mediation provides an independent person who tries to help the parties to the dispute work out the issues among themselves. Arbitration provides an independent person who acts much like a judge, who will listen to both sides in the dispute and make a determination. Although arbitrators in some jurisdictions may not have quite the discretion of the courts to award injunctions or punitive damages, they have substantial power to craft final remedies. In addition, if the arbitration is binding, then the decision of the arbitrator is as enforceable as that of a judge. The choice to forgo the right to go to court should be considered carefully. There are many protections given up by waiving the right to use the traditional legal system. On the other hand, the Con organizers probably do not have a great deal of money or time to fight the dispute through trial and appeal. As a result, arbitration may be a useful alternative. It is required in most union agreements when disputes arise with the union personnel. Each union will have specific language that it requires to be used. Also, the ability to choose the arbitrator allows the parties to use the services of a decision-maker familiar with the industry and the issues involved. These provisions vary greatly, but the following serves as an example. Any and all disputes hereunder shall be resolved by arbitration in accordance with the American Arbitration Association of America (“AAA”) under the rules then obtaining. Any party hereto electing to commence an action shall give written notice to the other party hereto of such election. The location for such arbitration shall be Los Angeles, California, subject to the convenience of the parties, and any and all rights of discovery available pursuant to such arbitration shall be limited by the applicable arbitration provisions of the California Code of Civil Procedure. The award of such arbitrator may be confirmed or

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enforced in any court of competent jurisdiction. The costs and expenses of the arbitrator, including the attorneys’ fees and costs of each of the parties, may be apportioned between the parties by such arbitrator. 5. Assignment Most business contracts are freely assignable. In contrast, most contracts calling for a person’s individual services are not transferable or assignable. In the music, game, and comic book scenarios, both situations occur at once. The duties of most of the participants are personal in nature, but the Con organizers may create a company or change legal structures as part of the financing. So long as the Con organizers remain involved in the project, none of these activities should trigger the assignment clause. The services and obligations under this Agreement are personal in nature and cannot be assigned or delegated. The services of Company may be assigned upon consent, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, the transfer of this Agreement to a company owned in whole or part by Seller, a related company, or to another entity with substantially the same executive and principals of Company, or to a company that employs Seller in the same capacity, shall not be deemed an assignment requiring approval under this paragraph. 6. Amendments Things change. Dates changes, people are added or dropped from the Con, venues and locations become unavailable, funding increases and decreases. Nonetheless, when the Con goes to the trouble of creating a written agreement, it is important that any changes be put into writing, so that quick, last minute promises do not undermine the thoughtful management. As a result, every contract should include a statement that written amendments are required. The requirement is simple. “This Agreement may be modified or amended only in a writing signed by both parties.” Even with this language, some jurisdictions will allow for oral modification of the agreements. Further, courts will often find that a party has waived his rights to require a written document as a result of statements made or conduct relating to the transaction. Despite this risk, the provision should be included in the agreement and utilized by the parties throughout the term of their relationship.

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7. Severability In some situations, a portion of the contract cannot be enforced. The court (or arbitrator) must then decide to throw out the entire contract or just that provision. That choice can be provided for directly in the contract. In most situations, half a contract is better than none, as this provision reflects. If any provision of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited. 8. Entire Agreement To control the issues that may be swirling around the Con, everything should be in writing. A provision that specifies that all the issues have been incorporated into the written agreement may help to overcome claims that side agreements and promises were also made. Even the most well- meaning people hear what they want to hear, so the more exact and structured the contract, the fewer the misunderstandings. This Agreement contains the full and complete understanding between the parties hereto with reference to the within subject matter, supersedes all prior agreements and understandings, whether written or oral, pertaining thereto, and cannot be modified except by a written instrument signed by both of the parties hereto. Each of the parties acknowledges that no representation or promise not expressly contained in this Agreement has been made by the other or its agents or representatives. 9. No Obligation Unfortunately, many Cons fail to find funding and never open, so opportunities are often lost. The contract purchasing literary properties or services should be sure to protect the purchaser from claims that it was required to use those properties or services. This will not determine what payments or other obligations the Con must make. The payment terms will

240 Resources and References specify under what conditions the payments are due. If the payments are due for entering the contract, then the payments are owed, even if the comic book or game is never published. Most payment obligations are triggered as a result of publication or use of the acquired services, and in these cases there will not be any financial obligation. Notwithstanding the rights granted herein, Company is under no obligation to utilize [services/property] in any manner whatsoever, and failure to exercise any rights contained herein shall not constitute a breach of any covenant, express or implied. 10. No Partnership or Joint Venture The financial and business relationship should also be specified. Courts may ignore these self-serving declarations, but at least they remind the parties how they are supposed to relate to each other, and they may have some effect on courts if any problems do arise. Seller is an independent contractor with respect to Company and not an employee. Company will not provide fringe benefits and Seller shall be responsible for all income tax and withholding required which he may bear as a result of this Agreement. Nothing in this Agreement shall be construed as creating a partnership, joint venture or employment relationship between the parties hereto, and each party is solely and exclusively responsible for its own debts and obligations. 11. Further Documents Throughout the course of the project, a wide variety of financiers, exhibitors, leasing agents, government agencies, unions, contractors, and others may request legal documentation regarding the project. These may be the agreements that already exist, or it may be that a particular enterprise, such as a municipal venue, requires that the agreements contain some specific language. The Con must be able to compel the other participants to continue to sign documents necessary for the project, if those additional documents do not change the terms. This provision makes the willingness to sign additional papers an affirmative promise of each party. Each of the parties agrees to execute, acknowledge and deliver any and all further documents which may be required to carry into effect this Agreement and its respective obligations

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hereunder, all of which further documents shall be in accordance with and consistent with the terms of this Agreement. 12. Notices The contract should specify the form of delivery considered allowed. If e-mail is included as a form of legal notification, then the sender should confirm that the e-mail has been received. Many notice clauses include the address to which all notices should be sent, and often include the attorney or agent as a second address, entitled to a copy of the correspondence. Often these are left blank, however, so this paragraph provides more flexibility in selecting the applicable address. All notices, statements or other documents which either party shall desire to give to the other hereunder shall be in writing and shall be deemed given as when delivered personally or by e-mail (with confirmed receipt), telecopier (with confirmed receipt), or 48 hours after deposit in the U.S. mail, postage prepaid and addressed to the recipient party at the address set forth in the opening paragraph of this Agreement, or at such address as either party hereto may designate from time to time in accordance with this Paragraph. 13. Governing Law The parties can also choose which state’s law governs the contract, so long as that state is related to the agreement. Assuming one of the parties to the contract is from a particular state, or most of the work will occur in that state, then the selection will usually be respected by the court or arbitrator. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to agreements entered into and wholly performed therein. The choice of the state selected may depend on the laws of that state. If a state has particularly favorable laws regarding the contract, the Con may wish to choose the law of that state. The choice varies dramatically depending on the state and the issues involved, so the choice should be based on the advice of a lawyer familiar with the issues.

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14. Signature Line The signature should indicate who is signing the agreement and in what capacity. For example, if the Con is organized as a for-profit limited liability company, then the CEO/Executive Director should sign only in his capacity as Chief Executive Officer of the company, or manager of the LLC, etc. The contract should also identify that the company, rather than any individual, is the party to the agreement. This will limit the personal liability that would otherwise attach to the Con organizers if one of the organizers signed in her personal capacity rather than as a corporate officer on behalf of the company. Without properly drafting the contract and properly signing the contract, the value of creating the company will be lost.

20. Sample Agreements

A. Commercial Exhibitor Application and Agreement

Commercial Exhibitor Application and Agreement

This Agreement is made between the Pop Culture Business Handbook Convention (“Con”); and

Exhibitor Name______Contact______

Address______City ______State ______Zip______

Phone ( ) ______E-mail ______

Website______Date ______

The exhibitor listed above (“Exhibitor”) shall be considered for space at the Convention to be held [dates] at [name of venue] subject to the terms and conditions of this Agreement. Exhibitor shall be notified by Con if a booth or exhibit hall is available. The terms and conditions of this contract constitute a binding agreement by the parties. 1. Acceptance to Exhibit. Con reserves the right to reject any Exhibitor Application that might be objectionable and to prohibit or remove any exhibit that might detract from the general character of the Exhibition. In addition, Con reserves the right to deny access to the Exhibition to any person at any time during the Convention. Any organization or individual causing a disturbance may also be denied access to any or all of activities, removed, or excluded from the returning as an Exhibitor for a period of time to be determined solely by Con. The contract for exhibit space, when executed by the exhibitor and accepted by Con, is a binding agreement between the two parties.

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2. Character of Exhibits. Con shall have sole and final approval regarding the appropriate character of booth content. Exhibitor agrees to be bound by the decisions and to cooperate in the enforcement thereof. 3. Con shall have the authority to interpret and enforce the rules. All matters not covered by these rules are subject to the discretion of Con. All decisions so made shall be as binding on all parties as the original rules. The Exhibitor or its designated representative is responsible for familiarizing itself with all rules. The Exhibitor or its representative who fails to observe the conditions, terms, or rules of the contract may be excluded from the Exhibition without refund. 4. Circular and Promotional Material. Distribution of circulars or promotional materials may be made only within the booth area assigned to the Exhibitor presenting such material. Exhibiting and showcasing organizations are prohibited from placing or circulating promotional or advertising materials in any common area. 5. Weapons and Props. No operable weapons (whether used or not) are allowed in the Exhibition at any time. Any non-operable replica/prop weapons (“Prop”) used for display must be properly secured or kept in a locked display case at all times. The owner of any Prop is responsible for the Prop at all times and is solely liable for its presence. 6. Audio. Loudspeakers or operation of any amplification equipment without headphones is prohibited. Live performances within the booths must be fully enclosed within the booth and any audio kept to a level that it is not intrusive into the common areas. Con shall have final authority to close, cancel, or terminate any performance for any reason, including attendee flow, noise, decorum, or otherwise in its sole and exclusive judgement. 7. Drawings, Contests. All opportunity drawings and contests must be approved in writing in advance by Con not less than sixty days prior to the event. Exhibitor assumes entire responsibility for adherence to federal, state, and local laws and ordinances regarding such activities. The exhibitor further assumes entire liability for fines, penalties, or governmental penalties or civil actions for such

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activities resulting from a breach of the above-mentioned laws or ordinances. All giveaways must be open to all attendees. 8. Alcohol. The use or sale of alcoholic beverages is prohibited. 9. General Terms and Conditions. Con reserves the right to take the following actions at any time prior to or during the Exhibition and at its sole discretion: (1) terminate this agreement or decline to provide space to an Exhibitor for any reason, including but not limited to Exhibitor conduct, or Exhibitor use, promotion and/or distribution of material(s) and/or content, that is objectionable to Con or is not consistent with Con’s bylaws, rules and regulations, or mission; (2) prohibit any exhibit, or part thereof, that violates this Agreement or is, in any other way, not suitable for, or not in keeping with, the character and spirit of the Exhibition; (3) close any exhibit that is determined by Con to be too loud or disruptive and/or to disturb other exhibits because of, including but not limited to, material, content or method of operation; and/or (4) refuse to permit an Exhibitor who violates this Agreement to participate in one or more future Con Exhibitions. 10. Terms of Payment. Upon Con’s receipt of the Application & Contract, the main contact will receive an e-mail confirmation notice with an invoice and payment instructions. 11. Booth Fees. A separate schedule provides the cost for each size and type of booth. 12. Payment Schedule. A 50% non-refundable deposit is due 2 weeks following the date of invoice. The remaining balance must be paid in full sixty days prior to the start of the event. Con has the right to reassign and/or sell Exhibitor’s exhibit space if payment deadlines are missed without notification to the Exhibitor. 13. Exhibitor Registration. Each Exhibitor will receive two (2) complimentary Exhibitor Booth Personnel admissions for each booth. An additional three Exhibitor Booth Personnel admissions may be purchased at the prices listed on the booth schedule. The badge is not transferable. Con shall have sole authority over admission policies at all times.

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14. Installation, Occupancy, and Dismantle of Exhibits. Exhibitor agrees to fully follow the schedule for booth construction, operation, and dismantling. All exhibits/displays must remain fully intact throughout the exhibit hall hours. Dismantling or removing an exhibit or materials before the official closing of the show is prohibited. Con and the official show contractor will also maintain control and have priority at the loading areas at all times. All shipments must be prepaid. 15. Failure to Occupy Space. Any space not occupied by the specified schedule shall be considered forfeited to Con, which reserves the right to reuse or re-lease the booth without any liability. 16. Cancellation Policy. Cancellations (or reduction in exhibit space occupied) must be received in writing from the primary contact on file. The initial deposit is nonrefundable. Additional payments will be refunded prior to sixty days before the event. All rental payments after that date are fully due and payable without any refund. 17. Subleasing. Booths may not be sublet. Booths may be shared only with express permission of Con and any booth sharing requires each Exhibitor to separately agree to the full terms and conditions of this Agreement in writing and to fulfill all duties hereunder, including purchase of insurance. 18. Liability and Insurance. Con, the Convention Center and their officers, directors, agents, employees or representatives (hereafter referred to as the indemnitees) shall not be responsible for any injury, loss or damage that may occur to the Exhibitor, or to the Exhibitor’s employees or property, prior, during or subsequent to the period covered by this Agreement unless directly attributable to indemnitees’ gross negligence or willful misconduct. To the extent permitted by law the Exhibitor, on signing this contract, expressly agrees to indemnify same against, any and all claims for such loss, damage or injury provided in every instance that Exhibitor is promptly notified in writing of such liability or claim and given full and complete authority, information and assistance, at Exhibitor’s expense, for the defense thereof, including any settlements or appeals related thereto. The Exhibitor also agrees to indemnify the indemnitees from any and all liability, costs or

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damages arising out of or relating to acts or omissions of the Exhibitor, its agents or employees including any security personnel hired directly by the Exhibitor pursuant to the procedures enumerated below. 19. Insurance. Exhibitors shall obtain, at their own expense, for the duration of the term of the installation and use of the exhibit premise, Comprehensive General Liability Insurance (CGL) in an amount, not less than one million dollars ($1,000,000.00), specifically naming Con and the Convention Center as additional insureds as their interests appear. Evidence of insurance shall be made to Con upon written request. Exhibitors also are recommended to obtain insurance policies covering the transporting of their booth materials, equipment, or both from their home base to the Exhibition and return. 20. Limitation of Liability. In no event shall Con or any of its officers, directors, agents or employees be liable to Exhibitors for any amount beyond the booth rental fee actually paid by the Exhibitor to Con with respect to which or in connection with which liability is asserted for any indirect, incidental, consequential or other damages (including but not limited to claims for lost profits) arising out of or relating to an Exhibition event, the rental of booth space, the conduct of Con, any breach of contract, or any other act, omission or occurrence. 21. Space Restrictions. All displays, interviews, conferences, distribution of literature, lectures, audience seating/standing and the transactions of business of any nature shall be made within the space contracted. Aisles and other spaces in the Convention Center not leased to Exhibitors shall be under the control of Con. Temporary booth personnel shall be restricted to the same aforementioned rules as authorized Exhibitor personnel. 22. Force Majeure. It is further agreed that in the case that said premises shall be destroyed by fire or the elements, or by any other cause, or in the case of government intervention or regulation, military activity, strikes, or any other circumstances that make it impossible or inadvisable for Con to hold the Exhibition or portion thereof at the time and place herein provided, this

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Agreement shall terminate and the said Exhibitor shall and does hereby waive any claim for property or other damages or compensation except the prorated return on the amount paid after deduction by Con of actual expenses incurred in connection with the Exhibition, and there shall be no further liability on the part of either party. 23. Compliance with the Law. Exhibitors, exhibits, and exhibit materials and displays shall be at all times in compliance with all applicable federal, state and local laws, codes and regulations. Without limiting the foregoing, this compliance includes the prohibition of all bootleg products or unauthorized use of intellectual property of any third parties unless permitted by law. 24. Use of Con Name. The use or display in any manner or medium of Con’s name, the conference name, logo, acronym, marks or copyrighted materials is not permitted without express permission. Exhibitor is permitted to identify Con for purposes of advertising that it is participating as an Exhibitor at Con but shall not use any logo, marks or artwork without express, prior written permission by Con. 25. Damage of Property. Exhibitors are liable for any damage caused to Exhibition building, floors, walls, columns standard booth equipment or other Exhibitors’ property. Exhibitors may not apply paint, lacquer, adhesive or any other coating to building columns and floors, or to standard booth equipment. 26. Official Contractors. In the best interest of the Exhibitors, Con has appointed various official service contractors for such services as material handling, furniture rental, booth and floral decorations, signs, photographs, drinking water, facility catering, skilled labor or any other service deemed necessary. Complete information, instructions, and contacts will be provided in the exhibit service kit for all official show providers. Exhibitor may not use its own vendors for these services. Exhibitor is responsible for the costs associated with the rental of the equipment, power, Internet, signage, food, and similar items. 27. Food and Beverage. Exhibitors wishing to distribute food and/or beverages must obtain prior written permission from Con. All approvals are subject to the use of exclusive in-house catering

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vendors when required. Con shall have the sole authority in determining the application of this regulation. 28. Exhibition. After-hours access after opening day, if for any reason a properly badged Exhibitor or representative desires to enter the exhibit area in advance of the prescribed time, or after closing hours, a request specifying the reason and giving all names of persons who will enter the exhibit area in accordance with such request shall be presented to Con for approval. Exhibitors receiving approval will be required to have an official security representative escort the group to the designated booth. All costs associated with admission during non-official hours, including but not limited to security, will be the responsibility of the Exhibitor. Con reserves the right to refuse admission or eject from the Exhibition any person whose conduct is deemed by Con to be disorderly or unbecoming. The license granted by admission to the Exhibition may be terminated by tendering to the attendee the purchase price of admission to the Exhibition. 29. Relocation of Exhibits. Con reserves the right to alter locations of exhibits as shown on the official floor plan, if deemed advisable and in the best interests of the Exhibition as determined by Con in its sole discretion. 30. Soliciting/Demonstrating. Exhibits must be confined to the exact space allocated. Circulars, publications, advertising matter and all kinds of promotional giveaways must be distributed only within booth spaces. Nothing can be posted on, tacked, nailed, screwed or otherwise attached to columns, walls, floors or other parts of the building or furniture. Signs, rails, etc., will not be permitted to intrude into or over aisles. Canvassing, exhibiting or distributing advertising matter outside the designated exhibit area is prohibited. Soliciting or demonstrating by an Exhibitor must be confined to the Exhibitor’s own booth. Distribution of the Exhibitor’s printed advertisements must be done within the Exhibitor’s own space. 31. Access for Persons with Disabilities. Con works to provide an accessible Exhibition for all attendees with disabilities and believes that persons with disabilities should be given the opportunity to participate and interact to the fullest extent possible. Con requires

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all Exhibitors to make reasonable accommodations for wheelchairs and to otherwise make the booth layout accessible to people with disabilities. 32. Fire, Safety and Health. The Exhibitor agrees to accept full responsibility for compliance with local, city and state fire, safety and health ordinances regarding the installation and operation of equipment or otherwise relating to the Exhibitor or his/her booth. Furthermore, all exhibit materials and equipment must be located within the booth and protected by safety guards and devices, where necessary, to prevent personal accident or injury to spectators or to other exhibitors. Only fireproof materials will be used in displays, and the necessary fire precautions will be a responsibility of the Exhibitor. 33. Hazards and Firearms. Equipment with sharp or protruding edges posing a potential danger to attendees and/or exhibit personnel, at whatever level, must have protective covering and/ or be flagged. No firearms of any nature may be brought into the Convention Center. 34. Additional Venue Requirements. Rules and Regulations specific to the Convention Center can be found in the Other Contractor Services section of the Exhibitor Service Kit. 35. Arbitration. Any and all disputes hereunder shall be resolved by arbitration in accordance with the American Arbitration Association of America (“AAA”) under the rules then obtaining. Any party hereto electing to commence an action shall give written notice to the other party hereto of such election. The location for such arbitration shall be Los Angeles, California, subject to the convenience of the parties, and any and all rights of discovery available pursuant to such arbitration shall be limited by the applicable arbitration provisions of the California Code of Civil Procedure. The award of such arbitrator may be confirmed or enforced in any court of competent jurisdiction. The costs and expenses of the arbitrator, including the attorneys’ fees and costs of each of the parties, may be apportioned between the parties by such arbitrator. 36. Nondelegation; Transfer. The services and obligations under this Agreement are personal in nature and cannot be assigned or

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delegated. The services of Company may be assigned upon consent, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, the transfer of this Agreement to a company owned in whole or part by Seller, a related company, or to another entity with substantially the same executive and principals of Company, or to a company that employs Seller in the same capacity, shall not be deemed an assignment requiring approval under this paragraph. 37. Severability. If any provision of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited. 38. Full Integration. This Agreement contains the full and complete understanding between the parties hereto with reference to the within subject matter, supersedes all prior agreements and understandings, whether written or oral, pertaining thereto, and cannot be modified except by a written instrument signed by both of the parties hereto. Each of the parties acknowledges that no representation or promise not expressly contained in this Agreement has been made by the other or its agents or representatives.

B. Sample Agreement: Band/Artist Participation Agreement

This sample agreement is the type used by the Con for signing bands to a music festival or using bands as supplemental entertainment at any other kind of event. By simply eliminating the provision on load-in and sound check, this agreement can be used for guest artists signing autographs, appearing on panels, or participating in other aspects of the Con. Artist or Band Participation Agreement For valuable consideration, receipt of which is hereby acknowledged, this agreement (Agreement) is entered into as of the date listed below

252 Resources and References between [Con, LLC,] including its assignees or licensees, or anyone associated with the comic book and music festival tentatively known as [the “Amazing Bountiful Confab convention” (ABC Con)] (collectively “Company”) and the artist(s) listed below (Artist) as an independent contractor for participation in ABC Con on the terms and conditions of this Agreement. 1. Performance: Subject to the terms and conditions of this Agreement and any amendments or riders incorporated into this Agreement, Artist shall perform a musical set of between XX and YY minutes in duration. If Artist is comprised of multiple members, all members of Artist shall appear during the performance unless otherwise agreed in writing. 2. Venue; Date; Time: The time and place of ABC Con will be at [Venue], [address, city, state] on the dates of [dates]. Artist is anticipated to perform at [time] or at such other times as specified by Company during the dates listed above, upon mutual agreement of the parties. 3. Payment: Company agrees to pay Artist the amount of ______dollars ($______) by check. Twenty percent shall be paid immediately upon execution of this Agreement (the “Advance”) and the remainder shall be paid immediately following the performance. Company shall provide Artist [X] complimentary tickets to ABC Con for the date of Artist’s performance. 4. Nonperformance: Both parties shall be excused from their obligations hereunder in the event of unpredictable events occurring outside the control of either party (e.g., proven sickness, accident, riot, strike, epidemic, act of God or any other legitimate condition). Any amounts previously paid will be refunded. In the event Company is unable to otherwise perform its duties hereunder, Artist shall be entitled to retain the Advance but shall not be entitled to any other payments or damages. In the event Artist is otherwise unable to perform its duties, Artist shall refund the Advance and be responsible for any additional costs incurred by Company in securing alternative entertainment. 5. Marketing: Artist hereby approves the use of each participants’ name, voice, and image by Company in any manner related to ABC Con and forever release and discharge Company from any and all claims, actions, and demands arising out of such use. Artist approves the perpetual and universal right to photograph and re-photograph Artist

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(still and moving) and to record and rerecord, double, and dub voices and performances, by any methods or means, and to use and authorize others to use Artist’s name, voice, and likeness for and in connection with ABC Con. 6. Equipment; Systems: Artist shall provide to Company its equipment list not less than ten (10) business days prior to the date of the performance. As agreed among the parties, additional equipment may be provided by the venue. Company shall work with the venue to confirm all Artist’s equipment may be used in the venue. Artist shall be solely responsible for the supervision and load in of all equipment required for the performance. Artist shall conduct a sound check of its equipment and/or the equipment provided by the venue at a time to be mutually arranged between Artist and Company. 7. Warranties and Representations of the Parties: Each party to this Agreement hereby represents and warrants that it has the right and authority to enter into this Agreement and that it is not subject to any contract, agreement, judgment, statute, regulation or disability which might interfere with its full performance of all the covenants and conditions hereunder. a. Each party agrees to indemnify the other and to hold the other harmless from and against any and all claims, actions, cause of actions, liabilities, damages, judgments, decrees, losses, costs and expenses, including reasonable attorneys’ fees, arising out of any breach or alleged breach of any representations, warranties or agreements made by it hereunder. b. Artist further represents and warrants that at all times throughout the term of this Agreement, nothing in the content performed, displayed, or reproduced shall violate the copyright of any other party, nor shall it be defamatory or invade the privacy of any person. c. Company further represents and warrants that venue will be of sufficient size to safely conduct the performance, that venue is of stable construction and sufficiently protected from weather, and that there will be adequate security and/or emergency medical responders available if foreseeably necessary.

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8. Limitation: Artist agrees to waive any and all claims against the Company or against any of its assignees or licensees, or anyone associated with ABC Con, that includes assertions of (a) infringement of rights of publicity or misappropriation (such as any allegedly improper or unauthorized use of Artist’s name or likeness or image), (b) intrusion (such as any allegedly offensive behavior or questioning or any invasion of privacy), (c) false light (such as any allegedly false or misleading portrayal of me), (d) infliction of emotional distress (whether allegedly intentional or negligent), (e) defamation (such as allegedly false statements made on ABC Con), or (f) intellectual property rights (such as copyright, trademark, unfair competition, trade secrets, patents, Lanham Act, or other state or federally protected interests). 9. No Obligation: Company is under no obligation to produce ABC Con hereunder and failure to exercise any rights contained herein shall not constitute a breach of any covenant, express or implied. This Agreement shall inure to the benefit of Company’s successors, assigns, licensees, grantees, and associated, affiliated, and subsidiary companies. 10. Resolution of Disputes: Any and all disputes hereunder shall be resolved by arbitration in accordance with the American Arbitration Association of America (“AAA”) under the rules then obtaining. Any party hereto electing to commence an action shall give written notice to the other party hereto of such election. The location for such arbitration shall be [Con location], subject to the convenience of the parties and any and all rights of discovery available pursuant to such arbitration shall be limited by the applicable arbitration provisions of the [State] Code of Civil Procedure. The award of such arbitrator may be confirmed or enforced in any court of competent jurisdiction. The costs and expenses of the arbitrator, including the attorneys’ fees and costs of each of the parties, may be apportioned between the parties by such arbitrator. 11. Miscellaneous: a. No Partnership or Joint Venture: Nothing in this Agreement shall be construed as creating a partnership, joint venture or employment relationship between the parties hereto, and each

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party is solely and exclusively responsible for its own debts and obligations. b. Further Documents: Each of the parties agrees to execute, acknowledge and deliver any and all further documents which may be required to carry into effect this Agreement and its respective obligations hereunder, all of which further documents shall be in accordance with and consistent with the terms of this Agreement. c. Headings. Provision headings are solely for convenience and reference, and have no legal significance. d. Assignment. Neither party may assign this Agreement without the written consent of the other party. e. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of [Con’s state] applicable to agreements entered into and wholly performed therein. f. Notices. All notices, statements or other documents which either party shall desire to give to the other hereunder shall be in writing and shall be deemed given as when delivered personally or by telecopier, or 48 hours after deposit in the U.S. mail, postage prepaid and addressed to the recipient party at the address set forth in the opening paragraph of this Agreement, or at such address as either party hereto may designate from time to time in accordance with this Paragraph. g. Amendments. This Agreement may be modified or amended only in a writing signed by both parties. h. Severability. If any provision of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited.

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i. Entire Agreement. This Agreement contains the full and complete understanding between the parties hereto with reference to the within subject matter, supersedes all prior agreements and understandings, whether written or oral, pertaining thereto, and cannot be modified except by a written instrument signed by both of the parties hereto. Each of the parties acknowledges that no representation or promise not expressly contained in this Agreement has been made by the other or its agents or representatives. IN WITNESS WHEREOF, the undersigned have executed this Agreement the day and year first written below. Dated: ______Con Law, LLC

______[Name], Manager

“Artist” [Band Name]

______Its______Print Name of Talent Age

______Signature For Artists under 18 years of Age: I represent I am the parent or guardian of the above-named Talent. For value received I hereby consent to this Agreement in his or her behalf.

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______Print Name of Talent Parent/Guardian ______Signature of Parent or Guardian

C. Sample Employment Agreement

This sample agreement is the type used when employing key personnel. The agreement does not reflect any duties the employee would have as member-manager of an LLC, so that agreement would need to be modified to include those provisions and to adjust the termination provisions if the manager were also a member. A simpler version of this agreement can be used with other employees by deleting provisions related to trade secrets, key-man life insurance, and restrictive covenants. Reproduced From JON M. GARON, OWN IT – THE LAW & BUSINESS GUIDE TO LAUNCHING A NEW BUSINESS THROUGH INNOVATION, EXCLUSIVITY AND RELEVANCE, (CAROLINA ACADEMIC PRESS 2007) (as adapted).

EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is entered into as of [Date] by and between Con LLC, with offices located at [Address] (“Company”) and ______(“Employee”). 1. Employment and Duties. Company hereby employs Employee as ______of the Company on the terms and subject to the conditions contained in this Agreement. Employee shall be responsible for the duties described more fully in the attached job description in Appendix A (Job Description). Employee hereby accepts such employment and agrees to perform in good faith and to the best of Employee’s ability all services which may be required of Employee hereunder and to be available to render services at all reasonable times and places in accordance with such reasonable directions, requests, rules and regulations made by the Company in connection with

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Employee’s employment. Employee shall, during the term hereof, devote Employee’s full time and energy to performing his duties. Employee shall be based at the Company’s corporate offices. Employee understands, however, that Employee shall be required to travel to each of the Company’s other facilities. 2. Employment Handbook. The policies of Company are set forth in an employee handbook (“Employee Handbook”) governing the policies of Company which has been made available to Employee, and the receipt of which is hereby acknowledged. Employee understands that the terms of the Employee Handbook serve as additional obligations of Employee and failure to materially comply with the terms of the Employee Handbook shall be deemed a material breach hereunder. The parties further agree that Company has full authority to modify, repeal, restate and amend the Employee Handbook at any time and Employee understands that all such modifications shall be binding on Employee. In the case of any conflict between this Agreement and the terms of the Employee Handbook, the terms specified in this Agreement shall take precedence over the terms of the Employee Handbook, to the minimum extent necessary to bring such provisions into compliance with this Agreement. 3. Term of Employment. The term of this Agreement shall commence as of the date hereof and shall terminate on ______, 20__, unless sooner terminated as provided herein. 4. Compensation. As full and complete compensation for Employee’s services hereunder and all the rights granted hereunder by Employee to Company, Company shall pay Employee $______per month payable in accordance with Company’s payroll practices for salaried employees, upon the condition that Employee fully and faithfully perform Employee’s services hereunder in accordance with the terms and conditions of this Agreement. In addition, Employee shall be entitled to such bonuses as shall be determined by the Board of Directors of the Company in its sole and absolute discretion. Company shall deduct and withhold from the compensation payable to Employee hereunder any and all amounts required to be deducted or withheld by the Company under the provisions of any statute, regulation, ordinance, or order and any and all amendments hereinafter enacted requiring the withholding or deducting from compensation payable to employees.

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5. Expense Reimbursement. In addition, to the compensation hereinabove provided, Employee shall be reimbursed in a sum equal to the amount of all traveling, hotel, entertainment and other expenses properly and necessarily incurred by Employee in the discharge of Employee’s duties hereunder, and Employee will supply the Company with vouchers, receipts and other details of such expenses upon the Company’s request therefore. 6. Marketing. Employee hereby approves the use of each participants’ name, voice, and image by Company in any manner and forever release and discharge Company from any and all claims, actions, and demands arising out of such use. Artist approves the perpetual and universal right to photograph and re-photograph Employee (still and moving) and to record and rerecord, double, and dub voices and performances, by any methods or means, and to use and authorize others to use Employee’s name, voice, and likeness for and in connection with Company’s activities, programs and events. 7. Death or Disability of Employee. In the event of Employee’s death or disability while in the employ of Company, this Agreement and the compensation due to Employee pursuant to Paragraph 3 hereof shall terminate upon the date of said death or disability and Company shall thereafter be required to make payments only to Employee or Employee’s estate, as the case may be, for all amounts due to Employee as compensation for the services rendered hereunder through the date of death or disability to the extent such amounts have accrued but have not been theretofore paid. If Employee shall recover from such disability prior to the expiration date of this Agreement set forth in Paragraph 2 hereof, this Agreement and Employee’s employment hereunder shall be reinstated for the balance of term of this Agreement. Employee shall be deemed disabled if, Employee in the opinion of Company, is unable to substantially perform the services required of Employee hereunder for a period in excess of 60 consecutive days or 60 days during any 90 day period. In such event, Employee shall be deemed disabled as of such 60th day. 8. Restrictive Covenant. During the term of this Agreement, Employee shall (i) devote Employee’s full time and energy solely and exclusively to the performance of Employee’s duties described herein except during periods of illness or vacation periods; (ii) not directly or

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indirectly provide services to or through any company or firm except Company unless otherwise instructed by Company; (iii) not directly or indirectly own, manage, operate, join, control or participate in the ownership, management, operation or control of or be employed by or connected in any manner with any enterprise which is engaged in any business competitive with or similar to that of Company; and (iv) not render any services of any kind or character for Employee’s own account or for any other person, firm or corporation without first obtaining Company’s consent in writing; provided, however, that Employee shall have the right to perform such incidental services as are necessary in connection with Employee’s (a) private passive investments where Employee is not obligated or required to, and shall not in fact, devote any managerial efforts and provided such investments are not geographically competitive when made with the business of Company or (b) charitable or community activities, or in trade or professional organizations, upon the condition, however, that such incidental services do not interfere with the performance of Employee’s services hereunder. 9. Confidentiality. Employee hereby acknowledges that during the term hereof, Company may, from time to time, disclose to Employee confidential information pertaining to the business and affairs of Company and its clients, including but not limited to, any information not generally known in the industry about Company’s ideas, concepts, products, designs, intellectual property, trade secrets, services, or any combination thereof, whether or not such information would be recognized as proprietary absent this Agreement, including but not limited to confidential information created by Employee whether in written form or embodied in tangible materials (including, without limitation, software, hardware, drafts, drawings, graphs, charts, spreadsheets, disks, tapes, prototypes, samples, letters, notes, memoranda or presentations) (Collectively, “Confidential Information”). Confidential Information shall also include customer lists and accounts and other similar items indicating the source of income of Company.

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The parties acknowledge that all Confidential Information is the sole property of Company, that Employee shall take all steps necessary to maintain the confidence of Confidential Information by complying with Company security measures, marking documents as required, and restricting access to documents and data in Employee’s possession. Employee shall not, at any time during or after the term of this Agreement, disclose to any third party or directly or indirectly make use of any such Confidential Information, All documents and data (whether written, printed or otherwise reproduced or recorded) containing or relating to any such Confidential Information, whether made or compiled by, or delivered or made available to, or otherwise obtained by Employee, shall be returned by Employee to Company at the time of the termination of this Agreement or upon any earlier request by Company, without Employee retaining any copies, notes or excerpts thereof. 10. Restrictive Covenant Following Employment. During a period of one year following the termination of this Agreement, Employee shall not accept employment, consulting services or otherwise engage in business with the direct competitors of Company listed on Appendix B or any direct or indirect competitor where Employee could reasonably utilize the Confidential Information in a manner that is not generally known to the public. 11. Ownership of Material and Ideas. Employee agrees that all material, ideas, and inventions pertaining to the business of Company or of any client of Company, including but not limited to, all trade secrets, patents and copyrights thereon and renewals and extensions thereof, and the names, addresses and telephone numbers of customers of Company, shall belong solely to Company. 12. Fringe Benefits. Company shall provide to Employee throughout the term of this Agreement the benefits of any group life insurance plan, group medical insurance plan and other employee benefit plans available which the Company or its parent may adopt and for which Employee shall qualify as set forth in the Employee Handbook. 13. Termination. Company may without notice terminate this Agreement and all of the Company’s obligations hereunder for cause as such term is defined herein (“Cause”). For purposes hereof, Cause shall mean the

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Employee’s conviction of a felony (which, through the lapse of time or otherwise is not subject to appeal) or material refusal, failure or neglect without proper cause to perform Employee’s obligations under this Agreement or material breach of any of Employee’s fiduciary obligations as an officer or member of the Board of Directors of Company. Upon termination for Cause, the Company shall thereafter be required to make payment to Employee only for amounts due to Employee as compensation for services rendered hereunder and not previously paid. In the event, Employee is terminated with Cause or without Cause, Employee is removed from the Employee’s current position and not provided a comparable position during the term of his employment hereunder, the Company shall continue to be obligated to pay the balance of compensation otherwise payable to Employee without any obligation on Employee’s part to mitigate and with Company having no right of offset in the event that Employee shall obtain other employment. 14. Services Unique. It is agreed that the services to be rendered by Employee hereunder are of a special, unique, unusual, extraordinary and intellectual character which gives them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in an action at law and that a breach by Employee of any of the provisions contained herein will cause the Company irreparable injury and damage. Employee expressly agrees that the Company shall be entitled to injunctive or other equitable relief to prevent a breach thereof. Resort to any such equitable relief shall not be construed as a waiver of any of the rights or remedies which the Company may have against Employee for damages or otherwise. 15. Key Man Life Insurance. During the term of this Agreement, the Company may at any time effect insurance on Employee’s life and/or health in such amounts and in such form as the Company may in its sole discretion decide. Employee shall not have any interest in such insurance, but shall, if the Company requests, submit to such medical examinations, supply such information and execute such documents as may be required in connection with or so as to enable the Company to effect such insurance.

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16. Vacation. Employee shall have the right during each one (1) year period of the term of this Agreement to take an aggregate of three (3) weeks of vacation, with pay, at such times mutually convenient to him and to the Company. Employee shall have the right, however, to accumulate his vacation from one period to the next period without the Company’s consent. 17. Applicable Law and Severability. This document shall, in all respects, be governed by the laws of the State of California applicable to agreements executed and to be wholly performed within the State of California. Nothing contained herein shall be construed so as to require the commission of any act contrary to law, and wherever there is any conflict between any provision contained herein and any present or future statute, law, ordinance or regulation contrary to which the parties have no legal right to contract, the latter shall prevail but the provision of this document which is affected shall be curtailed and limited only to the extent necessary to bring it within the requirements of the law. 18. Attorneys’ Fees. In the event any action be instituted by a party to enforce any of the terms and provisions contained herein, the prevailing party in such action shall be entitled to such reasonable attorneys’ fees, costs and expenses as may be fixed by the Court. 19. Modifications or Amendments. No amendment, change or modification of this document shall be valid unless in writing and signed by all of the parties hereto. 20. Successors and Assigns. All of the terms and provisions contained herein shall inure to the benefit of and shall be binding upon the parties hereto and their respective heirs, personal representatives, successors and assigns. 21. Entire Agreement. This document constitutes the entire understanding and agreement of the parties with respect to the subject matter of this Agreement, and any and all prior agreements, understandings or representations are hereby terminated and cancelled in their entirety and are of no further force or effect.

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

Con LLC, a [State] Limited Liability Company

By: ______“Company”

By: ______“Employee”

21. Insurance

This is a quick summary of the types of insurance companies and coverage available. Selection of these companies does not constitute an endorsement or indication of quality for these providers. Check with the Better Business Bureau and insurance ratings agencies before purchasing any insurance policy.

Event Insurance Now Event Insurance Now is an online delivery platform for Special Event Insurance Products offered by Gales Creek Insurance Services, a privately owned corporation located in Portland, Oregon. http://www.eventinsurancenow.com/index.cfm?fuseaction=cCo ntent.festivals

K&K Insurance Group Inc. 1-800-637-4757 https://www.kandkinsurance.com/EventsAttractions/Pages/Fes tivals.aspx

ProSight Global, Inc. http://www.prosightspecialty.com/ Entertaining Safety Handbook http://www.prosightspecialty.com/assets/Handbook/Entertaini ngSafety.pdf

SC Insurance Holdings, LLC 14850 Monfort Drive Ste 131 Dallas, TX 75254 888.749.2100 http://www.csicoverage.com/Festivals.aspx

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22. Federal Employment Law Requirements

A. Summary of Prohibited Employment Practices

This summary of employment practices is reproduced and compiled from the U.S. Equal Employment Opportunity Commission (EEOC). With minor editing, the text is provided by the EEOC. As a government-authored work, the original work is not protected by copyright. The text may be found at https://www1.eeoc.gov//laws/practices/index.cfm. 1. Prohibited Employment Policies/Practices Under the laws enforced by EEOC, it is illegal to discriminate against someone (applicant or employee) because of that person’s race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. It is also illegal to retaliate against a person because he or she complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit. The law forbids discrimination in every aspect of employment. The laws enforced by EEOC prohibit an employer or other covered entity from using neutral employment policies and practices that have a disproportionately negative effect on applicants or employees of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), or national origin, or on an individual with a disability or class of individuals with disabilities, if the policies or practices at issue are not job-related and necessary to the operation of the business. The laws enforced by EEOC also prohibit an employer from using neutral employment policies and practices that have a disproportionately negative impact on applicants or employees age 40 or older, if the policies or practices at issue are not based on a reasonable factor other than age. Job Advertisements It is illegal for an employer to publish a job advertisement that shows a preference for or discourages someone from applying for a job because of his or her race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information.

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For example, a help-wanted ad that seeks “females” or “recent college graduates” may discourage men and people over 40 from applying and may violate the law. Recruitment It is also illegal for an employer to recruit new employees in a way that discriminates against them because of their race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer’s reliance on word-of-mouth recruitment by its mostly Hispanic work force may violate the law if the result is that almost all new hires are Hispanic. Application & Hiring It is illegal for an employer to discriminate against a job applicant because of his or her race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not refuse to give employment applications to people of a certain race. An employer may not base hiring decisions on stereotypes and assumptions about a person’s race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. If an employer requires job applicants to take a test, the test must be necessary and related to the job and the employer may not exclude people of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, or individuals with disabilities. In addition, the employer may not use a test that excludes applicants age 40 or older if the test is not based on a reasonable factor other than age. If a job applicant with a disability needs an accommodation (such as a sign language interpreter) to apply for a job, the employer is required to provide the accommodation, so long as the accommodation does not cause the employer significant difficulty or expense. Job Referrals It is illegal for an employer, employment agency or union to take into account a person’s race, color, religion, sex (including gender identity,

22. Federal Employment Law Requirements 269 sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information when making decisions about job referrals. Job Assignments & Promotions It is illegal for an employer to make decisions about job assignments and promotions based on an employee’s race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not give preference to employees of a certain race when making shift assignments and may not segregate employees of a particular national origin from other employees or from customers. An employer may not base assignment and promotion decisions on stereotypes and assumptions about a person’s race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. If an employer requires employees to take a test before making decisions about assignments or promotions, the test may not exclude people of a particular race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), or national origin, or individuals with disabilities, unless the employer can show that the test is necessary and related to the job. In addition, the employer may not use a test that excludes employees age 40 or older if the test is not based on a reasonable factor other than age. Pay and Benefits It is illegal for an employer to discriminate against an employee in the payment of wages or employee benefits on the bases of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. Employee benefits include sick and vacation leave, insurance, access to overtime as well as overtime pay, and retirement programs. For example, an employer may not pay Hispanic workers less than African-American workers because of their national origin, and men and women in the same workplace must be given equal pay for equal work. In some situations, an employer may be allowed to reduce some employee benefits for older workers, but only if the cost of providing the

270 Resources and References reduced benefits is the same as the cost of providing benefits to younger workers. Discipline & Discharge An employer may not take into account a person’s race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information when making decisions about discipline or discharge. For example, if two employees commit a similar offense, an employer many not discipline them differently because of their race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. When deciding which employees will be laid off, an employer may not choose the oldest workers because of their age. Employers also may not discriminate when deciding which workers to recall after a layoff. Employment References It is illegal for an employer to give a negative or false employment reference (or refuse to give a reference) because of a person’s race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. Reasonable Accommodation & Disability The law requires that an employer provide reasonable accommodation to an employee or job applicant with a disability, unless doing so would cause significant difficulty or expense for the employer. A reasonable accommodation is any change in the workplace (or in the ways things are usually done) to help a person with a disability apply for a job, perform the duties of a job, or enjoy the benefits and privileges of employment. Reasonable accommodation might include, for example, providing a ramp for a wheelchair user or providing a reader or interpreter for a blind or deaf employee or applicant. Reasonable Accommodation & Religion The law requires an employer to reasonably accommodate an employee’s religious beliefs or practices, unless doing so would cause

22. Federal Employment Law Requirements 271 difficulty or expense for the employer. This means an employer may have to make reasonable adjustments at work that will allow the employee to practice his or her religion, such as allowing an employee to voluntarily swap shifts with a co-worker so that he or she can attend religious services. Training & Apprenticeship Programs It is illegal for a training or apprenticeship program to discriminate on the bases of race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. For example, an employer may not deny training opportunities to African-American employees because of their race. In some situations, an employer may be allowed to set age limits for participation in an apprenticeship program. Harassment Harassment is unwelcome conduct that is based on race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information. Harassment becomes unlawful where 1) enduring the offensive conduct becomes a condition of continued employment, or 2) the conduct is severe or pervasive enough to create a work environment that a reasonable person would consider intimidating, hostile, or abusive. Anti-discrimination laws also prohibit harassment against individuals in retaliation for filing a discrimination charge, testifying, or participating in any way in an investigation, proceeding, or lawsuit under these laws; or opposing employment practices that they reasonably believe discriminate against individuals, in violation of these laws. Petty slights, annoyances, and isolated incidents (unless extremely serious) will not rise to the level of illegality. To be unlawful, the conduct must create a work environment that would be intimidating, hostile, or offensive to reasonable people. Offensive conduct may include, but is not limited to, offensive jokes, slurs, epithets or name calling, physical assaults or threats, intimidation, ridicule or mockery, insults or put-downs, offensive objects or pictures, and interference with work performance. Harassment can occur in a variety of circumstances, including, but not limited to, the following:

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The harasser can be the victim’s supervisor, a supervisor in another area, an agent of the employer, a co-worker, or a non-employee. The victim does not have to be the person harassed, but can be anyone affected by the offensive conduct. Unlawful harassment may occur without economic injury to, or discharge of, the victim. Prevention is the best tool to eliminate harassment in the workplace. Employers are encouraged to take appropriate steps to prevent and correct unlawful harassment. They should clearly communicate to employees that unwelcome harassing conduct will not be tolerated. They can do this by establishing an effective complaint or grievance process, providing anti- harassment training to their managers and employees, and taking immediate and appropriate action when an employee complains. Employers should strive to create an environment in which employees feel free to raise concerns and are confident that those concerns will be addressed. Employees are encouraged to inform the harasser directly that the conduct is unwelcome and must stop. Employees should also report harassment to management at an early stage to prevent its escalation. Employer Liability for Harassment The employer is automatically liable for harassment by a supervisor that results in a negative employment action such as termination, failure to promote or hire, and loss of wages. If the supervisor’s harassment results in a hostile work environment, the employer can avoid liability only if it can prove that: 1) it reasonably tried to prevent and promptly correct the harassing behavior; and 2) the employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer. The employer will be liable for harassment by non-supervisory employees or non-employees over whom it has control (e.g., independent contractors or customers on the premises), if it knew, or should have known about the harassment and failed to take prompt and appropriate corrective action. When investigating allegations of harassment, the EEOC looks at the entire record: including the nature of the conduct, and the context in which the alleged incidents occurred. A determination of whether harassment is severe or pervasive enough to be illegal is made on a case-by-case basis.

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Harassment can take the form of slurs, graffiti, offensive or derogatory comments, or other verbal or physical conduct. Sexual harassment (including unwelcome sexual advances, requests for sexual favors, and other conduct of a sexual nature) is also unlawful. Although the law does not prohibit simple teasing, offhand comments, or isolated incidents that are not very serious, harassment is illegal if it is so frequent or severe that it creates a hostile or offensive work environment or if it results in an adverse employment decision (such as the victim being fired or demoted). The harasser can be the victim’s supervisor, a supervisor in another area, a co-worker, or someone who is not an employee of the employer, such as a client or customer. Harassment outside of the workplace may also be illegal if there is a link with the workplace. For example, if a supervisor harasses an employee while driving the employee to a meeting. Harassment is a form of employment discrimination that violates Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, (ADEA), and the Americans with Disabilities Act of 1990, (ADA). Terms & Conditions of Employment The law makes it illegal for an employer to make any employment decision because of a person’s race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. That means an employer may not discriminate when it comes to such things as hiring, firing, promotions, and pay. It also means an employer may not discriminate, for example, when granting breaks, approving leave, assigning work stations, or setting any other term or condition of employmenthowever small. Dress Code In general, an employer may establish a dress code which applies to all employees or employees within certain job categories. However, there are a few possible exceptions. While an employer may require all workers to follow a uniform dress code even if the dress code conflicts with some workers’ ethnic beliefs or practices, a dress code must not treat some employees less favorably

274 Resources and References because of their national origin. For example, a dress code that prohibits certain kinds of ethnic dress, such as traditional African or East Indian attire, but otherwise permits casual dress would treat some employees less favorably because of their national origin. Moreover, if the dress code conflicts with an employee’s religious practices and the employee requests an accommodation, the employer must modify the dress code or permit an exception to the dress code unless doing so would result in undue hardship. Similarly, if an employee requests an accommodation to the dress code because of his disability, the employer must modify the dress code or permit an exception to the dress code, unless doing so would result in undue hardship. Constructive Discharge/Forced To Resign Discriminatory practices under the laws EEOC enforces also include constructive discharge or forcing an employee to resign by making the work environment so intolerable a reasonable person would not be able to stay. Record Keeping All personnel and employment records made or used (including, but not limited to, requests for reasonable accommodation, application forms submitted by applicants, and records dealing with hiring, promotion, demotion, transfer, lay-off or termination, rates of pay, compensation, tenure, selection for training or apprenticeship, or other terms of employment) must be preserved for the following periods: Private employers must retain such records for one year from the date of making the record or the personnel action involved, whichever occurs later, but in the case of involuntary termination of an employee, they must retain the terminated employee’s personnel or employment records for one year from the date of termination. Educational Institutions and State and Local Governments must retain such records for two years from the date of the making of the record or the personnel action involved, whichever occurs later, but in the case of involuntary termination of an employee, they must retain the terminated employee’s personnel or employment records for two years from the date of termination.

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Labor Unions which are “referral unions” must retain all membership and referral records (including applications for same) for a period of one year from the date of making the record. Apprenticeship Committees that control apprenticeship programs must retain all apprenticeship records, including, but not necessarily limited to, requests for reasonable accommodation, test papers completed by applicants, and records of interviews, for a period of two years from the date of making of the record. Records Relating to a Charge of Discrimination Where a charge of discrimination has been filed under Title VII, the ADA, or GINA, or where a civil action has been brought by the Commission or the Attorney General, the respondent private employer, state or local government employer, educational institution employer, labor union, or apprenticeship committee must retain all records related to the charge or action until final disposition of the charge or action. The date of final disposition means the date of expiration of the statutory period within which the aggrieved person may bring an action in a U.S. District Court or, where such an action has been brought, the date on which such litigation is terminated.

B. Summary of Practices for Employee Screening and Hiring

This summary of employment practices is reproduced and compiled from the U.S. Equal Employment Opportunity Commission (EEOC) and the Federal Trade Commission (FTC). With minor editing, the text is provided by the EEOC. As a government- authored work, the original work is not protected by copyright. The text may be found at https://www1.eeoc.gov//laws/practices/index.cfm. Background Checks and Pre-Employment Inquiries – What Employers Need to Know: When making personnel decisionsincluding hiring, retention, promotion, and reassignmentemployers sometimes want to consider the backgrounds of applicants and employees. For example, some employers might try to find out about the person’s work history, education, criminal record, financial history, medical history, or use of social media. Except

276 Resources and References for certain restrictions related to medical and genetic information (see below), it’s not illegal for an employer to ask questions about an applicant’s or employee’s background, or to require a background check. However, any time you use an applicant’s or employee’s background information to make an employment decision, regardless of how you got the information, you must comply with federal laws that protect applicants and employees from discrimination. That includes discrimination based on race, color, national origin, sex, or religion; disability; genetic information (including family medical history); and age (40 or older). These laws are enforced by the Equal Employment Opportunity Commission (EEOC). In addition, when you run background checks through a company in the business of compiling background information, you must comply with the Fair Credit Reporting Act (FCRA). The Federal Trade Commission (FTC) enforces the FCRA. This publication explains how to comply with both the federal nondiscrimination laws and the FCRA. It’s also a good idea to review the laws of your state and municipality regarding background reports or information because some states and municipalities regulate the use of that information for employment purposes. As a general rule, the information obtained and requested through the pre-employment process should be limited to those essential for determining if a person is qualified for the job; whereas, information regarding race, sex, national origin, age, and religion are irrelevant in such determinations. Employers are explicitly prohibited from making pre-offer inquiries about disability. Although state and federal equal opportunity laws do not clearly forbid employers from making pre-employment inquiries that relate to, or disproportionately screen out members based on race, color, sex, national origin, religion, or age, such inquiries may be used as evidence of an employer’s intent to discriminate unless the questions asked can be justified by some business purpose. Therefore, inquiries about organizations, clubs, societies, and lodges of which an applicant may be a member or any other questions, which may indicate the applicant’s race, sex, national origin, disability status, age, religion, color or ancestry if answered, should generally be avoided.

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Similarly, employers should not ask for a photograph of an applicant. If needed for identification purposes, a photograph may be obtained after an offer of employment is made and accepted. Before You Get Background Information In all cases, make sure that you’re treating everyone equally. It’s illegal to check the background of applicants and employees when that decision is based on a person’s race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older). For example, asking only people of a certain race about their financial histories or criminal records is evidence of discrimination. Except in rare circumstances, don’t try to get an applicant’s or employee’s genetic information, which includes family medical history. Even if you have that information, don’t use it to make an employment decision. (For more information about this law, see the EEOC’s publications explaining the Genetic Information Nondiscrimination Act, or GINA.) Don’t ask any medical questions before a conditional job offer has been made. If the person has already started the job, don’t ask medical questions unless you have objective evidence that he or she is unable to do the job or poses a safety risk because of a medical condition. If you get background information (for example, a credit or criminal background report) from a company in the business of compiling background information, there are additional procedures the Fair Credit Reporting Act (FCRA) requires beforehand: Tell the applicant or employee you might use the information for decisions about his or her employment. This notice must be in writing and in a stand-alone format. The notice can’t be in an employment application. You can include some minor additional information in the notice (like a brief description of the nature of consumer reports), but only if it doesn’t confuse or detract from the notice. If you are asking a company to provide an “investigative report” – a report based on personal interviews concerning a person’s character, general reputation, personal characteristics, and lifestyle – you must also tell the applicant or employee of his or her right to a description of the nature and scope of the investigation.

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Get the applicant’s or employee’s written permission to do the background check. This can be part of the document you use to notify the person that you will get the report. If you want the authorization to allow you to get background reports throughout the person’s employment, make sure you say so clearly and conspicuously. Certify to the company from which you are getting the report that you:  notified the applicant and got their permission to get a background report;  complied with all of the FCRA requirements; and  won’t discriminate against the applicant or employee, or otherwise misuse the information in violation of federal or state equal opportunity laws or regulations. Using Background Information Any background information you receive from any source must not be used to discriminate in violation of federal law. This means that you should: Apply the same standards to everyone, regardless of their race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older). For example, if you don’t reject applicants of one ethnicity with certain financial histories or criminal records, you can’t reject applicants of other ethnicities because they have the same or similar financial histories or criminal records. Take special care when basing employment decisions on background problems that may be more common among people of a certain race, color, national origin, sex, or religion; among people who have a disability; or among people age 40 or older. For example, employers should not use a policy or practice that excludes people with certain criminal records if the policy or practice significantly disadvantages individuals of a particular race, national origin, or another protected characteristic, and does not accurately predict who will be a responsible, reliable, or safe employee. In legal terms, the policy or practice has a “disparate impact” and is not “job related and consistent with business necessity.” Be prepared to make exceptions for problems revealed during a background check that were caused by a disability. For example, if you are inclined not to hire a person because of a problem caused by a disability,

22. Federal Employment Law Requirements 279 you should allow the person to demonstrate his or her ability to do the job – despite the negative background information – unless doing so would cause significant financial or operational difficulty. When taking an adverse action (for example, not hiring an applicant or firing an employee) based on background information obtained through a company in the business of compiling background information, the FCRA has additional requirements: Before you take an adverse employment action, you must give the applicant or employee:  a notice that includes a copy of the consumer report you relied on to make your decision; and  a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act,” which you should have received from the company that sold you the report.  By giving the person the notice in advance, the person has an opportunity to review the report and explain any negative information. After you take an adverse employment action, you must tell the applicant or employee (orally, in writing, or electronically):  that he or she was rejected because of information in the report;  the name, address, and phone number of the company that sold the report;  that the company selling the report didn’t make the hiring decision, and can’t give specific reasons for it; and  that he or she has a right to dispute the accuracy or completeness of the report, and to get an additional free report from the reporting company within 60 days. Disposing of Background Information Any personnel or employment records you make or keep (including all application forms, regardless of whether the applicant was hired, and other records related to hiring) must be preserved for one year after the records

280 Resources and References were made, or after a personnel action was taken, whichever comes later. (The EEOC extends this requirement to two years for educational institutions and for state and local governments. The Department of Labor also extends this requirement to two years for federal contractors that have at least 150 employees and a government contract of at least $150,000.) If the applicant or employee files a charge of discrimination, you must maintain the records until the case is concluded. Once you’ve satisfied all applicable recordkeeping requirements, you may dispose of any background reports you received. However, the law requires that you dispose of the reportsand any information gathered from themsecurely. That can include burning, pulverizing, or shredding paper documents and disposing of electronic information so that it can’t be read or reconstructed. For more information, see “Disposing of Consumer Report Information? Rule Tells How” at http://www.business.ftc.gov/documents/alt152-disposing-consumer- report-information-rule-tells-how. Specific Types of Inquiries Race: In general, it is assumed that pre-employment requests for information will form the basis for hiring decisions. Therefore, employers should not request information that discloses or tends to disclose an applicant’s race unless it has a legitimate business need for such information. If an employer legitimately needs information about its employees’ or applicants’ race for affirmative action purposes and/or to track applicant flow, it may obtain the necessary information and simultaneously guard against discriminatory selection by using a mechanism, such as “tear-off” sheets. This allows the employer to separate the race-related information from the information used to determine if a person is qualified for the job. Asking for race-related information on the telephone could probably never be justified. Height & Weight: Height and weight requirements tend to disproportionately limit the employment opportunities of some protected groups and unless the employer can demonstrate how the need is related to the job, it may be viewed as illegal under federal law. A number of states and localities have laws specifically prohibiting discrimination on the basis of height and weight unless based on actual job requirements. Therefore, unless job-related, inquiries about height and weight should be avoided.

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Financial Information: “Financial information” includes current or past assets, liabilities, or credit rating, bankruptcy or garnishment, refusal or cancellation of bonding, car ownership, rental or ownership of a house, length of residence at an address, charge accounts, furniture ownership, or bank accounts. Federal law does not prevent employers from asking about your financial information. But, the federal EEO laws do prohibit employers from illegally discriminating when using financial information to make employment decisions. First, employers must not apply a financial requirement differently to different people based on their race, color, national origin, religion, sex, disability, age, or genetic information. Second, an employer must not have a financial requirement if it does not help the employer to accurately identify responsible and reliable employees, and if, at the same time, the requirement significantly disadvantages people of a particular race, color, national origin, religion, or sex. Third, an employer might have to make an exception to a financial requirement for a person who cannot meet the requirement because of a disability. Depending on the state you live in, there also may be state laws governing employers’ use of financial information. Unemployed Status: “Unemployed status” includes current or past periods of unemployment. Federal law does not prevent employers from asking about unemployed status, but the federal EEO laws do prohibit using this information to discriminate. If an employer does reject job applicants based on unemployed status, it must do so consistently, without regard to race, color, national origin, religion, sex, disability, age, and genetic information. Employers also must not screen out job applicants based on unemployed status if it does not help the employer to accurately identify responsible and reliable employees and if, at the same time, it significantly disadvantages people of a particular race, color, national origin, religion, or sex. In addition, an employer may have to make exceptions to a policy of rejecting applicants based on unemployed status for applicants whose unemployed status was caused by a disability. Depending on the state you live in, there also may be state laws governing employers’ consideration of unemployed status.

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Background Checks: When making personnel decisionsincluding hiring, retention, promotion, and reassignmentemployers sometimes want to consider the backgrounds of applicants and employees. Except for certain restrictions related to medical and genetic information, it is not illegal for an employer to ask questions about an applicants or employees background, or to require a background check. But the employer cannot conduct background checks or use the information obtained in a manner that denies equal employment opportunity to anyone on a protected basis, by intent or by unlawful disparate impact. Religious Affiliation or Beliefs: Questions about an applicant’s religious affiliation or beliefs (unless the religion is a bona fide occupational qualification (BFOQ)), are generally viewed as non-job-related and problematic under federal law. Religious corporations, associations, educational institutions, or societies are exempt from the federal laws that EEOC enforces when it comes to the employment of individuals based on their particular religion. In other words, an employer whose purpose and character is primarily religious is permitted to lean towards hiring persons of the same religion. This exception relieves religious organizations only from the ban on employment discrimination based on religion. It does not exempt such organizations from employing individuals due to their race, gender, national origin, disability, color, and/or age. Other employers should avoid questions about an applicant’s religious affiliation, such as place of worship, days of worship, and religious holidays and should not ask for references from religious leaders, e.g., minister, rabbi, priest, imam, or pastor. Citizenship: Employers should not ask whether or not a job applicant is a United States citizen before making an offer of employment. The Immigration Reform and Control Act of 12986 (IRCA) makes it illegal for employers to discriminate with respect to hiring, firing, or recruitment or referral for a fee, based on an individual’s citizenship or immigration status. For example, the law prohibits employers from hiring only U.S. citizens or lawful permanent residents unless required to do so by law, regulation or government contract; it also prohibits employers from preferring to hire temporary visa holders or undocumented workers over qualified U.S. citizens or other protected individuals, such as refugees or individuals granted asylum.

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Sex/Gender: Questions about an applicant’s sex, (unless it is a bona fide occupational qualification (BFOQ) and is essential to a particular position or occupation), marital status, pregnancy, medical history of pregnancy, future child bearing plans, number and/or ages of children or dependents, provisions for child care, abortions, birth control, ability to reproduce, and name or address of spouse or children are generally viewed as non-job- related and problematic under Title VII. Any pre-employment inquiry in connection with prospective employment expressing or implying limitations or special treatment because of sex (unless based upon BFOQ) or any inquiry made of members of one sex and not the other, is similarly troublesome. Marital Status, Number of Children: Questions about marital status and number and ages of children are frequently used to discriminate against women and may violate Title VII if used to deny or limit employment opportunities. It is clearly discriminatory to ask such questions only of women and not men (or vice-versa). Even if asked of both men and women, such questions may be seen as evidence of intent to discriminate against, for example, women with children. Generally, employers should not use non job-related questions involving marital status, number and/or ages of children or dependents, or names of spouses or children of the applicant. Such inquiries may be asked after an employment offer has been made and accepted if needed for insurance or other legitimate business purposes. The following pre-employment inquiries may be regarded as evidence of intent to discriminate when asked in the pre-employment context:  Whether applicant is pregnant  Marital status of applicant or whether applicant plans to marry  Number and age of children or future child bearing plans  Child care arrangements  Employment status of spouse  Name of spouse Disability: Under the law, employers generally cannot ask disability- related questions or require medical examinations until after an applicant

284 Resources and References has been given a conditional job offer. This is because, in the past, this information was frequently used to exclude applicants with disabilities before their ability to perform a job was evaluated. Employers are permitted pre-offer to ask limited questions about reasonable accommodation if they reasonably believe that the applicant may need accommodation because of an obvious or voluntarily disclosed disability, or where the applicant has disclosed a need for accommodation. Also pre- offer, employers may ask if the applicant will need an accommodation to perform a specific job duty, and if the answer is yes, the employer may then ask what the accommodation would be. The employer may not ask any questions about the nature or severity of the disability pre-offer. However, after making a conditional job offer, an employer may ask any disability-related question or require a medical examination as long as all individuals selected for the same job are asked the same questions or made to take the same examination. Medical Questions & Examinations: The ADA places restrictions on employers when it comes to asking job applicants to answer medical questions, take a medical exam, or identify a disability. An employer may not ask a job applicant, for example, if he or she has a disability (or about the nature of an obvious disability). An employer also may not ask a job applicant to answer medical questions or take a medical exam before making a job offer. An employer may ask a job applicant whether they can perform the job and how they would perform the job. The law allows an employer to condition a job offer on the applicant answering certain medical questions or successfully passing a medical exam, but only if all new employees in the same job have to answer the questions or take the exam. Once a person is hired and has started work, an employer generally can only ask medical questions or require a medical exam if the employer needs medical documentation to support an employee’s request for an accommodation or if the employer has reason to believe an employee would not be able to perform a job successfully or safely because of a medical condition. The law also requires that the employers keep all medical records and information confidential and in separate medical files.

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Employment Eligibility IRCA requires employers to verify the identity and employment eligibility of all employees hired after November 6, 1986, by completing the Employment Eligibility Verification (I-9) Form, and reviewing documents showing the employee’s identity and employment authorization. The law prohibits employers from rejecting valid documents or insisting on additional documents beyond what is legally required for employment eligibility verification (or the Department of Homeland Security (DHS) Form I-9), based on an employee’s citizenship status or national origin. For example, e.g., an employer cannot require only individuals the employer perceives as “foreign” to verify their employment eligibility or produce specific documents, such as Permanent Resident (“green”) cards or Employment Authorization Documents. It is the employee’s choice which of the permitted documents to show for employment eligibility verification. As long as the document appears reasonably genuine on its face, and relates to the employee, it should be accepted. Because of potential claims of illegal discrimination, employment eligibility verification should be conducted after an offer to hire has been made. Applicants may be informed of these requirements in the pre- employment setting by adding the following statement on the employment application: “In compliance with federal law, all persons hired will be required to verify identity and eligibility to work in the United States and to complete the required employment eligibility verification document form upon hire.” The Immigration Reform and Control Act of 1986 (IRCA) also prohibits discrimination on the basis of national origin by smaller employers (with 4 to 14 employees). IRCA prohibits retaliation against individuals for asserting their rights under the Act, or for filing a charge or assisting in an investigation or proceeding under IRCA. Discrimination charges under IRCA are processed by the Department of Justice, Office of Special Counsel (OSC) for Immigration-Related Unfair Employment Practices. For more information, contact the OSC at:

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1-800-255-7688 (voice for employees/applicants), 1-800-237-2515 (TTY for employees/applicants), 1-800-255-8155 (voice for employers), or 1-800-362-2735 (TTY for employers), or http://www.usdoj.gov/crt/osc. Employers must complete Form I-9 to document verification of the identity and employment authorization of each new employee (both citizen and noncitizen) hired after November 6, 1986, to work in the United States … Employers are responsible for completing and retaining Form I-9 no later than the first day of employment. Section 1 should never be completed before the employee has accepted a job offer. … The form is not filed with the USCIS or any government agency. Form I-9 must be retained by the employer and made available for inspection by U.S. Government officials ….

23. Regulations for Crowdfunding: A Small Entity Compliance Guide for Issuers

This summary of employment practices is reproduced and compiled from the U.S. Securities and Exchange Commission (SEC). Regulation Crowdfunding: A Small Entity Compliance Guide for Issuers first published May 13, 2016. As a government-authored work, the original work is not protected by copyright. The text may be found at https://www.sec.gov/info/smallbus/secg/rccomplianceg uide-051316.htm. 1. Introduction Under the Securities Act of 1933, the offer and sale of securities must be registered unless an exemption from registration is available. Title III of the Jumpstart Our Business Start-ups (JOBS) Act of 2012 added Securities Act Section 4(a)(6) that provides an exemption from registration for certain crowdfunding transactions.[2] In 2015, the Commission adopted Regulation Crowdfunding to implement the requirements of Title III.[3] Under the rules, eligible companies will be allowed to raise capital using Regulation Crowdfunding starting May 16, 2016. 2. Requirements of Regulation Crowdfunding In order to rely on the Regulation Crowdfunding exemption, certain requirements must be met. a. Maximum Offering Amount of $1 Million A company issuing securities in reliance on Regulation Crowdfunding (an “issuer”) is permitted to raise a maximum aggregate amount of $1 million in a 12-month period. In determining the amount that may be sold in a particular offering, an issuer should count:  The amount it has already sold (including amounts sold by entities controlled by, or under common control with, the issuer, as well as any amounts sold by any predecessor of the issuer) in reliance on Regulation Crowdfunding during the 12-month period preceding the expected date of sale, plus

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 The amount the issuer intends to raise in reliance on Regulation Crowdfunding in this offering.  An issuer does not aggregate amounts sold in other exempt (non-crowdfunding) offerings during the preceding 12-month period for purposes of determining the amount that may be sold in a particular Regulation Crowdfunding offering. b. Investors Subject to Limits Individual investors are limited in the amounts they are allowed to invest in all Regulation Crowdfunding offerings over the course of a 12- month period:  If either of an investor’s annual income or net worth is less than $100,000, then the investor’s investment limit is the greater of:  $2,000 or 5 percent of the lesser of the investor’s annual income or net worth.  If both annual income and net worth are equal to or more than $100,000, then the investor’s limit is 10 percent of the lesser of their annual income or net worth.  During the 12-month period, the aggregate amount of securities sold to an investor through all Regulation Crowdfunding offerings may not exceed $100,000, regardless of the investor’s annual income or net worth.  Spouses are allowed to calculate their net worth and annual income jointly. This chart illustrates a few examples of the investment limits:

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Investor Investor Calculation Investment Annual Net Worth Limit[4] Income

$30,000 $105,000 Greater of $2,000 or 5% of $2,000 $30,000 ($1,500)

$150,000 $80,000 Greater of $2,000 or 5% of $4,000 $80,000 ($4,000)

$150,000 $100,000 10% of $100,000 ($10,000) $10,000

$200,000 $900,000 10% of $200,000 ($20,000) $20,000

$1,200,000 $2,000,000 10% of $1,200,000 ($120,000), $100,000 subject to $100,000 cap

c. Transactions Conducted Through an Intermediary Each Regulation Crowdfunding offering must be exclusively conducted through one online platform. The intermediary operating the platform must be a broker-dealer or a funding portal that is registered with the SEC and FINRA. Issuers may rely on the efforts of the intermediary to determine that the aggregate amount of securities purchased by an investor does not cause the investor to exceed the investment limits, so long as the issuer does not have knowledge that the investor would exceed the investment limits as a result of purchasing securities in the issuer’s offering. d. Eligibility Certain companies are not eligible to use the Regulation Crowdfunding exemption. These include:  Non-U.S. companies;  Companies that already are Exchange Act reporting companies;  Certain investment companies;

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 Companies that are disqualified under Regulation Crowdfunding’s disqualification rules;  Companies that have failed to comply with the annual reporting requirements under Regulation Crowdfunding during the two years immediately preceding the filing of the offering statement; and  Companies that have no specific business plan or have indicated their business plan is to engage in a merger or acquisition with an unidentified company or companies. 3. Disclosure by Issuers a. Form C Any issuer conducting a Regulation Crowdfunding offering must electronically file its offering statement on Form C through the Commission’s Electronic Data Gathering, Analysis and Retrieval (EDGAR) system and with the intermediary facilitating the crowdfunding offering. A Form C cover page will be generated when the issuer provides information in XML-based fillable text boxes on the EDGAR system. Other required disclosure that is not requested in the XML text boxes must be filed as attachments to Form C. There is not a specific presentation format required for the attachments to Form C; however, the form does include an optional “Question and Answer” format that issuers may use to provide the disclosures that are required but not included in the XML portion. b. Offering Statement Disclosure The instructions to Form C indicate the information that an issuer must disclose, including:  Information about officers, directors, and owners of 20 percent or more of the issuer;  A description of the issuer’s business and the use of proceeds from the offering;  The price to the public of the securities or the method for determining the price;  The target offering amount and the deadline to reach the target offering amount;

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 Whether the issuer will accept investments in excess of the target offering amount;  Certain related-party transactions; and  A discussion of the issuer’s financial condition and financial statements.  The financial statements requirements are based on the amount offered and sold in reliance on Regulation Crowdfunding within the preceding 12-month period:  For issuers offering $100,000 or less: Financial statements of the issuer and certain information from the issuer’s federal income tax returns, both certified by the principal executive officer. If, however, financial statements of the issuer are available that have either been reviewed or audited by a public accountant that is independent of the issuer, the issuer must provide those financial statements instead and will not need to include the information reported on the federal income tax returns or the certification of the principal executive officer.  Issuers offering more than $100,000 but not more than $500,000: Financial statements reviewed by a public accountant that is independent of the issuer. If, however, financial statements of the issuer are available that have been audited by a public accountant that is independent of the issuer, the issuer must provide those financial statements instead and will not need to include the reviewed financial statements.  Issuers offering more than $500,000: o For first-time Regulation Crowdfunding issuers: Financial statements reviewed by a public accountant that is independent of the issuer, unless financial statements of the issuer are available that have been audited by an independent auditor.

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o For issuers that have previously sold securities in reliance on Regulation Crowdfunding: Financial statements audited by a public accountant that is independent of the issuer. c. Amendments to Offering Statement For any offering that has not yet been completed or terminated, an issuer can file on Form C/A an amendment to its offering statement to disclose changes, additions or updates to information. An amendment is required for changes, additions or updates that are material, and in those required instances the issuer must reconfirm outstanding investment commitments within 5 business days, or the investor’s commitment will be considered cancelled. d. Progress Updates An issuer must provide an update on its progress toward meeting the target offering amount within 5 business days after reaching 50% and 100% of its target offering amount. These updates will be filed on Form C-U. If the issuer will accept proceeds over the target offering amount, it also must file a final Form C-U reflecting the total amount of securities sold in the offering. If, however, the intermediary provides frequent updates on its platform regarding the progress of the issuer in meeting the target offering amount, then the issuer will need to file only a final Form C-U to disclose the total amount of securities sold in the offering. e. Annual Reports An issuer that sold securities in a Regulation Crowdfunding offering is required to provide an annual report on Form C-AR no later than 120 days after the end of its fiscal year. The report must be filed on EDGAR and posted on the issuer’s website. The annual report requires information similar to what is required in the offering statement, although neither an audit nor a review of the financial statements is required. Issuers must comply with the annual reporting requirement until one of the following occurs: (1) The issuer is required to file reports under Exchange Act Sections 13(a) or 15(d); (2) The issuer has filed at least one annual report and has fewer than 300 holders of record;

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(3) The issuer has filed at least three annual reports and has total assets that do not exceed $10 million; (4) The issuer or another party purchases or repurchases all of the securities issued pursuant to Regulation Crowdfunding, including any payment in full of debt securities or any complete redemption of redeemable securities; or (5) The issuer liquidates or dissolves in accordance with state law. Any issuer terminating its annual reporting obligations is required to file notice on Form C-TR reporting that it will no longer provide annual reports pursuant to the requirements of Regulation Crowdfunding. 4. Limits on Advertising and Promoters An issuer may not advertise the terms of a Regulation Crowdfunding offering except in a notice that directs investors to the intermediary’s platform and includes no more than the following information:  A statement that the issuer is conducting an offering pursuant to Section 4(a)(6) of the Securities Act, the name of the intermediary through which the offering is being conducted, and a link directing the potential investor to the intermediary’s platform;  The terms of the offering, which means the amount of securities offered, the nature of the securities, the price of the securities, and the closing date of the offering period; and  Factual information about the legal identity and business location of the issuer, limited to the name of the issuer of the security, the address, phone number, and website of the issuer, the e-mail address of a representative of the issuer, and a brief description of the business of the issuer.  Although advertising the terms of the offering off of the intermediary’s platform is limited to a brief notice, an issuer may communicate with investors and potential investors about the terms of the offering through

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communication channels provided on the intermediary’s platform. An issuer must identify itself as the issuer and persons acting on behalf of the issuer must identify their affiliation with the issuer in all communications on the intermediary’s platform. An issuer is allowed to compensate others to promote its crowdfunding offerings through communication channels provided by an intermediary, but only if the issuer takes reasonable steps to ensure that the promoter clearly discloses the compensation with each communication. 5. Restrictions on Resale Securities purchased in a crowdfunding transaction generally cannot be resold for a period of one year, unless the securities are transferred:  To the issuer of the securities;  To an “accredited investor”;  As part of an offering registered with the Commission; or  To a member of the family of the purchaser or the equivalent, to a trust controlled by the purchaser, to a trust created for the benefit of a member of the family of the purchaser or the equivalent, or in connection with the death or divorce of the purchaser or other similar circumstance. 6. Exemption from Section 12(g) Section 12(g) of the Exchange Act requires an issuer with total assets of more than $10 million and a class of securities held of record by either 2,000 persons, or 500 persons who are not accredited investors, to register that class of securities with the Commission. However, securities issued pursuant to Regulation Crowdfunding are conditionally exempted from the record holder count under Section 12(g) if the following conditions are met:  The issuer is current in its ongoing annual reports required pursuant to Regulation Crowdfunding;  Has total assets as of the end of its last fiscal year of $25 million or less; and

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 Has engaged the services of a transfer agent registered with the SEC. As a result, Section 12(g) registration is required if an issuer has, on the last day of its fiscal year, total assets greater than $25 million and the class of equity securities is held by more than 2,000 persons, or 500 persons who are not accredited investors. In that circumstance, an issuer is granted a two-year transition period before it is required to register its class of securities pursuant to Section 12(g), so long as it timely files all of the annual reports required by Regulation Crowdfunding during such period. An issuer seeking to exclude a person from the record holder count of Section 12(g) is responsible for demonstrating that the securities held by the person were initially issued in an offering made under Section 4(a)(6). 7. Bad Actor Disqualification Rule 503 of Regulation Crowdfunding includes “bad actor” disqualification provisions that disqualify offerings if the issuer or other “covered persons” have experienced a disqualifying event, such as being convicted of, or subject to court or administrative sanctions for, securities fraud or other violations of specified laws. a. Covered Persons Understanding the categories of persons that are covered by Rule 503 is important because issuers are required to conduct a factual inquiry to determine whether any covered person has had a disqualifying event, and the existence of such an event will generally disqualify the offering from reliance on Regulation Crowdfunding. “Covered persons” include:  The issuer, including its predecessors and affiliated issuers;  Directors, officers, general partners or managing members of the issuer;  Beneficial owners of 20% or more of the issuer’s outstanding voting equity securities, calculated on the basis of voting power;

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 Promoters connected with the issuer in any capacity at time of sale; and  Persons compensated for soliciting investors, including the general partners, directors, officers or managing members of any such solicitor. b. Disqualifying Events Under the final rule, disqualifying events include:  Certain criminal convictions;  Certain court injunctions and restraining orders;  Certain final orders of certain state and federal regulators;  Certain SEC disciplinary orders;  Certain SEC cease-and-desist orders;  Suspension or expulsion from membership in a self- regulatory organization (SRO), such as FINRA, or being barred from association with an SRO member;  SEC stop orders and orders suspending the Regulation A exemption; and  U.S. Postal Service false representation orders. Many disqualifying events include a look-back period (for example, a court injunction that was issued within the last five years or a regulatory order that was issued within the last ten years). The look-back period is measured from the date of the disqualifying event – for example, the issuance of the injunction or regulatory order and not the date of the underlying conduct that led to the disqualifying event – to the date of the filing of an offering statement. Disqualification will not arise as a result of disqualifying events relating to any conviction, order, judgment, decree, suspension, expulsion or bar that occurred before May 16, 2016, the effective date of Regulation Crowdfunding. Matters that existed before the effective date of Regulation Crowdfunding, are still within the relevant look-back period, and would otherwise be disqualifying are, however, required to be disclosed in the issuer’s offering statement.

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c. Exceptions and Waivers Regulation Crowdfunding provides an exception from disqualification when the issuer is able to demonstrate that it did not know and, in the exercise of reasonable care, could not have known that a covered person with a disqualifying event participated in the offering. The steps an issuer should take to exercise reasonable care will vary according to particular facts and circumstances. An instruction to the rule states that an issuer will not be able to establish that it has exercised reasonable care unless it has made, in light of the circumstances, factual inquiry into whether any disqualifications exist. Disqualification will not arise if, before the filing of the offering statement, the court or regulatory authority that entered the relevant order, judgment or decree advises in writing – whether in the relevant judgment, order or decree or separately to the Commission or its staff – that disqualification under Regulation Crowdfunding should not arise as a consequence of such order, judgment or decree. Regulation Crowdfunding also provides for the ability to seek waivers from disqualification by the Commission upon a showing of good cause that it is not necessary under the circumstances that the exemption be denied. 8. Other Resources The adopting release Regulation Crowdfunding can be found on the SEC’s website at http://www.sec.gov/rules/final/2015/33-9974.pdf. Regulation Crowdfunding (17 CFR 227.100 et seq.) can be accessed through the “Corporation Finance” section of the SEC’s website at http://www.sec.gov/divisions/corpfin/ecfrlinks.shtml. You can also submit complaints or tips about possible securities laws violations on the SEC’s questions and complaints page at http://www.sec.gov/complaint.shtml. 9. Contacting the SEC Staff The SEC staff is happy to assist with questions regarding Regulation Crowdfunding. For issuer questions, you may contact the Division of Corporation Finance’s Office of Small Business Policy using this online

298 Resources and References request form at or by telephone at (202) 551-3460. For intermediary questions, you may contact the Division of Trading and Markets, Office of Chief Counsel, at (202) 551-5777, or search for your answer in the Small Business Compliance Guide for Intermediaries.

[1] This guide was prepared by the staff of the U.S. Securities and Exchange Commission (the “Commission”) as a “small entity compliance guide” under Section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended. The guide summarizes and explains the rules adopted by the SEC, but is not a substitute for any rule itself. Only the rule itself can provide complete and definitive information regarding its requirements. [2] Crowdfunding is a relatively new and evolving method of using the Internet to raise capital to support a wide range of ideas and ventures. An entity or individual raising funds through crowdfunding typically seeks small individual contributions from a large number of people. Individuals interested in the crowdfunding campaign – members of the “crowd” – may share information about the project, cause, idea or business with each other and use the information to decide whether to fund the campaign based on the collective “wisdom of the crowd.” [3] The Regulation Crowdfunding adopting release is available at http://www.sec.gov/rules/final/2015/33-9974.pdf. The staff has also issued a small entity compliance guide concerning registration of funding portals, which is available at http://www.sec.gov/divisions/marketreg /tmcompliance/fpregistrationguide.htm. [4] This “Investment Limit” column reflects the aggregate investment limit across all Regulation Crowdfunding offerings within a 12-month period.

24. Sample Nonprofit Corporation Articles of Incorporation These Articles of Incorporation are adapted from IRS Sample Articles of Incorporation for Articles of Incorporation of ______The undersigned, a majority of whom are citizens of the United States, desiring to form a Nonprofit Corporation under the Nonprofit Corporation Law of [name state], do hereby certify: First: The name of the Corporation shall be ______. Second: The place in this state where the principal office of the Corporation is to be located is the City of ______, ______County. Third: Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Fourth: The names and addresses of the persons who are the initial directors of the corporation are as follows: Name ______Address______Fifth: No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, directors, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any

299 300 Resources and References candidate for public office. Notwithstanding any other provision of these articles, this corporation shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the purposes of this corporation. Sixth: Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes. In witness whereof, we have hereunto subscribed our names this day of ______20_____.

25. Contact Information The following may be helpful resources noted for companies identified in the text. These references are for convenience only. Being listed does not constitute an endorsement: Professional Security Contemporary Services Corporation, Crowd Management 17101 Superior Street Northridge, CA 91325 t: 818.885.5150 | f: 818.885.0609 http://www.csc-usa.com/

Johnson & Associates, Inc., Security Consultants 7825 Highland Village Pl., Ste. 520 San Diego , CA 92129 Toll Free: 1-800-496-0182 x 702 Fax: (858) 793-0471 E-mail: [email protected] http://www.jnasecurity.com/ Nonprofit Resources IRS, https://www.irs.gov/charities-nonprofits/charitable- organizations/exemption-requirements-section-501-c-3-organizations National Council of Nonprofits 1001 G Street NW Suite 700 East Washington, DC 20001 Phone: (202) 962-0322 https://www.councilofnonprofits.org/tools-resources/fiscal- sponsorship-nonprofits

WGAW Registry 7000 West Third St. Los Angeles, CA 90048 (323) 782-4500 https://www.wgawregistry.org/ E-mail: https://www.wgawregistry.org/registrationcontactus.asp

301 302 Resources and References

26. Bibliography BOOTH, PAUL, PLAYING FANS: NEGOTIATING FANDOM AND MEDIA IN THE DIGITAL AGE (Iowa Press 2015). CHAIRES, ROBERT H. AND BRADLEY CHILTON, STAR TREK VISIONS OF LAW AND JUSTICE (U. NORTH TEXAS PRESS, 2004). COPPA, FRANCESCA, “A Brief History of Media Fandom,” in HELLEKSON, KAREN; BUSSE, KRISTINA, FAN FICTION AND FAN COMMUNITIES IN THE AGE OF THE INTERNET, JEFFERSON, NORTH CAROLINA: MCFARLAND & COMPANY p. 43 (2006). DELL, CHAD, THE REVENGE OF HATPIN MARY: WOMEN, PROFESSIONAL WRESTLING AND FAN CULTURE IN THE 1950S, (Peter Lang Inc., International Academic Publishers, 2006). GARON, JON M., THE INDEPENDENT FILMMAKER’S LAW & BUSINESS GUIDE TO FINANCING, SHOOTING, AND DISTRIBUTING INDEPENDENT AND DIGITAL FILMS, (A CAPPELLA BOOKS/CHICAGO REVIEW PRESS, 2d Ed. 2010). GOLDBERG, HARRIS ET. AL., CONCERT IDEAS EVENT PLANNING GUIDE (Revised Ed. 2010), CONCERT IDEAS, INC., http://www.concertideas.com/pdf/CIEventPlanningGuide.pdf. GREENBERG, MARC, COMIC ART, CREATIVITY AND THE LAW (Edward Elgar Publishing, Inc., 2014). JAMISON, ANNE, FIC: WHY FANFICTION IS TAKING OVER THE WORLD (SmartPop 2013). JARVIS, ROBERT M. AND PAUL R JOSEPH (EDS), PRIME TIME LAW: FICTIONAL TELEVISION AS LEGAL NARRATIVE (Carolina Academic Press, 1998). JENKINS, HENRY, TEXTUAL POACHERS (Routledge, 1992). MCLUHAN, MARSHALL, THE MEDIUM IS THE MASSAGE (Gingko Press, 2001 Ed.). PRESTON, C. A., EVENT MARKETING: HOW TO SUCCESSFULLY PROMOTE EVENTS, FESTIVALS, CONVENTIONS, AND EXPOSITIONS 2ND EDITION (Wiley, 2012).

303 304 Resources and References

WHITE, E.B., STUART LITTLE (HarperCollins, 1945). DE VALCK, MARIJKE ET. AL. (EDS), FILM FESTIVALS, HISTORY, THEORY, METHOD, PRACTICE (Routledge, 2016). VAN ZOONEN, LIESBET, ENTERTAINING THE CITIZEN: WHEN POLITICS AND POPULAR CULTURE CONVERGE (Rowman & Littlefield, 2005).

Index

Academy Awards, 78-79 Academy of Motion Picture Arts and Sciences, 77, 78 Adams, John, 222 Advertising, 17, 20, 21, 32, 41, 120, 128, 135, 138, 150, 170, 205-212, 244, 248-249, 293 Americans with Disabilities Act, 11, 99-100, 273 Appearances by Stars, 62-63 Artist Alley/Artists’ Row, 13, 18-19, 61 Attendance Planning, 193-194 Attendee Survival Guide, 79-86 Autographs and Original Art, 61-62, 84, 251 Axanar, 172-174 Ayn Rand Society, 189 Baker Street Irregulars, 161, 165 Benefit Concerts, 186 Berlin International Film Festival, 66 Berlinale (see “Berlin International Film Festival”) Betamax (see Sony Corp. v. Universal City Studios) Biennale di Venezia (see “Venice International Film Festival”) Bootleg Products, 59, 159-160, 175, 248 Brokers and Scalpers, 23-24 Budgeting, 31-40, 82-83, 109, 193-196 Budget Concerns and Management, 31-39, 194-196 Cannes (see “Festival de Cannes”) Cash Flow, 34-36 Civil Code System, 221 Civil Court System, 225 Clickwrap, 24-25 Comic Book Legal Defense Fund, 140-141 Comicon ’64, 5 Common Law System, 221 Competition (Film Festival), 71-73 Competitions and Special Events, 62-63 Concert Ideas, Inc., 38 Constitutional Law (U.S.), 133, 136-138, 213, 216, 219-220, 222-225 Contract Basics, 41-46

305 306 Resources and References

Conditions, Covenants and Warranties, 42-46 Parties, 42 Payment, 42 Copyright, 45, 55-56, 72, 135, 143-160, 166-175, 210-212, 226, 235, 248, 253, 254, 261 Authorship, 143-145 Definition, 143 Fair Use (see “Fair Use”) In Cosplay, 175 Limits, 147, 152-160 Ownership, 148 Scope, 146 Securing and Protecting, 147-149 Term and Termination, 150-152 Transfer, 149 Work for Hire (see “Work for Hire”) Corporations, 105-108 Cosplay, 7, 79, 81-82, 84-85, 175 Credit Line, 35-36 Crowd Financing, 121, 123-124, 287-298 Crowd Management and Crowd Control, 198-201 Crowdfunding, 18-20, 121-123, 172, 172 Crowdsourcing, 121, 123 Declaration of Independence, 219 Defamation, 73, 136-138, 235 In Fan Fiction, 168-170 De Niro, Robert, 67, 70 DeviantArt, 166 Discrimination, 52, 104, 138, 267, 271, 273, 275, 276-277, 280, 281, 283, 286 Dune, 228 Dylan, Bob, 162, 164, 185 EEOC (Equal Employment Opportunity Commission), 267, 272-273, 276-285 Employment and Volunteers, 51-55 Employment Agreement, 34, 54 Sample, 257 Equity Financing, 117-121 Esau and Jacob, 229-230

Index 307

Expense Budget, Sample 38-39 FCC (Federal Communications Commission), 135 FTC (Federal Trade Commission), 135, 207-210, 275 Fair Labor Standards Act, 55 Fair Use, 60, 72, 135, 152-157, 160, 166-168, 172-176, 212 Concept, 152-157 Four-Factor Test, 155-157 In Cosplay, 175 In Fan Fiction, 166-168 Limitations, 157 Secondary Liability, 157-160 Fan Art, 165-166 Fan Culture, 161-164, 188 Fan Fiction, 164, 165, 166, 173, 175 FanFiction.net, 165 Festival de Cannes, 66, 67, 68 Film Festivals, 65-79 FilmFreeway, 72 Film Market, 65 Financial Responsibility, 37-38 Financial Structure, 117-119 Firefly, 171 First Amendment, 133-141, 143, 201, 204, 210 First Sale Doctrine, 152-153 Fiscal Sponsorships, 115 Fixed Costs, 21, 31 Food Sales, 25-27 Food Trucks, 11, 27 Fonovisa, Inc. v. Cherry Auction, Inc., 76 F. 3d 259 (9th Cir. 1996), 159 For-Profit Organizations, 102-104 Funding, 19, 20 Organizational Structure, 108 Traditional Equity Financing, 117 Free Speech (see also First Amendment), 133-135 Free Speech, Hecklers, and Censorship, 201 Private Activities, 138 Frémaux, Thierry, 66 Gambling, 29, 177

308 Resources and References

Charitable Gambling, 181-184 Games of Chance or Skill, 177-181 Raffles, Door Prizes and Giveaways, 15, 177, 178, 181 Game of Thrones, 227 Game Strategy, 12-16 General Overhead, 31-32 General Partnerships, 101-102 Gershwin Pub. Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159 (2d Cir. 1971), 158 Global Road Safety Film Festival, 76-77 Graham, Bill, 185, 204 Harry Potter Alliance, 188-190 Harry Potter Lexicon, 170-171, 173 Hinck, Ashley, 188 Holmes, Oliver Wendell, 134, 140 IRCA (Immigration Reform and Control Act), 282, 285 I, Claudius, 228 Independent Filmmaker’s Law & Business Guide to Financing, Shooting, and Distributing Independent and Digital Films, The, 1, 127, 233, 257 Insurance, 44-45, 54, 58, 92-94, 103, 114-115, 246-247, 262 Invasion of Privacy, 48, 168-170, 254 Jayne Hats, 171-172 Jobs, Steve, 8 Jury (Film Festival), 75-77 Kapp, Karl M., 15-16 Law & Order, 224 Legal Structure of the Con, 101-116 Legal Systems, 217, 219, 222, 224, 231 Limited Liability Companies, 102-108 Live Aid, 185, 189 Loans, 117, 125-132, 196 Martin, George R.R., 5 Marvel Comics / Marvel Universe, 13, 61, 163, 212, 232 MCM Comic Con, 48 Magic: The Gathering, 3, 28, 177, 179 Marketing and Promotion Strategies, 205-212 McLuhan, Marshall, 161 Media Appropriation, 165 Media Distribution, 205-207

Index 309

MGM Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005), 158 Morrow v. State, 511 P.2d 127, 129–30 (Alaska 1973), 179 N.Y. Times Co. v. Sullivan, 376 U.S. 254, 279–80 (1964), 136 Obama, Barack, 123 Obama, Michelle, 202-203 Ofca, Bill, 96-98 Oscars (see “Academy Awards”) Own ItThe Law & Business Guide to Launching a New Business through Innovation, Exclusivity and Relevance, 1, 26, 127, 143, 255 Microloans, 130-131 Nonprofit Organizations, 102-105 Film Festivals As, 69 Fiscal Sponsorship, 114 Funding, 19, 20 Gifts, 17, 19, 121-122 Legal Structure, 110 Nonprofit Partnerships, 114 Qualifying, 112 Physical Safety (see also “Weapons”), 98-100 Political Action Groups, 188-190 Pricing Strategies, 20-23 Prime Directive, 189 Primogeniture, 229-230 Profit Participation, 34-35 ProSight Specialty Insurance, 91-92 Publicity Rights, 50, 210-212, 235 Pyrotechnics and Stage Safety, 88, 93, 96-98, 199 Regulation of Crowdfunding, 287-299 Regulation of Content, 210-212 Required Insurance, 92-94 Renaissance and Medieval Festivals, 8, 11, 25, 99 Resale of Tickets, 23-24 Restatement (Third) of Unfair Competition, 21-=212 Revenue, 17-30 Risk Management, 91, 94-95 Rowling, J.K., 170-171 Rules 505 and 506, 119-121 SBA Guaranteed Loans, 125-127

310 Resources and References

San Diego Comic-Con, 3, 5, 7-8, 47, 79 San Francisco Mime Troupe, 185, 204 SEC (Securities and Exchange Commission), 120-123, 289, 291-298 SEO, 206 Section 501(c)(3), 104, 299-300 Security and Anti-Terrorism Considerations, 95-96 Securities Regulation, 118-123 Sherlock Holmes, 161, 163, 165 Skillz, 180 Snyder v. Phelps, 562 U.S. 443 (2011), 137 Social Action, 185-190 Social Media, 14, 52, 84-86, 121, 135, 164, 170, 175, 188, 205-211, 275-276 Social Purpose Corporations, 105-106 Sole Proprietorships, 101-102 Sony Corp. v. Universal City Studios, 464 U.S. 417 (1984), 154 South by Southwest, 5, 67, 74, 79 Spielberg, Steven, 70 Staffing, 11, 32-33, 95, 193 Star Trek, 163, 165, 172-175, 189-190, 213, 227 Star Wars, 8, 26, 67, 163, 165, 189-90 Stepped Costs, 31-32 Stuart Little, 214-215, 218-219 SXSW (see “South by Southwest”) Subchapter S Corporations, 102, 106-109 Submissions to Festivals, 65-75 Sundance Film Festival, 66-67, 79 Talent Agreements, 49-50 Teach-in, 186-188 Ten Commandments, 217, 219 Ticket Terms and Agreements, 47-49 Torts (also Tort Liability Basics), 87-89, 103, 136, 169, 224, 226 Trademarks, 54, 56, 59-61, 171-172, 210, 212, 234-235, 254 Transformative Artwork, 59 Tribeca Film Festival, 67-68 Valuation, 117-118, 228 Van Halen, 50-51 Variable Costs and Scalability, 31, 35 Vendors, 10, 14, 18-19, 25-27, 35-39, 46, 55-63, 84, 96, 122-124, 138, 156, 159, 178, 181, 183, 184, 190-192, 195, 197-198, 207, 209, 248-251

Index 311

Venice International Film Festival, 66 Venue Agreement, 46, 56, 91-94 Vicarious Liability, 89-90, 157-159 Victoria Comic Con, 18-19 Volunteers, 11-12, 26, 32-33, 51-52, 85, 87, 89-96, 101-102, 110-115, 122, 163, 177, 191, 194, 196-199, 208 Warner Bros. Entertainment Inc. v. RDR Books, 575 F. Supp.2d 513, 521 (S.D.N.Y. 2008), 170 Water, 26-28, 83-84, 196, 227-228, 248 Weapons (see also Physical Safety), 47-48, 57, 88, 98-99, 198-199, 244 White, E.B., 214-215, 217, 225 WithoutABox, 72, 75 Wolf, Dick, 224 Work for Hire, 145-147, 149, 152 World Science Fiction Convention, 6

312 Resources and References

About the Author Jon M. Garon is an attorney and professor of entertainment, intellectual property, informatics, and business law. He has extensive practice experience in the areas of entertainment law (including film, music, theatre, and publishing), data privacy and security, business planning, copyright, trademark, and software licensing. He has written numerous books, book chapters, articles, and plays. His other books Include: THE INDEPENDENT FILMMAKER’S LAW & BUSINESS GUIDE TO FINANCING, SHOOTING, AND DISTRIBUTING INDEPENDENT AND DIGITAL FILMS, (A CAPPELLA BOOKS/CHICAGO REVIEW PRESS, 2d Ed. 2010). OWN IT – THE LAW & BUSINESS GUIDE TO LAUNCHING A NEW BUSINESS THROUGH INNOVATION, EXCLUSIVITY AND RELEVANCE (Carolina Academic Press, 2007). ENTERTAINMENT LAW & PRACTICE (Carolina Academic Press, 2d Ed. 2014). Mr. Garon serves as dean of Nova Southeastern University Shepard Broad College of Law. A Minnesota native, he received his bachelor’s degree from the University of Minnesota in 1985 and his juris doctor degree from Columbia University School of Law in 1988. Prior to joining NSU, Mr. Garon was the inaugural director of the NKU Chase Law + Informatics Institute where he focused on business innovation and the development of best business practices regarding the exploitation and effectiveness of the information and data systems in business, health care, media, and entertainment, and the public sector. Mr. Garon is of counsel to the law firm of Gallagher, Callahan, and Gartrell, located in Concord New Hampshire. He was also the founding artistic director of the Menorah Theatre, located in Orange County, California.

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