trees growing on coins

Donating Unwanted Inventory Can Yield Tax Advantages

January 26, 2015
Most companies seem to have excessive pallets of merchandise that is either overstock or past dated. It’s taking up space that could be better used and benefit others.

There is an easy way to rid your organization of that unwanted stock and reap the benefits on many levels. Product philanthropy is aimed at C Corporations yet many of them have never even heard of this section of the tax code.

According to IRC Section 170(e) (3), when C Corps donate their inventory to qualified nonprofits, they can receive a federal tax deduction equal to up to twice the cost of the donated products. Read more

Orange marker on copyright word

9 Copyright Myths and Facts: A Museum Retailer’s Guide to Copyright

A customer wanders in to a museum’s retail store. He is inspired by the art exhibition he just visited and wants to take something home to commemorate his experience. Enjoying the ambient music as he shops, he eventually purchases a magnet featuring a photo of the artist, a coffee cup with an image of one of the artist’s paintings on the front and the exhibition catalog featuring a full set of color plates of the artist’s best works. The customer is probably unaware that all of his purchases, and even the music he listened to while he shopped, contain copyrighted works protected by federal law.

As the above scenario illustrates, copyrighted works are all around us. As a retailer, it is important to know some basic elements of copyright law in order to avoid getting into hot water for infringement under the federal Copyright Act. To begin with, a copyright is an intellectual property right to an original creative work. Just like a title document can be used to defend tangible and real property (like a car or land) from trespassers, a copyright can be used by an artist or author to defend his or her original creative work from infringement by others. Like a title, the copyright to a piece of work can be sold and transferred. However, unlike a title to a piece of land, physical ownership of an original work is different from ownership of the copyright corresponding to that original work.

For example, when an artist sells her painting to a museum, she still retains her ownership of the painting’s copyright. The museum has the right to exhibit the painting, loan it out or resell it. However, the museum may not copy or otherwise reproduce images of the painting without licensing the copyright from the artist first. This means photographs or digital images of the painting cannot be used in advertising, on the museum website or on postcards and t-shirts in the museum shop without prior permission from the artist. In addition, because she owns the copyright, the artist may license the image of the painting to another person (or museum) for use on products or in books even though she no longer owns the actual painting; she does not need to ask the permission of the museum to exercise her copyright.

Are you confused yet? If so, you are not alone. Consider the following nine copyright myths that can arise in a retail setting when developing a product for sale or using images to advertise an existing product.

MYTH #1: “If I use only a small portion of a work, say, 10 percent, it is not infringement.”
REALITY: There is no set amount of a work that is automatically safe to use. Lawsuits have resulted from something as seemingly innocent as the unlicensed use of a single line of text from a Faulkner novel in a Woody Allen movie (Faulkner Literary Rights LLC v Sony PicturesClassic). It is logical to think that if you only use a very small amount of a copyrighted work, such as 30 seconds of a song or 20 words from a published book, you are “in the clear.” However, even using small portions of a copyrighted work may infringe a copyright holder’s rights.

MYTH #2: “If a work is not marked with a copyright notice (©), or is not registered, then I can use it however I want.”
REALITY: Copyright notice and/or registering the work with the U.S. Copyright Office is completely optional. Since 1989, a copyright attaches to fixed or tangible original creative works automatically—no special actions are needed for it to be protected. This being said, a copyright notice informs others of the identity of the work’s owner, which can be handy if you want to know who to approach for a license.

MYTH #3: “There is an exception for nonprofit museums—right?”
REALITY: Wrong. Many think that because a museum operates as a nonprofit entity that it is not subject to the same copyright rules as private companies. The reality is that copyright law applies to everyone equally, and there is no special exemption or exception for museums.

MYTH #4: “Since the museum purchased the artwork, the museum now owns the copyright.”
REALITY: This is another common misconception. Copyright law makes an important distinction between owning the physical embodiment of a work and owning the copyright. The two are usually divided, so that the museum may own the artwork, but will still have to ask for permission from the artist to use images of it for commercial purposes. For example, it is permissible for the owner of a physical work (like a painting) to display it in an exhibition, sell it to another or even destroy it. However, unless the artist has assigned his copyright in writing to the owner of the work (in this example the museum) the right to reproduce images of the artwork for things like retail merchandise or advertising is off limits without a license. Of course, copyright protection does not last forever. However, determining whether or not a work is still protected by copyright (also called falling into the “public domain”) is equally challenging.

MYTH #5: “What if I properly acknowledge the copyrighted material when I use it, inserting the © symbol? Isn’t that enough?”
REALITY: No. Acknowledging the source of copyrighted material does not substitute for obtaining permission. If you do not seek permission for the use of copyrighted materials, you risk copyright infringement. Copyright infringement is not like plagiarism; you cannot remedy it by attribution.

MYTH #6: “If a work is already freely distributed online it must be okay to use.”
REALITY: The pace of technology makes it remarkably easy for anyone to put copyrighted images on the Internet, even when they are clearly not licensed to do so. A simple Google search of “Pablo Picasso images” or “Andy Warhol paintings” yields literally millions of image hits. It is easy to see how confusion about copyright ownership results. In short, just because the image (or even a part of the image, such as a close-up) is out there on the Internet, it is still protected by copyright and you must seek a license before using it for most commercial purposes.

It is also important to note that a copyright holder, such as an artist, does not forfeit her copyright by posting her own work on the Internet. Consider that many modern artists use the Internet to sell physical copies of their work. This would be impossible if they could not post the pictures without fear of losing that copyright.

MYTH #7: “Well, at least I can take and use images of museum patrons and other individuals on my retail products or advertising without asking permission—as long as they are not celebrities.”
REALITY: This also is a common mistake that retailers make, especially with advertising or promotions on the web. While each state has its own rules about this issue, generally every individual has a right to control how his or her image or likeness is being used. You do not have to be a celebrity to have such a right, which is commonly known as the “right to publicity” and varies from state to state. In short, if you want to use models or images of patrons for merchandise or publicity, a written release from that person is a must.

MYTH #8: “Copyright only protects things like artwork and books. Playing a CD or the radio in the museum shop will not get me in trouble.”
REALITY: Copyright protects any fixed or tangible original creative work. Such works include paintings, sculptures, books, music, movies, choreography, dramatic works, computer programs and even architectural works. Playing a CD or the radio at a venue that is open to the public, such as a museum store, constitutes what is legally a “public performance” under U.S. copyright law. The right to publicly perform a copyrighted work (and this includes playing a recording in public) is one of the exclusive rights enjoyed by the copyright owner. As a result, someone who wishes to publicly perform such works must generally seek permission from the copyright owner(s) of the works.

MYTH #9: “Well, copyright is certainly difficult to navigate, at least my museum’s name and logo are protected.”
REALITY: Not so. A copyright protects fixed original creative works; a registered trademark protects and identifies a corporate enterprise. Because they seem similar, copyrights and trademarks are often confused. A trademark (or service mark) is a word, phrase, symbol or design that identifies or distinguishes a company or product, and can be indicated by TM or ®. Essentially, a trademark is a brand name designed to identify the source of goods. While similar to copyright, trademark is a different concept and has its own set of registration rules and procedures.

Conclusion
Copyright law is complex and nuanced. While copyright does not last forever, the rules are complicated enough that you should not try to navigate them on your own. Museum retailers would be wise to stay especially vigilant when developing and selling retail products that feature copyrighted works. When in doubt, it is always appropriate to seek help from the museum’s legal counsel.

Author Carlotta Ramirez is an attorney and administrator at The Museum of Fine Arts, Houston, specializing in legal compliance as well as the formulation and implementation of museum policy. Her daily work at the museum spans a variety of legal practice areas, including contracts, intellectual property, trusts and estates, and tax.

taking inventory

It’s the Most Wonderful Time of the Year!

My apologies to Andy Williams. No, not that time. You are now off and running in the great holiday race. Shelves are stocked, everything is decorated and business is booming. This is about about the next most wonderful time of the year: Physical Inventory. The key to a successful Physical Inventory (PI) is organization. I have some organizational steps that have proven successful in my past and continue help our customers today.

Start the old fashion way with pen paper and a calendar.

Timeline: Select the dates that you will be performing your physical inventory count. Make these dates known now so you are not besieged with vacation/time off requests for that week. Make it a blackout period when no one is off. It is very important to have the support of your staff in getting this task accomplished successfully. Taking into account your dates, set some guidelines for your purchasing and receiving areas. You should cut off merchandise delivery for a period of time prior to your PI (I used to cut off two weeks before my count date). A full PI is best scheduled during a period of time when your stock levels are at a low point, when there’s less to count and more room for organization of merchandise. If merchandise is received during this period set it aside and do not enter it into your system until after you have completed your counts.

Staffing: Ensure that you have allocated adequate staff for the task at hand. The physical count should be performed by teams of two, a caller and a recorder. The actual purpose of these individuals has changed from the days of pencil and paper tallies to having teams give credibility to the actual count in terms of checks and balances. It speeds the scanning process along as well (if you are using scanners) and as the count progresses, a second count can be completed. It is easier to verify the electronic count with teams of two and expedite recovery after the count is completed.

Maps: Draw a map of your store. I use graph paper but this can be done in excel or using various CAD (computer aided design) programs, which is a critical tool for successful preparation for a PI. You probably already have maps of your store(s) that are used for planning layouts, displays etc. Be sure to include all window displays, warehouses, storage closets, back office spaces, offsite storage and any place you can possibly have stored inventory. The idea of a having a map is to make sure you have gone through all of these locations thoroughly and that everything is counted. Check absolutely everywhere; in cabinets, under cabinets, on top of shelving units. I have found merchandise in old display units in storage, on top of and under warehouse shelving. It’s a good idea to check these odd locations where you have found merchandise after the PI has been completed; hidden merchandise is a Loss Prevention issue. Check desk drawers, closets and even the rest rooms. I used to check drop ceilings as well. I found a stack of denim in the ceiling once (I’m sure it was just misplaced!). Verify that each of these locations has been checked before your inventory begins, using your map for reference.

Fixtures: Label the map so each of your fixtures, every shelf, hang bar, t-stand and merchandise peg have a number and letter. A corresponding spreadsheet should be created listing each location and fixture; this spreadsheet and map will be used the day of your physical inventory to verify a physical count has been entered and verified by your team. I used to highlight the map to verify that an area has been counted and then check it off on the spreadsheet. Starting with yellow for first count, then blue, and green would mean that an area was finished. Count your fixture in numerical order not randomly; this is a time for order!

Tags: Nothing can hold up a physical inventory like merchandise without tags or with incorrect tags. It is important to have your staff verify that all merchandise has a bar code label prior to your count. Set up an area in your stock room for your team to place merchandise so it can be properly labeled before your PI and have it re-tagged. Faded or torn tags should be reprinted so that everything is counted properly. If you are scanning tags verify that your scanner can read your bar codes. I once attempted a PI and none of my tags scanned. I did not check prior to the team arriving and so I had to reschedule the PI. It was an expensive mistake I will never make again.

Pre-counts: Pre-counting merchandise can save you a lot of time. Have a plan for difficult to count items; counting bath beads by hand is not the most efficient way; use a scale. Chocolates, coffee, soaps and those small items at the POS should be pre-counted.

All of this is preparation for entering the counts into your software system and that process will differ based upon the software you’re running.

Remember this is not something that happens every day and it should be made into a special event. I always brought in food throughout the day and held a contest for the team member who found the most items with missing tags, etc. The point is that it is a time for cleaning up and getting on to the next page. Spring cleaning and setting order is actually happening after the holidays at the beginning of the New Year for most of you because you are setting the tone for the New Year. Embrace Physical Inventory! It’s a wonderful thing.

Happy Holidays!

Author Peter Pishko is VP of Operations at One Step Retail Solutions. One Step’s All About Retailing Blog tackles the topic of retail technology solutions and key retail trends.

chazan store for blog

The Chazan Museum of Art Shop

The Chazen Museum of Art, located on the University of Wisconsin-Madison campus, underwent a major expansion and remodel project that opened in Fall 2011. Unfortunately, while the store was given a bigger space, it continued to operate in the red and was not able to find its voice or leverage the added media attention or visitorship into an increase in revenue. The store was disorganized, both in the sense of product selection and how that product was merchandised. I came on as museum shop manager in November 2013. Within a week of taking on the retail management for the Chazen I knew I had a huge challenge ahead of me. Read more