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Highlights of the latest franchising news from around the country.

The sale of company units to franchisees ("refranchising") differs from a traditional asset sale because the transaction contemplates a continuous business relationship between the parties. The basic terms of this relationship should be outlined in a letter of intent and will be contained in the provisions of the various transaction documents, including the Asset Sale Agreement (ASA), related transfer documents, such as deeds, leases, subleases, assignments, bills of sale, etc., one or more franchise agreements and, if the obligation to develop additional units is part of the transaction, a development agreement. This article continues the discussion of refranchising in last month's issue by reviewing some of the issues that the parties should consider carefully as they document their on-going relationship post closing.

<i>In the wake of accounting scandals involving Enron, WorldCom, and other companies, the Financial Accounting Standards Board (FASB) is upgrading many rules to force public companies to provide more information about their finances. One of the areas it is addressing relates to how the primary company's financial obligations toward "variable interest entities" are shown on its balance sheet. These rules are aimed primarily at companies that have controlling interests in other companies and, as was the case with Enron, potentially could use those companies to hide their own financial obligations.</i>

Highlights of the latest franchising cases from around the country.

Slow to start, authorized Internet downloads of individual sound recordings now exceed one million per week. For recording artists, this may mean a return to the heyday of singles sales experienced in the '50s, '60s and the disco era of the '70s, when singles were created to stand and sell on their own, with little or no relation to other tracks contained on an artist's album. A single in that era routinely consisted of a record with an A and B side, the sale of which rarely produced anything more for an artist than promotion for the artist's live performances. However, with increases in royalty rates and CD retail prices during the '80s and '90s, successful major label artists were able to negotiate provisions in their recording agreements allowing for greater advances and royalties from the production and sale of albums in CD form. Over the past few years, major labels, in large part, have discontinued the release of commercial singles in an effort to eliminate the cannibalization of higher-profit margin CD album sales. As a result, recording artists and their representatives are carefully watching the consumer change from purchasing albums in pre-recorded CD form to purchasing individual tracks from the Internet. Undoubtedly, a return to living the singles life could have severe financial ramifications for recording artists who have become accustomed to living the CD album life.

Recent developments in entertainment law.

What constitutes an acceptable book manuscript has been at the heart of numerous disputes between authors and publishers. An acceptance clause in a recent…

Recent cases in entertainment law.

The U.S. Court of Appeals for the Ninth Circuit decided that placing a sampling loop of a six-second, three-note segment from a musical composition into a new sound recording wasn't copyright infringement because the use was <i>de minimis</i>. <i>Newton v. Diamond</i>.