Protecting personal assets with an LLC?

[tjhooker]

Hello,

I live in California. In the past few years I have made about $200,000 on YouTube from creating content that I feel is “Fair Use” of others’ copyrighted material. My concern is that I might get sued some day by the copyright holder. If I were to lose the case, I’m assuming I might be forced to pay some or all of that money back. Any money that I have made so far has gone into my personal accounts.

Would setting up an LLC in any way protect the money I have made in the past or will make in the future? For example, if I set up an LLC today and for the month of January 2017 I make $6000, can I route the $6000 from the LLC to my personal account. So whatever I could be sued for would be what is in the LLC, which would be little or nothing.

Thanks a lot for any advice.

 

[quincy]

Hello,

I live in California. In the past few years I have made about $200,000 on YouTube from creating content that I feel is “Fair Use” of others’ copyrighted material. My concern is that I might get sued some day by the copyright holder. If I were to lose the case, I’m assuming I might be forced to pay some or all of that money back. Any money that I have made so far has gone into my personal accounts.

Would setting up an LLC in any way protect the money I have made in the past or will make in the future? For example, if I set up an LLC today and for the month of January 2017 I make $6000, can I route the $6000 from the LLC to my personal account. So whatever I could be sued for would be what is in the LLC, which would be little or nothing.

Thanks a lot for any advice.

No. If you are creating the content, you are personally liable for the content. Your LLC will not protect you or your personal assets from a lawsuit.

Copyright infringement awards can be $750 to $30,000 per infringed work (up to $150,000 per work for willful infringement) if the copyrighted work is federally registered prior to infringement, or a copyright holder can be awarded damages based on the infringer's profits or the copyright holder's losses.

It can be smart to have your YouTube creations personally reviewed by an IP attorney but it is smartest to acquire permission from copyright holders before you use their works. At the very least you should have liability insurance enough to cover the costs of a lawsuit in the event a copyright holder takes exception to your use of their work and sues. A court can be the ultimate determiner of whether your use is a "fair use" of copyrighted material or not.

 

[tjhooker]

Thanks, Quincy for the comments. On a slightly separate subject, if I lost a court case regarding copyright infringement and had a judgement against me of say $500,000 would declaring personal bankruptcy allow me to avoid that judgement? Not that I would file for bankruptcy protection, but I might not have any other choice.

 

[quincy]

Thanks, Quincy for the comments. On a slightly separate subject, if I lost a court case regarding copyright infringement and had a judgement against me of say $500,000 would declaring personal bankruptcy allow me to avoid that judgement? Not that I would file for bankruptcy protection, but I might not have any other choice.

If structured properly and operated correctly, an LLC can protect your personal assets from liability for contract breaches or debts or bad business deals. An LLC, however, provides you with no protection from tort liability.

Bankruptcy can be a solution to judgments over contract breaches or debts or bad business deals. Bankruptcy (generally) will not help you escape paying damages awarded in intentional tort claims (e.g., infringement, defamation, fraud).*

The best protection from a copyright infringement lawsuit would be to acquire permission from copyright holders before using their works (and, if permission is not granted, don't use the work), or to use only your own original works in your YourTube creations.

Having insurance enough to cover the costs of a lawsuit should one be filed against you is also wise and advised.

Have you been threatened with an infringement lawsuit? Usually infringed content is pulled from YouTube on receipt of a DMCA takedown notice filed by a copyright holder. Having the infringed content removed from its location online is often enough to satisfy a copyright holder. If a copyright holder decides to file suit over the unauthorized use of their copyrighted material, and if you receive a cease and desist letter with a settlement demand or if you are served with a summons and complaint for infringement, that is the time you will need to seek out legal assistance in your area. Some copyright holders are willing to negotiate. Others are not so willing to do so.


*Here is a link to the applicable section of the US Code on bankruptcy exceptions to discharge, 11 USC sect 523(a)(6): http://codes.lp.findlaw.com/uscode/11/5/II/523

 

[tjhooker]

Thanks again Quincy for this helpful information. I have reached out to Hiscox for information on liability insurance. I think getting insurance is my best option, instead of incorporating or something like that. I don't even have a business license. I am just one person who posts videos and any earnings get paid to me in my name.

I have had a few copyright takedown notices from YouTube. Some of these notices occur because of YouTube's automated Content ID system, which basically just scans videos to see if they match something in the copyright bucket. Or the copyright holder can issue a manual takedown notice if they come across a video that they feel infringes. But I always appeal these takedown notices because I feel my content is fair use. I create sports blooper type videos which take clips from the major sports leagues. Some sports are ok with the use of their content because it promotes the sponsors, players, the sport, etc. But other sports are more protective.

YouTube helps copyright holders protect their content (which is good) with various tools, but YouTube's official policy is that the copyright holder must sue the infringer if the copyright holder wants to ultimately protect their content. A lawsuit is what I am afraid of. I'm sure these sports leagues have better things to do at this time than worry about me, but if the day comes and I get sued (and lose) and face a million dollar judgement, I'm in trouble.

 

[quincy]

Thanks again Quincy for this helpful information. I have reached out to Hiscox for information on liability insurance. I think getting insurance is my best option, instead of incorporating or something like that. I don't even have a business license. I am just one person who posts videos and any earnings get paid to me in my name.

I have had a few copyright takedown notices from YouTube. Some of these notices occur because of YouTube's automated Content ID system, which basically just scans videos to see if they match something in the copyright bucket. Or the copyright holder can issue a manual takedown notice if they come across a video that they feel infringes. But I always appeal these takedown notices because I feel my content is fair use. I create sports blooper type videos which take clips from the major sports leagues. Some sports are ok with the use of their content because it promotes the sponsors, players, the sport, etc. But other sports are more protective.

YouTube helps copyright holders protect their content (which is good) with various tools, but YouTube's official policy is that the copyright holder must sue the infringer if the copyright holder wants to ultimately protect their content. A lawsuit is what I am afraid of. I'm sure these sports leagues have better things to do at this time than worry about me, but if the day comes and I get sued (and lose) and face a million dollar judgement, I'm in trouble.

You are smart to worry about lawsuits because using clips from professional or college sports games can be legally risky. It is a very good idea to have liability insurance to cover lawsuits should they arise over your video content so I am happy to hear you are looking into this.

Although I know that many complain about YouTube's filtering system and the DMCA takedown notices, these actually work to protect both the copyright holders and the (intentional or unintentional) infringers. Infringers who might otherwise face costly copyright infringement lawsuits are often spared these legal actions when their infringing content is never published or when it is removed promptly.

Good luck with your videos. I hope you continue to stay lawsuit-free.

Thanks for the thanks.

 

[Zigner]

... I feel is “Fair Use” of others’ copyrighted material.

"Fair Use" is a defense that you would raise in court. Of course, it's going to be a very expensive proposition by the time it gets to the point where you can argue "Fair Use".

 

[quincy]

"Fair Use" is a defense that you would raise in court. Of course, it's going to be a very expensive proposition by the time it gets to the point where you can argue "Fair Use".

... and I am not at all sure the defense would work here.

Fair use is still infringement. It is just an infringement that is excused.

What a court considers when determining whether a use of another's copyrighted work can be considered a fair use of the material will be the purpose and character of the use - which often centers on whether the use is of a commercial nature or is for a nonprofit educational purpose. Because tjhooker is profiting from the clips taken from copyrighted material, this can works against a fair use defense. The court looks at the nature of the copyrighted work - and this often centers on whether the work used is of entertainment value or informational. The court also looks at the amount or substantiality of the portion used in relation to the work as a whole - and although here the use of small clips taken from a game could favor tjhooker, there are other issues here beside copyright to consider such as publicity rights and trademark infringement. And a fourth factor looked at by a court will be the effect of the use upon the potential market for or value of the copyrighted work. This final factor can be a problem for tjhooker if the sports team also has capitalized or intends to capitalize on the "bloopers" by licensing them for, say, network use or for a special bloopers video.

I believe that tjhooker is risking a costly lawsuit which makes insurance a necessity. I also do not think he should "tempt fate" by challenging takedown notices with a counter-notice - at least until he has the video that has been removed from its online location personally reviewed by an IP attorney in his area. When a counter-notice is filed by an alleged infringer, the next step taken by a copyright holder is to file a lawsuit - a lawsuit that might not be filed but for the counter-notice.

 

[jdbofky]

Insurance companies who assume risks for a fee take a good close look at the risk they are insuring. OP should be prepared to open the kimono very widely to whomever he hopes will insure this venture against IP infringement risks. This is not likely to be cheap, or perhaps even affordable, insurance if the risk is great.

 

[quincy]

Insurance companies who assume risks for a fee take a good close look at the risk they are insuring. OP should be prepared to open the kimono very widely to whomever he hopes will insure this venture against IP infringement risks. This is not likely to be cheap, or perhaps even affordable, insurance if the risk is great.

Right. Just as tjhooker must assess his risks of a lawsuit when he uses copyrighted material without authorization of the copyright holder, any insurance company will be assessing these same risks when tjhooker looks to be insured.

It is always the best and safest course of action to seek out permission from a copyright holder prior to using their copyrighted works, even if you are somewhat confident that your use of the copyrighted material would be seen by a court as a fair use of the material (and, as described here, this confidence might not be warranted).

If permission is granted by a copyright holder, this ensures no infringement lawsuit will result. Otherwise the risk of a suit will be there.