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.
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.
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.
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.
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.
There are publishers and there are companies that provide printing and distribution services. The printing/distribution services contract can be misleading, first in that it is typically styled as a “publishing agreement” and second that in one way or another the business model calls for the author to pay the printing and other costs associated with the services. Some of these agreements, the one’s least advantageous to authors take exclusive rights for a stipulated period of time. The less disadvantage (but no less inexpensive) take nonexclusive rights. It is a good idea to review all contracts carefully, but with particular care with printing/distribution service contracts.
An unhappy author who contracted with PublishAmerica without considering the consequences of disadvantageous terms states on her website:
I did not research PublishAmerica thoroughly before submitting my manuscript to them. I took my information strictly from PublishAmerica’s own website. After my contract was signed and my book was well into the publication process, I decided to do a Google search just out of curiosity.
I soon found myself confused and frightened by the negatives I encountered. I really didn’t know what to think. Had I made a mistake by contracting with PublishAmerica? How was I to really know?
PublishAmerica describes itself as “the Nation’s number one book publisher!!” And as a “traditional book publisher.” It may be the first, but not the second.
The genesis of this Note on contracts is an offer from PublishAmerica to its published authors brought to my attention by one of my readers to revert rights granted in its “publishing contract.” To put the matter in context, the author granted “publisher” exclusive rights for 7 years. The contract contains no provision for reversion of rights, but provides for reassignment to author (reversion) for a fee:
24. When in the judgment of the Publisher, the public demand for the work is no longer sufficient to warrant its continued manufacture, the Publisher may discontinue further manufacture and destroy any or all plates, books, sheets and electronic files without any liability in connection therewith to the Author.
If “publisher” elects to discontinue manufacture for lack of “public demand”
the Publisher agrees to notify the Author of such decision in writing, and will offer to transfer to the Author the work and its rights in the copyrights thereon, the plates (if any), the bound copies and sheet stock (if any) on the following terms F.O.B. point of shipment: the plates at their value for old metal, the engravings (to be used only in the work) at one-half (½) their original cost, the bound stock at one-half (½) the list price, and the sheet stock at cost of gathering, folding, sewing and preparing for shipment, all without royalties.
Only if the author agrees to pay a fee for reversion will PublishAmerica “offer to transfer to the Author the work and its rights in the copyrights.” The offer is made in an e-mail:
Your book … has shown no sales for longer than a year.
At this time you may want to have your book’s publishing rights reverted back to you.
We can arrange that.
Go to http://www.publishamerica.net/service/ReturnRights.html and instruct us to return the rights to you. In the Ordering Instructions box, write your name and the title of your book. You will receive the termination documents by mail. There are no strings attached to this termination except the $199 processing fee that covers our administration costs and our de-listing obligations
to vendors and/or wholesalers. You must choose a shipping option to activate your rights return
Thank you for having been a PublishAmerica author, or for sticking around if that’s what you
–PublishAmerica Author Support Team
The likelihood of “public demand” is remote after an initial period. Much depends on the author’s own initiatives – a promise by someone calling itself “publisher” that “[s]ales promotion, advertising and publicity shall be at the Publisher’s election and discretion” is illusory. A promise of performance at a party’s “election and discretion” is not an enforceable. If there is continuing “public demand” it is up to the author:
17. ***The Author agrees to actively participate in promoting the sales of the said literary work in his home town area and elsewhere, by making himself available to media interviews, book readings and/or signings, and other public sales promotion appearances.
In essence, the right of reversion is transformed into a right of “publisher” to discontinue manufacture and all the other services “promised”, so “offering” reversion is simply another source of income to “publisher.”
Strings of effectively arranged letters, words, phrases, clauses and sentences are the essence of expression. They are owned by the author who creates them and protected by copyright law, although infringements are not actionable unless the work is registered with the Copyright Office. If an author includes in his work expressive material owned by others (compilations or derivative works) he or she must carve out in the copyright application what is not to be included in the certificate. This requirement applies whether or not the author has been granted permission to use the expressive material. Section 103 of the Copyright Act provides as follows
(a) The subject matter of copyright as specified by section 102 includes compilations and derivative works, but protection for a work employing preexisting material in which copyright subsists does not extend to any part of the work in which such material has been used unlawfully.
(b) The copyright in a compilation or derivative work 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. The copyright in such work is independent of, and does not affect or enlarge the scope, duration, ownership, or subsistence of, any copyright protection in the preexisting material.
The copyright application asks the applicant to state under oath the specific content both included and excluded for registration. The Copyright Office defines material to be excluded as “preexisting material”, as follows:
Material is preexisting if it has been previously registered, previously published, is in the public domain, or is not owned by this claimant. (Emphasis added).
The Application lists four categories for exclusion, “Text,” “Artwork,” Photographs,” and “Computer Program.” There is also a blank field for “Other” which can be used to more specifically particularize what is being either excluded and included for copyright registration.
In speaking about expressive material, it is not only that which is written, or if written only published, but includes verbal expression as memorialized for example in an interview. The expressive material in unpublished letters as another example is owned by the writer of the letters not the recipient who owns only the paper on which the content is written. None of this material can be copied unless it meets the criteria for fair use. Control over the reproduction of a work and derivatives, dramatic performances and other exclusive rights is reserved to the author.
Rights to unpublished material was the principal issue in a Salinger lawsuit concerning the use of the most interesting quotations from letters in an unauthorized biography of the author. “Salinger” held the Court, “has a right to protect the expressive content of his unpublished writings for the term of his copy-right, and that right prevails over a claim of fair use under ‘ordinary circumstances’,” Salinger V. Random House, Inc., 811 F.2d 90 (2nd Cir. 1987). Ideas, however, are not copyrightable (to be discussed in a later Note).
For protecting expressive material, what applies to longer works is equally true of shorter published or accepted for publication on the Internet. Internet anthologists and aggregators who publish material have the right to register their aggregations as compilations, but depending on the terms of license (exclusive or non exclusive) have no control over an author’s future use of his or her work. Separately, authors may register their own journalistic and opinion pieces and exploit them as they will. Whether to register, however, may depend on the occasion for the publication, whether independent or part of an aggregation and the value of the expressive material.
Ephemeral and generic musings pass in a blink. More thoughtful notes and essays standing independently are more likely candidates for registration. There is a line of cases that hold that expressive material may even extend to short phrases if the “sequence of thoughts, choice of words, emphasis, and arrangement … satisf[ies] the minimal threshold of required creativity.” The “minimal threshold of required creativity”, however, is a high bar. Flash fiction or flash any other genre may qualify and should be registered. Copyright registration is relatively inexpensive and can be completed online for $35.
If the purpose for writing is to provide serious material to an Internet audience and the author is not the publisher, publishing is not without bumps. In a recent contract involving contributions to a website “journal” a website publisher agreed to accept articles on a non-exclusive basis (which is fine), but its contract provided that “[i]f you choose to republish your articles, you MUST publish them either with a NoIndex HTML tag or as an image file” (which is not so fine because although it appears not to restrict it limits the author’s ability to reach audiences other than the publisher’s). So, in clicking “accept” at least pay attention to the terms and who will own the published piece.