The Copyright Act of 1976 decrees that the author shall have a right exercisable only once for each separate literary work under exclusive license and for a brief window of time after 35 years from the date of a work’s publication to terminate a license. (There are some qualifications to this, but not necessary to explain the concept). There are two provisions concerning statutory termination, one [Section 304(c)] relates to literary works published prior to January 1, 1978; the other [Section 203] relates to literary works published after January 1, 1978. Both sections can be thought of as gifts from Congress to authors, or their estates, or spouses and children to renegotiate with the licensee of an economically valuable work or terminate licenses entered into at the beginning of an author’s career when he or she was in an unequal bargaining position with the licensee. We are going to confine our comments to Section 203, for post-1978 publications. The procedures for exercising the right are complicated.

If your literary work was published in 1978, 2013 is an important (in fact, the opening) year because if you acted properly in accordance with the time requirements for notice you are either in the process of renegotiating the license or taking steps to terminate an exclusive license for further exploitation with another licensee. If you started publishing in 1988, to take a random subsequent year, your important year is 2023, which means that this year, 2013 is the opening year for giving notice. Notice can be served at anytime between 2013 and 2021.

What was the purpose of the Act and how does it work? In its Report on the passage of the Copyright Act of 1976 the House of Representatives stated that “The purpose of the Act was to “safeguard[ ] authors against unremunerative transfers” [that is, transfers at the beginning of their careers] and address “the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited.” H.R. Rep. No. 94-1476, at 124 (1976). Section 203 reads in pertinent part:

In the case of any work other than a work made for hire, the exclusive or nonexclusive grant
of a transfer or license of copyright or of any right under a copyright, executed by the author
on or after January 1, 1978 … is subject to termination.

In other words, you have to own the copyright to be eligible to terminate the license. This issue has come up in some cases involving the superman character. There are no termination rights because the cartoonists created the superman stories and character as works made for hire.

You are familiar I know with the standard grant of rights provision in a publishing contract. It states that the grant is exclusive to the Publisher for “the term of copyright and all renewals thereof.” Well, this is not exactly accurate because 35 years from publication of a literary work is likely to be less than halfway through the current term of copyright which is life of the author plus 70 years. Nothing in the grant of rights language takes away the author’s statutory termination right which is non-waivable. In order to receive the benefit of the Act the author has to give notice to the licensee at least 2 years before the date of termination. The notice can be served anytime within a 10 year window preceding the anniversary date of the publication year. In other words, for a termination to be effective in 2013, notice had to have been given between 2003 and 2011. If notice was given in 2012, the earliest date for termination would be 2014.

The problem is that there is another window, a 5 year window. In other words, if the critical year is 2013 the window closes in 2018 so that if the notice is not served between 2008 and 2016 the right is irretrievably lost. Who benefits? The author if he or she is still living, the author’s estate if there is no living spouse and children, or living spouse and children if there are any. If there are only children and grandchildren, the termination interest can only be exercised by the action of a majority of them. Very, very complicated particularly if the family is at odds with each other.

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The publishing world is a vortex of change. There has been a steady flow of news reports, court filings by the Department of Justice, judicial decisions followed by settlements, merger announcements, controversial contract terms for new digital imprints and much more besides. We find publishers, brick and mortar bookstores, and distributors all trying to adjust their business models to respond to revolutionary changes in the production and distribution of literary material. All these changes have immense consequences for authors. It appears that the Kindle reader introduced in 2007 was as upsetting to the marketplace as the change from manuscript books to print books in the 15^th century. Before Kindle, readers bought print on paper books; now paper and ebook sales are close to equal in fiction genres and gradually approaching equality in non-fiction.

When paper was King, there were two publishing models: traditional for the general reading public and vanity for the family. Splitting production and delivery has triggered a variety of new models. Just as movable type replaced the quill, electronic production is impinging on the market for print books. Traditional publishers pay a premium up front in the form of an advance against royalties for the right to publish and distribute an author’s work. Vanity publishing is essentially an arrangement in which authors pay for printing and other services. There are two models for ebooks: self-publishing for a fee is a vanity like model in which authors keep a significant portion of proceeds; or licensing to an epublisher such as Open Road or RosettaBooks for a royalty (but no advance) based on a percentage of net proceeds.

Traditional publishers have expanded their business models over the past few years. They are already publishing ebooks under the advance and royalties formula and they are also searching for new relationships with authors. We can see this with the  recent introduction by Random House of the Hydra, Alibi, Loveswept and Flirt digital imprints. When Random House announced contract terms for these imprints there was an uproar. Science fiction and other authors and literary agents were horrified. This brouhaha was reported by Victoria Strauss in her Writer Beware Blog of March 7, 2013. She later reported on March 12 that “Based on strong criticism from writers’ groups, authors, and agents, Random House has decided to make major changes in its digital contract.” The Hydra Model is essentially a collaborative or partnership relationship in which the author agrees to license a literary work to a publisher for a share in the net proceeds from ebook sales. In the Hydra contract initially proposed there was no advance. After the response from authors and agents Random House posted a “Special Message” on March 12. The Hydra initiative has now been subdivided: there is a profit sharing model and a traditional advance and royalties model.

Two further points about changes in the publishing industry. First, in the Business Day section of Friday March 8, 2013, the New York Times reported that attempts are under way to create a marketplace for secondhand digital books. This is an extraordinary development. We all know about the market for print books; they are owned by the purchaser who can resell them. The “first sale” doctrine has been reaffirmed in the past week by the U.S. Supreme Court in Kirtsaeng v. John Wiley & Sons, Inc. At the present time electronic books are not owned because downloading is a license rather than a purchase in the traditional sense. Amazon and Apple have created algorithms for setting up an exchange for digital material. Amazon in fact received a patent for its algorithm in January of this year.

The second point concerns the domain name extension dot book. I’m quoting from a PW report of March 11: “In a filing with ICANN … the Association of American Publishers came out against a bid by Amazon to buy the .book domain name for its exclusive use, saying such an application would be counter to public interest.” To permit a company like Amazon to own a registrar for the dot book domain name would be equivalent to Citibank or Bank of America becoming the registrar for dot bank.

All this is playing out along with disputes between Barnes & Noble and Simon & Schuster about paying for shelf space (Report in the New York Times) and Amazon’s announced purchase of the social site Goodreads (from the same source). None of this suggests the demise of print publishing, but it disproportionately impacts authors whose works are less and less available in physical formats.

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Productive authors increase in status and over time become recognized by the general public as the source of their literary works. At the beginning of a career authors simply start out as names.  They become brands when readers recognize them as sources for goods and services in a trademark sense.  Names can acquire value separate from the individuals who answer to them.  Authors who have achieved “brand” recognition qualify for trademark registration, as exemplified by J.K. Rowling whose licensees own a host of trademarks in a variety of jurisdictions and Classes.  Domain names are different from trademarks in that anyone can purchase a domain name, even the name of an author who has become a brand. There is no gatekeeper to say “you can’t do that!”  If challenged in a proceeding under the Uniform Domain Name Resolution Policy (UDRP) the purchaser will most likely forfeit the domain name, but he cannot have been prevented from registering the domain name that is identical or confusingly similar to the author’s name.  Again taking J.K. Rowling as an example: in 2004 a Uruguayan domiciliary purchased and .  Joanne Rowling (the owner of the trademark) filed a complaint and the domain name registrations were transferred to her.

Many authors do not have trademark registrations but own domain names corresponding to their “brand” which is either their persona (“J.K. Rowling,” not Joanne Rowling) or personal name.  Some authors have been chagrined to learn that someone has beaten them to their “names” on the Internet.  I will name names in a moment.  Other authors may not realize that their names have been registered as domain names.  For example, Joyce Carol Oates is a distinguished author who does not own her domain name.  The domain name is “owned” by Alberta Hot Rods.  Alberta Hot Rods is a serial cybersquatter.  Among the names this cybersquatter has purchased and then forfeited in UDRP proceedings are authors Michael Crichton and Jeffrey Archer, Pamela Anderson and Amber Smith (models and actresses), Tom Cruise and Kevin Spacey (actors) and Larry King (television personality).  Ms. Oates has not (yet) challenged the bad faith use of her name.  She is not alone.     

U.S. trademark law recognizes “common law [unregistered] rights” to a personal or persona name if it has acquired “secondary meaning” and is identified as the source of goods or services.  In contrast to Joanne Rowling, authors Crichton and Archer owned common law unregistered rights to their names.  Even if they never register their names as trademarks, productive authors have the right to maintain a proceeding under the UDRP and capture the domain names that infringe their rights.  Unproductive authors are probably out of luck, unless their single works have achieved great success in the marketplace.  Joyce Carol Oates and other distinguished authors have standing to maintain proceedings to police their names and ensure that only they can use them.  At present, does not resolve to an active website; that is, held passively for the very good reason that any content would constitute an infringement of the author’s right to her personal or persona name.  

The UDRP is an on-line arbitration regime available to trademark owners which includes unregistered (common law) rights.  Rogue domain names for “Harry Potter” () have been successfully shut down.  Titles for example that cannot be copyrighted can be trademarked if they are associated as the source of goods or services. “Harry Potter” has featured in a dozen or more domain names; all have been captured by licensees in UDRP proceedings.  HARRY POTTER is a registered trademark for clothing; HARRY POTTER AND THE DEATHLY HALLOWS is a registered trademark for printed matter and paper goods (including notebooks, diaries, greeting cards, photographs and calendars).

Authors who have prevailed over the past year in capturing domain names corresponding to their personal names include Delia Ephron (bestselling author, screenwriter, and playwright), Louise Rennison (author of the Confessions of Georgia Nicolson series for teenage girls), Gary Regan (Cocktail Columnist for San Francisco Chronicle, host of gazregan.com, and publisher of newsletters for bartenders worldwide) and Nathaniel Branden (author, lecturer, therapist and corporate consultant focusing on self-esteem and personal development).   

If Author has not already, she should make sure that her personal or persona name has not been appropriated and if it has to take action to recapture it.

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A writer’s income generally comes from royalties and licensing revenues for works which are protected by copyright.  Section 102(a) of the U.S. Copyright Act states that “original works of authorship fixed in any tangible medium of expression” are protected by copyright.  By definition in Section 102(b) ideas and concepts do not have copyright protection.  A writing known in the entertainment industry as a “series treatment” which embodies an idea developed for a television series is protected in part and unprotected in part.  If there is no statutory copyright protection for “thought creations” the creator’s right to compensation must come from contract.  Binding a party to whom an idea or concept has been disclosed does not necessarily require a written contract.  An implied or quasi-contract may be sufficient.  

Forest Park Pictures and others v. Universal Television Network, Inc. reached the Second Circuit Court of Appeals (which sits in New York) after a judgment dismissing the complaint.  The case concerned the obligation of USA Network to pay for using a concept it received from the plaintiffs/creators for its television series. There was no written contract but plaintiffs alleged an implied promise to pay reasonable compensation if the concept was used (a quasi-contract).  According to Forest Park Pictures, USA Network misappropriated its idea by producing its own television series based on the same concept.

After submitting the series treatment Forest Park met with USA Network’s representative.  The complaint alleges defendant scheduled the meeting “for the express purpose of hearing Plaintiffs pitch their show.” Defendant knew “that writer-creat[o]rs pitch creative ideas to prospective purchasers with the object of selling those ideas for compensation” and “that it was standard in the entertainment industry for ideas to be pitched with the expectation of compensation in the event of use”…. And, at the meeting, “[i]t was understood that Plaintiffs were pitching those ideas with the object of persuading [defendant] to purchase those ideas for commercial development.” The parties exchanged further communications in the week following their meeting but then discussions ended and they had no further contact.

The threshold issue was whether dismissal of the complaint on the ground of preemption by the Copyright Act was premature.  The District Court held in dismissing the complaint that the subject matter of plaintiffs’ breach of contract claim – the character biographies, plots, and story lines it pitched to defendant “fall within the subject matter of the copyright laws” and concluded 

Plaintiffs’ breach-of-implied-contract claim based on his alleged right to be compensated for the use of his idea for a television series is equivalent to the exclusive rights protected by the copyright law and is therefore preempted by the Copyright Act.

The Court of Appeals viewed the preemption issue differently.  It held in a decision in June 2012 that the complaint “adequately alleged the breach of a contract that included an implied promise to pay” and plaintiffs’ rights to compensation “are not equivalent to those protected by the Copyright Act.”

An enforceable implied-in-fact-contract is an alternative theory for compensation that does not rest on the Copyright Act.  Misappropriation is not equivalent to copyright infringement.  The question is “whether the Complaint actually pleads an enforceable implied-in-fact contract.”  Defendant argued that the “Complaint falls short because there was no meeting of the minds over the price term.”  But under California law where the contract was to be performed the absence of a specific price term is not fatal.  “[A]n implied-in-fact contract can have an open price term to be filled in by industry standards.”
    
A disclosure expressly conditioned on a promise of payment is actionable against a party who knew or should have known that such a condition was implied.  The Circuit Court pointed out that California has long recognized that an implied-in-fact contract may be created where the plaintiff submits an idea (the offer) that the defendant subsequently uses (the acceptance) without compensating the plaintiff (the breach).  Of course, Forest Park will still have to prove at trial that such an industry standard price exists and that both parties implicitly agreed to it. That Forest Park may fail to prove its claim, however, does not render the contract unenforceable as a matter of law.

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Originally published as a Guest Blog on Writer Beware® September 7, 2012

Authors create the content blog aggregators need for their web collections. Each gains in different ways. For the aggregator, the greater the variety of material and the steadier the receipt of content the more valuable the aggregated website. Because aggregating content is a business not a charitable operation, it is natural that aggregator agreements to publish content will primarily reflect the aggregator’s interests. Benefits to authors come in the form of readership and (possibly) recognition which may be a fair exchange even the author is un- or minimally compensated for her work. However, particularly productive authors will wish to retain control over their contributions and may find aggregators’ “Terms of Use” unaccommodating. It is a fair question, What does an author give up in exchange for granting a license for the privilege of having her content aggregated with others and accessible to the searching public?

The consideration in exchange for a license should begin with an appreciation for copyright. This is so because all agreements between publishers and authors start with a grant of rights. The Copyright Act states that “Copyright protection subsists … in original works of authorship fixed in any tangible medium of expression” (§ 102). Content submitted for aggregation is a tangible medium of expression, but remedies for infringement of content come through registration. There is no immediate remedy for unregistered content however egregious the taking. Neither the granting of rights nor the publication of content protects an author against infringement. Copyright registration is not expensive but it may be (or may be thought to be) uneconomical.

The questions concerning aggregator “Terms of Use” are not simply academic. They can affect an author’s future. Active content creators produce volumes of original material which can be collected and reworked into other formats. It is one thing to confer limited rights of publication and distribution of content on a nonexclusive basis and another to lose control of other statutory rights. One of the exclusive rights an author has under the Copyright Act is the right “to prepare derivative works based upon the copyrighted work” (§ 106(2)). Exclusive licenses are not typical in aggregator agreements, but there is a form of nonexclusive license that has some worrying features.

It is prudent before granting rights for the author to carefully examine the terms under which the aggregator accept content in exchange for publication. Not all terms are equally beneficial to the author. There are different monetizing models, all of which have the ultimate purpose of creating revenue for the aggregator. Some aggregators create libraries of material which are accessed for payment. Other aggregators generate revenue from the advertising on their websites. Some models may share the revenue with authors.

The potential problems are illustrated by several examples. In drawing attention to terms in the following agreements we are not suggesting any deliberate attempt to benefit at the author’s expense, but we are pointing out that the agreements are essentially on a “take it or leave it” basis, which is always a sign for caution.

1. The ODP (Open Directory Project) is a comprehensive directory of Web resources.
In exchange for ODP’s agreement to include an author’s work the author agrees:

To grant AOL LLC. Corporation a non-exclusive, royalty-free license to use, publish, copy, edit, modify, or create derivative works from my submission.

The catch is “edit, modify or create derivative works from my submission.” Although the ODP license is nonexclusive the author grants AOL extensive rights to the blog content. The author can terminate the license but AOL owns any derivative work it creates, but the derivative works created from the author’s submission are owned by the aggregator “royalty free.”

2. BLOGLINES is an aggregator of syndicated news feeds operated by WYBS.
The Bloglines Terms of Service assert that “WYBS does not claim ownership of the Content you place on your Private Page or Public Page,” but “[b]y uploading, submitting or otherwise disclosing or distributing content of any kind on the WYBS website or otherwise through the Bloglines Service, you” – here comes the kicker –

[You] Grant to WYBS, its affiliates and their assignees the perpetual, irrevocable, non-exclusive, royalty-free right to use, reproduce, display, perform, adapt, modify, distribute, make derivative works of and otherwise exploit such content in any form for the purpose of providing the Bloglines Service, including without limitation, any concepts, ideas or know-how embodied therein….

Even though Bloglines disclaims ownership of blog content, the author has lost control of her work. She has granted WYBS the right to “exploit such content in any for” and in any way it chooses to on a “perpetual [and] irrevocable” basis that includes the right “without limitation … to exploit such content … an any concepts, ideas or know-how embodied therein.” The “non-exclusive” is meaningful only to the extent that the author has the means to exploit the work in the same fashion as the aggregator.

3. Curata is a content curator for businesses which describes itself as “how smart marketers produce a consistent stream of high-quality content.”

Curata’s Terms of Use state that:

“By submitting, posting or displaying Content you give us an irrevocable, worldwide, royalty-free, and non-exclusive license to reproduce, adapt, modify, translate, publish, publicly perform, publicly display and distribute any Content which you submit, post or display on or through, the Website. You represent and warrant to us that you have all the rights, power and authority necessary to grant the above license. You agree that you are solely responsible for (and that we have no responsibility to you or to any third party for) any Content that you create, transmit or display or permit to be created, transmitted or displayed while using the System and for the consequences of such actions (including any loss or damage which we may suffer) by doing so.”

While Curata does not use the term “derivative” the author has all but granted it in the terms “adapt, modify … publicly perform [and] publicly display” the substance of the work.

In each of these examples, the author has licensed aggegator the right to exploit her work. It is not as though she does not have the same rights or is inhibited in licensing to others but the exploiting by aggregators is without approval, and without approval she has no control. Authors should assess the benefits, consider what they are prepared to give up in exchange for publication of their works to audiences larger than they themselves can attract and make their decisions with knowledge that they lose control of many of their copyright rights. Productive authors should be particularly careful because for them original content can be collected or packaged in different formats or reworked into books for traditional or e-publishers.

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The traditional publishing process begins with an editor’s enthusiastic response to an author’s outline, proposal, and sample chapter, followed by an offer and contract from the publisher.  Once the contract is signed the focus shifts to the quality of the final manuscript.  The publishing contract includes a “d & a” (abbreviation for delivery and acceptance) clause, which requires the author to deliver a manuscript that is complete and satisfactory to the publisher in form and content.  If the manuscript is unacceptable to the publisher for any reason it can terminate the contract and demand return of the portion of the advance already paid.

Both Federal and state courts have interpreted the unsatisfactory manuscript clause to allow publishers wide discretion to terminate contracts provided that the termination is made in good faith. Determination of the publisher’s good or bad faith is tricky.  In a federal lawsuit for return of a $350,000. advance paid by Random House the judge noted that “evaluations of editorial acceptability are based on the subjective judgment of the publisher” and “[what] in good faith may be acceptable to one publisher may be, in equal good faith, not acceptable to a different publisher.” (By paying a large advance Random House had taken a calculated risk that the author’s next work would be as commercially successful as his earlier books.).  At the same time, to properly reject a manuscript the publisher must demonstrate that it did not “arbitrarily change its mind.” There must be good reason other than a change of market conditions for the publisher’s decision to terminate the contract.

Following guidelines set out in several important cases, “good faith” is arrived at by examining the publisher’s efforts to provide editorial assistance to the author to produce a book the publisher believes can be profitably sold.  Even if the publisher has accepted and paid for portions of the manuscript it may only terminate a book contract on the basis that the completed manuscript is unsatisfactory if it has provided editorial assistance to the author and reasonable time for the author to make revisions.

New York courts have ruled that there is an implied good faith obligation in publishing contracts “for the publisher to engage in appropriate editorial work with the author of a book”.  This means giving the author editorial suggestions and an opportunity to make revisions.  In a lawsuit by the publisher Harcourt Brace Jovanovich against Senator Barry Goldwater [Harcourt Brace Jovanovich, Inc. v. Goldwater, 532 F. Supp. 619, 624 (S.D.N.Y. 1982)] for return of the advance after delivery of a memoir the publisher rejected as unsatisfactory, the judge concluded

It cannot be … that the publisher has absolutely unfettered license to act or not to act in any way it wishes and to accept or reject a book for any reason whatever. If this were the case, the publisher could simply make a contract and arbitrarily change its mind and that would be an illusory contract. It is no small thing for an author to enter into a contract with a publisher and be locked in with that publisher and prevented from marketing the book elsewhere..

In an action by Random House against the novelist Herbert Gold [HBJ, Random House, Inc. v. Gold, 464 F. Supp. 1306 (S.D.N.Y.), aff'd mem., 607 F.2d 998 (2d Cir. 1979)] another judge held that “allowing unfettered license to publishers to reject a manuscript submitted under contract would permit overreaching by publishers attempting to extricate themselves from bad deals.”

The major unsatisfactory manuscript cases have had varied outcomes: Senator Goldwater was  permitted to keep his $65,000. advance.  In that case the publisher simply rejected the manuscript and did not work with the author.  In the Random House case the publisher terminated the contract after two rewrites and the author had to return $350,000.  A fundamental rule emerges: the party that breaches the contract pays, either the publisher who fails to give the author editorial guidance or the author who fails to submit an acceptable final manuscript.  Both parties have rights and obligations which should be clearly expressed and acknowledged in their contract.

The legal issues I discuss are the underpinning of the delivery and acceptance clauses in publishing contracts.  If you or your lawyer or literary agent is negotiating a contract, try to include the following protective provisions:

1.  All communications from the publisher relating to acceptance or rejection of the manuscript will be in writing.
2.  The publisher is required to either accept the manuscript or direct the author to make editorial revisions by a specified time after delivery of the complete manuscript.
3.  The editor’s suggestions for revisions will be reasonably detailed and specific.
4.  The author will have a reasonable time to deliver a revised manuscript; and
5.  The publisher is required to make a final decision about the revised manuscript within a specified time after delivery.
6.   A “first proceeds” provision.  If the final manuscript is unsatisfactory the author is permitted to defer repayment of the advance until she resells the book and receives another advance.  In the past some publishers would agree to limit repayment to the amount of the second advance, even if it was smaller.  Most traditional publishers’ contracts now require the author to repay the entire first advance within a stipulated period after the contract is terminated, even if the author fails to resell the book.

A final point: By both industry custom and most literary agents’ agreements, if the contract is terminated the agent does not repay the 10% or 15% commission she received for making the sale to the publisher.

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When lawyers talk about “standard” clauses and courts refer to publishing contracts as “standard agreements” it is not to suggest that there is a standard form such as we expect for certain real estate transactions.  What we mean by “standard” is that the contract clauses address similar concepts of rights and duties expressed in language differently crafted by each publisher.  We will comment on the standard clauses from the Author’s perspective. The reason to emphasize the Author’s perspective is that publishing contracts are not negotiated from the ground up.  They are prepared by the Publisher and delivered to the Author as though ready for signature.  And, many Authors (some to their regret) sign without understanding what the contracts contain or what rights they are giving up.

The first of the so-called “standard” clauses in traditional publishing contracts is the Grant of Rights.  Depending on the business model the author will grant many of her rights for the term of copyright to a traditional publisher, fewer rights for a limited term to an ebook publisher, or retain all rights granted under the Copyright Act if she self publishes.

We start from the proposition that if a Publisher offers a contract to an author the rights it is bargaining for have significant economic value.  Contracts signed without negotiation are drafted primarily with the publisher’s benefits in mind and only incidentally with the author’s.  Publishers understand this and are generally amenable to making some contractual changes as long as the changes don’t undermine their economic interests.  

U.S. copyright law and the Copyright Act are never far from publishing contracts.  A logical beginning is to consider the following questions:

1.  What rights does an Author have that a Publisher would want to license?  And,
2.  Where do the rights come from?

The answers are in the U.S. Copyright Act.  Section 102 provides that “Copyright protection subsists … in original works of authorship fixed in any tangible medium of expression.  “Literary works” is the first of 8 categories of “works of authorship.” Other “authors” include composers, dramatists, choreographers, artists, sculptors, and architects.

Section 106 of the Copyright Act lists the exclusive rights granted to Authors.  The list is commonly referred to as a “basket of rights.”  The Author has the exclusive rights to do and to authorize others to

reproduce the copyrighted work
prepare derivative works
distribute copies to the public
perform the work and
display the work publicly  

This basket of rights is divisible, meaning that individual rights can be licensed separately.  Authors should resist giving Publishers every right they have.  There is no point, for example, in giving most Publishers “performance” rights, which they will not be able to exploit.  Most authors do not want to give up their right to prepare derivative works, yet some publishing contracts contain language that does just that.

At a minimum Publishers ask for the rights to reproduce, publish, distribute and sell a book to the public.  A “standard” Grant of Rights clause reads:
   
The Author grants to the Publisher the sole and exclusive right during the full term of copyright and any renewals or extensions thereof to exercise and license (i) the right to reproduce, publish, distribute and sell the full length Work in the English language in a product reproduced in print-on-paper or other physical media (“book form”); (ii) the right to use the full length content of the Work in the English language in electronic media; and (iii) the subsidiary rights to the Work specified below, in the following territories.

You will notice that the Grant of Rights clause contains six elements:
1.  The “sole and exclusive right” to exploit the Work;
2.  For the full term of copyright and any renewals or extensions;
3.  To reproduce, publish, distribute and sell the Work;
4.  HOW?  In “book form” AND in “electronic media”;
5.  The right to sublicense subsidiary rights; and
6.  All rights are to be exercised in stipulated territories.  

Under the 1976 Copyright Act the full term of copyright (if the contract is not terminated earlier) is the life of the author plus 70 years.  Publishing contracts also enumerate the Subsidiary Rights granted in a separate clause.  We will discuss subsidiary rights in another essay.

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Whether money is the motive for writing – “[n]o man but a blockhead ever wrote, except for money” (Samuel Johnson) – or only one of the rewards for those lonely hours of composition, how does the author get paid? Before she reaches the “royalties” clause in her publishing contract she has to negotiate the “grant of rights”. What is she giving up for what she is getting?  In exchange for granting rights that may extend beyond the grave, she earns royalties

Royalties were not an established convention in Samuel Johnson’s writing lifetime. What is the current practice? Royalties for trade books are typically based on list or catalog price, although some publishers pay on net receipts and net receipts are offered by traditional publishers for e-books. List price is better for the author. If royalties are based on net, it is crucial for the deducted expenses to be clearly defined. Thus, if the list price of a hardcover book is $36. and royalties (before escalations) are 10% the author’s account will be credited $3.60 per sale. Trade paperback and mass market paperbacks are similarly treated. It matters little to the author that the publisher discounts her books to a retailer because the discount does not affect royalties.

E-books are priced different. It makes a difference whether the publisher subscribes to the “agency” or “wholesale” model. This is so because under the agency model (which five of the big six publishers negotiated with Apple in 2010 and to which presently all six subscribe) the publisher rather than the distributor sets the price. The typical royalty provision for e-books reads “If published as an e-book edition, 25% of the net amount actually received from such sales.” If the distributor (Apple under the “agency” model) takes a “commission” of 30% the author will receive 25% of 70%. If the e-book price is fixed at $9.99 the publisher will credit the author’s account $1.75. (John Sargent, CEO of Macmillan in his letter to Staff following an unsuccessful meeting with Amazon on the “agency” model in January 2010, before Amazon acceded to it, stated that “[o]ur plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.”).

Independent e-book publishers subscribe to the “wholesale” model. A typical e-book contract may provide for

a royalty of fifty percent (50%) based upon Publisher’s Net Receipts for the first 2,500 units sold and sixty percent (60%) based upon Publisher’s Net Receipts thereafter. Net Receipts shall mean the amount actually received by the Publisher from the sale of the electronic editions of the Work, net of the following items: charges of third parties which sell the Work through websites or other distribution channels.

Assume an e-book has a list price of $9.99 and a discounted price of $4.99 and that the platform distributor (Amazon or Barnes & Noble) under the “wholesale” model) takes 30%, then publisher will credit author’s account $3.50 (at 50%) and $4.20 (at 60%). If the “agency” model survives an anticipated Justice Department lawsuit against the five publishers who crafted it, consumers will continue to lose on price and authors (at 25% of net) on royalties.

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To have a work included in a compilation is a goal eagerly sought after by authors. It is a distinction for a story or article to appear in an anthology. What should the author be alert to? The question comes up in discussing digital aggregation of compilations in the context of authors’ rights under the Copyright Act. The answer is found in sections 103 and 201(c) of the Copyright Act as construed in decisions from the United States Court of Appeals for the Second Circuit and the Supreme Court.

Compilers and authors have complementary rights. Section 103 provides in pertinent part

The copyright in a compilation … extends only to the material contributed by the author of such work, as distinguished from the preexisting material employed in the work, and does not imply any exclusive right in the preexisting material. (Emphasis added)

Authors typically grant exclusive first publication rights to the compiler but non-exclusive rights thereafter. A non-exclusive right is not a transfer of rights under the Copyright Act. A “compilation” is defined in Section 101 as “a work formed by the collection and assembling of preexisting materials.” It includes “collective works” which are works “in which a number of contributions, constituting separate and independent works in themselves, are assembled into a collective whole.”

Section 201(c) of the Copyright Act is composed of two sentences. The first concerns the author; the second the compiler. The first provides: “Copyright in each separate contribution to a collective work is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution.” The second sentence defines the compiler’s rights:

In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series. (Emphasis added)

Legally, author and compiler have separate rights under the Copyright Act, but the compiler’s “privilege of reproducing and distributing the contribution” after its initial appearance is limited.

Imagine that an author has contributed a story to a compilation which is one of a series, for example a quarterly anthology of short stories. The compiler wishes to have the entire series made available to future readers by an electronic database provider. Essentially two scenarios can be envisioned. In the first, the compiler licenses the series of compilations (the archives) to a third-party who aggregates the material in electronic and CD-ROM databases without the author’s permission. The compiler assumes the “privilege” to license the individual stories in the compilation. In the second scenario, the compiler (also without permission) either creates or licenses the compilations for distribution in a format that duplicates the compilations page for page.

The first scenario was the subject of a case decided in favor of authors, Tasini v. New York Times, 206 F.3d 161 (2nd Cir. 1999), affirmed by the Supreme Court, 533 U.S. 483 (2001). The second was decided in favor of the compiler, Faulkner v. National Geographic Enterprises Inc., 409 F.3d 26 (2nd Cir. 2005). Authors win in the first case because section 201(c) does not permit the author of a collective work (the compiler) to license an individual contribution without the author’s agreement to “express[ly] transfer … [her] copyright.” The compiler wins when the medium of reproduction preserves the original format.

The author of an individual contribution to a collective work owns the copyright to that contribution. Any unauthorized reproduction and distribution generally infringes the copyright unless such use is specifically protected by the Act. There are two sides to this principle: Tasini illustrates one; Faulkner the other. In Tasini, individual contributors’ works were licensed by the compiler for inclusion in electronic databases. The presumption under section 201(c) is that the author of a short story (or article, as in Tasini) “gives the publisher the author’s permission to include the article in a collective work … [as well as] a non-assignable, non-exclusive privilege to use the article as identified in the statute.” The Court held that section 201(c) does not permit compilers (or, as in Tasini, publishers”) to license copyrighted works where they “may be retrieved individually or in combination with other pieces originally published in different editions of the periodical or in different periodicals.”

Putting its decision in context with Tasini, the Court in Faulkner emphasized the different factual circumstances between the two cases. “Crucial to our decision” (in Tasini) “was the fact that each article had to be retrieved individually from the particular database and made ‘available without any material from the rest of the periodical in which it first appeared’.” The Supreme Court held that “publishers are not sheltered by §201(c) because

the databases reproduce and distribute articles standing alone and not in context, not “as part of that particular collective work to which the author contributed, “as part of … any revision thereof, or “as part of … any later collective work in the same series.”

In contrast National Geographic did reproduce the back issues of the magazine “as part of the collective work to which the author contributed or as part of any ‘revision’ thereof’.” National Geographic is entitled to the § 201(c) “privilege” because it converted the “intact periodicals (or revisions of periodicals) from one medium to another.” The Court noted that

Each issue of the magazine was scanned two pages at a time into a computer system. As a result, the [complete digital collection] user sees exactly what he or she would see if viewing an open page of the paper version, including the fold of the magazine.

Having complete digital collections available for the reading public is valuable – individual works would otherwise be lost in the accumulation of newer works. However, to scan separate individual works into a database must be expressly agreed upon by each author to avoid exposure to liability for copyright infringement. A digital database should benefit authors as well as readers and compilers.

sjlevine

Literary agents are the filters to the publishing industry; the first readers; and mainly indispensable.  Acquisition editors rely on their tastes and take their calls.  In relation to authors they are like as adventurers to booty: they seek and sell. Their fee, a commission for placing an author’s work, is spread over the economic life of the publishing contracts their efforts bring into being. What exactly is promised and performed and the commission the literary agent is entitled to is set out in the parties’ agreement. A literary agent typically receives a commission of 15% of the publisher’s gross revenues from book sales or licenses of subsidiary and ancillary rights. Author/agent agreements are terminable, but an agent’s right to commissions for services performed survives.

Authors are not captive to their agents.  We stress “not captive” and “services performed” because these issues arose in Lampack Agency v. Grimes, an unreported New York case decided in October 2010, and further reviewed in an appellate decision announced on March 1, 2012 (1st Dept.) The appellate division affirmed the trial court’s judgment dismissing the literary agent’s complaint that it was entitled to commissions from contracts negotiated after the author terminated the agency. The questions raised and the answers given in this case are significant markers as to an agent’s right to share in proceeds from subsequently created production after his connection with the author has ended.

Whether or not there is a written agent/author agreement, commissions are protected through a clause incorporated into the publishing agreement, an “Agency Clause.” The agent’s theory in  Lampack rested on the inclusion in the publishing agreement negotiated by the Lampack agency of an option provision for the author’s next work of fiction. The publishing agreement for the “option” work was negotiated by the author’s new agent.

The Lampack Agency included the following “agency clause” in the publishing agreement:

The Author hereby appoints [PLA] irrevocably as the Agent in all matters pertaining to or arising from this Agreement. . . . Such Agent is hereby fully empowered to act on behalf of the Author in all matters in any way arising out of this Agreement. . . . All sums of money due the Author under this Agreement shall be paid to and in the name of said Agent. . . . The Author does also irrevocably assign and transfer to [PLA], as an agency coupled with an interest, and [PLA] shall retain a sum equal to fifteen percent (15%) of all gross monies due and payable to the account of the Author under this Agreement.

If a discharged agent has negotiated a publishing agreement that includes an option on the author’s next work, is he entitled to receive a commission on the publishing agreement for the option book? Both courts in the Lampack case made it clear that if such a right exists it would have to be expressly stated in the agreement between the author and the agent.

What does it mean for the author to have “irrevocably assign[ed] and transfer[ed] to [an agent] … an agency coupled with an interest”? What an author “irrevocably assign[s] and transfer[s]” is limited to commissions paid as a percentage of the author’s earnings. “An agency coupled with an interest” (the trial judge citing a case from 1896) “[means that] as a part of the arrangement with the principal, the agent received title to all or part of the subject matter of the agency.” The trial court stated:

In this case, the commission provision grants PLA a 15% commission in the proceeds from its sale of rights in Grimes’ literary works and not an interest in those literary works themselves…. (Emphasis added).

The appellate court went a step further:

It is not reasonable to interpret the phrase “this Agreement” to include either extensions of the 1999-2003 agreements or an agreement for the future work mentioned in the 2005 agreement …. If Grimes and Penguin had meant to give plaintiff commissions on such extensions and future agreement, they would have said so, especially since the 2005 agreement had a specific Option on Next Work clause.

Indeed, to interpret otherwise (in the Court’s words) would produce an “absurd result.” Rather,

Interpreting “this Agreement” to mean only the actual contract signed by the parties, not future agreements or extensions, is consistent with the doctrine that “[a]n at-will sales representative is entitled to post-discharge commissions only if the parties’ agreement expressly provided for such compensation.” (Emphasis added).

An agent engaged for an unfixed period is entitled to commissions on future contracts only for services performed during his agency. The appellate court in Lampack reached back to a 1900 case to explain why an agent is not entitled to commissions received for contracts entered into after discharge with customers he originally secured. In that earlier case the Court held:

He was to have his commission upon all such business, not merely because he had secured these original contracts, but because he was there to aid, if necessary, in securing renewals or additional contracts, and in keeping his customers in touch with the defendant …. contracts. He was consequently entitled to commissions upon renewals or additional contracts which came in during his period of employment…. The customers were … not his when they chose to contract directly with the defendant after his connection with the latter had ceased.

The legal principle is clear. An agent’s right to commissions is for services that result in one or more contracts. The “interest” agents have which survives termination of their agency accrues from their having completed services. The expectancy, if there is any, comes from fulfilling the purpose for which the agent is engaged. The phrase “an agency coupled with an interest”, which refers to ownership of a literary property, does not belong in an Agency Clause because that is not what the agent has. In Lampack the phrase served only to invigorate a dispute. And, who wants that?

sjlevine