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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.
In consideration for publishing and distributing an author’s work and for the risk that revenues from publication will fall short of expenses publishers take an exclusive license for the term of copyright subject to two forms of termination and reversion: by statute and by contract. I have discussed statutory termination in an earlier Note. Under that right authors have an opportunity within a window of time to give notice of termination and, failing the original publisher bidding anew for the copyright, can license the work (or arrange for its publication) to another publisher. Contractual reversion of literary property by notice of termination is typically built into the publishing agreement in an “out of print” clause that gives the author the right to terminate the exclusive license under stipulated circumstances.
The “out of print” clause in words or substance opens with the following words:
If, at any time after the expiration of [stipulated time] from the publication date, the Publisher allows the Work to go out of print [or no print or electronic version is available for sale] and such status continues in effect for [a stipulated time] after the Author shall have given Publisher [a first] written notice to put the Work back into print, then the Author by a [a second] notice in writing may terminate this Agreement ….
The term “out of print” means both availability for sale and actual sales. Inventory is not determinative although it may be important if the agreement provides for post-termination sales to the author. Thus,
The Work will be considered available for sale only if the total number of copies of any edition of the Work sold in the [licensed territory] on which the Author is paid royalties exceeds a total of [number of copies] in the aggregate in the two most recent royalty periods and the Work is included in the Publisher’s then recent print and/or electronic catalog.
Implicit in “available” is “unavailable.” A work is unavailable if unit sales fail to reach a stipulated level. For digital or print on demand books “out of print” is typically measured by the amount of earnings over an agreed number of royalty periods: if the author receives less for a stipulated number of royalty periods than a stipulated number of dollars the work is considered “out of print.” Being dropped from the catalog is a powerful indicator that the publisher has no further interest in the work.
If the publisher responds to author’s notice by reissuing the work timely as provided in the “out of print” clause, there can be no termination since the condition for its exercise has been preempted. The stipulated periods for exercising a right, number of units sold and dollar amounts should be carefully considered before executing the publishing agreement. This is so because most trade books fall into the mid-list category and (apologies for uttering an unpleasant truth) tend to have a short shelve life. If works go out of print, and the publisher has no interest in reissuing them, authors should be able to regain control over their copyrights. There is no rule that says that works out of print are incapable of revival.
Particular care should be given to text books or books published by textbook publishers for which publishers are more than mere licensees: they register and own the copyright in their own names. In these agreements, authors assign and transfer their copyright rights in exchange for a small advance and “royalties.” An “out of print” clause in this kind of agreement is the only way to re-capture copyright via a reassignment (reversion) to the author.
A reader has asked for some clarification on contract terms. Authors should not fixate on the myth of “standard” terms, but there are terms that publishers tare adamant about that may have to be adjusted to accommodate particular circumstances. One such term is the non-competition clause. It means what the publisher says it means when the term is dusted off and invoked. Here is a sample provision from a “big-6 ” publisher:
COMPETITIVE WORKS
(a) The Author will not authorize or arrange for the publication, distribution or sale in the Exclusive Territory, otherwise than by the Publisher, of any work by the Author (or anyone who receives an author’s credit on the Work) that will directly compete with the work or diminish the value of any rights granted to the Publisher by this Agreement where such publication, distribution or sale will take place at any time during the term of this Agreement.
This provision has been in the news and is worth reflecting on. The New York Times reported recently that “Amazon Signs Up Authors, Writing Publishers Out of Deal” (David Streitfeld). This is what Mr. Streitfeld noted:
For a sense of how rattled publishers are by Amazon’s foray into their business, consider the case of Kiana Davenport, a Hawaiian writer whose career abruptly derailed last month.
In 2010 Ms. Davenport signed with Riverhead Books, a division of Penguin, for “The Chinese Soldier’s Daughter, a Civil War love story. She received a $20,000 advance for the book, which was supposed to come out next summer [2012]”. Ms. Davenport picks up the story in her Blog of August 26, 2011:
Recently [the] publisher discovered I had self-published two of my story collections as electronic books…. The editor shouted at me repeatedly on the phone. I was accused of breaching my contract … [and] of blatantly betraying them with Amazon….
Upshot? Based on the non-compete provision, Riverhead terminated the contract and demanded return of the advance. The standard no-competition term contains no objective standards for measuring what is meant by “competitive.” For a publisher to assert that story collections would “diminish the value” of the Work is totally subjective, of course and perhaps unreasonable. There are several points of interest in the case if it were to proceed to a lawsuit.
One question is, Is it reasonable for the publisher to believe that short story collections would be competitive with a novel (after all, it could argued contra that the collections would enhance rather than diminish value by giving additional weight to the brand). The subjective element of the provision creates ambiguity. What standard is to be applied? If ambiguous, contracts are read against the draftsman and in favor of the other party. Further, if termination and demand for return of the advance were found to be out of pique with the author for having the gumption to package the collections with Amazon for self e-publication it would not sit well with the jury.
Terms are not set in stone, however. They can be negotiated, or if refused a business decision would then have to be made to go along or look elsewhere. Authors having published works they want to return to market should negotiate for the publisher’s approval.
A misconception about publishing agreements is that the form authors receive is “standard” in the industry. “Standard” is a myth. One imagines an editor saying to an author: “This is our standard contract.” What he means to convey – he is being very nice about it – is that the form contract is fair because it is standard. But, this is a non sequitur. One size does not fit all. “Don’t worry. We’re looking out for your interests” is nonsense. The myth is perpetuated by acquiring parties to induce insomnia. Understandably, repetition of the myth gives strength to the concept of “fairness.” And, for this reason authors may find it difficult to resist the temptation of signing what others have accepted. But, authors should surely resist. She is licensing her copyrights; the publisher or licensee is promising what it will do with them.
It is true that authors and publishers (or other licensees) have in common a desire to profit from the author’s work, but their interests are not isotropous and lawyers for the offering party are more adept in phrasing terms to promote their client’s interests than in attending to the author’s. For this reason alone, publishing (and other) agreements should not be accepted merely on faith of fairness. In every publishing agreement authors can expect to encounter “standard” subjects, such as grant of primary, subsidiary and ancillary rights, division of licensing fees, representations and warranties, compensation in the form of advances and royalties, option for future works, non-compete clauses and so on. However, the language and content of the terms – the promises made by the publisher and its demands upon the author – represent only the publisher’s offer.
The view taken here and in future postings is that authors should know what they are buying when they sign a contract. Some kicking of tires is not irrational. The fact is, publishing and licensing contracts are not drafted for the benefit of the author. They always ask for more than an author should be willing to give. Because the publisher has the advantage of being the first to state the terms of the offer. So, unless the author responds with proposed terms of her own the negotiation is controlled by the publisher’s language and demands. Don’t be placated if questions about the contract elicit the response that the provisions are “standard.” Uncertainty about what rights have been granted will only lead to trouble if the work is commercially successful. The contract should certainly include provisions expressly stating what rights the author has granted and those she retains.
Although it may be difficult for an author to resist picking up the pen and instantly agreeing to the terms offered, a publishing contract from a publisher should be regarded as an invitation to negotiate. Authors should not sign a contract without understanding what she is giving up in exchange for a publisher’s or licensee’s promises. Contract terms are merely proposals until the parties reach agreement.
Important Negotiation Points
1. The publisher should have the resources to distribute and publicize the book in the territory granted;
2. The contract should contain a clause which specifically states which rights are reserved by the author;
3. The contract should be clear about submission deadlines, acceptable manuscript, royalties and bonuses;
4. The contract should contain out of print and termination clauses which permit the author to reclaim all rights to the book or rights which the publisher has not licensed within a reasonable time after notice of demand for reversion.
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