Friday, February 25, 2022

Negotiating a Book Publishing Contact

By Lloyd Jassin

Book Publishing Contract Attorney
I should probably have my lawyer look at this

In book publishing, unlike the film industry, the grant of rights is (or should be) narrow. In exchange for an advance against future royalties, publishers receive the basic right to print, publish, and sell the work in book form for the entire term of copyright. Today, copyright lasts almost one hundred years from a book's initial publication. So what could go wrong with a contract that runs for an author's life plus another 70 years? Plenty. Just ask a publishing attorney. Common problems include:

  • unconscionable non-compete clauses
  • one-sided option (next book) clauses 
  • lack of approval over the settlement of claims
  • no objective criteria to determine"out of print" & rights reversion
  • no rights reversion for failure to account
  • no rights reversion for failure to publish
  • rights grabs and warehousing valuable subsidiary rights

Unless a publishing contract allows an author to terminate for cause, they are caught between bad and worse options - asking a court to rescind the contract (rescission is seldom granted) or waiting 35 years to exercise their right of termination under the Copyright Act.

A Book Contract Should Not be Entered into Hastily

Taking stock provisions for granted can have serious consequences. For example, rather than relying on a lawsuit to get back rights, if a publisher fails to publish within a contractually agreed time limit, there should be a mechanism that permits an author to regain their rights. Similarly, if a publisher fails to exploit specific subsidiary rights (e.g., audiobook or foreign translation) within a reasonable time, it should trigger a reversion of those rights.  In addition to reclaiming or recapturing rights, an author should reserve, or hold for their own use, film, television, live stage, and merchandise licensing rights. If a publisher claims these rights, they are deviating from industry norms. 

What to Expect When Expecting a Book Contract

Preceding the actual book contract is the term sheet. The term sheet contains the main deal terms. To decode a term sheet or a book publishing agreement, some authors turn to literary agents, who receive 15% off the top for guiding them in the complicated journey from unbound to bound. Others retain flat or hourly fee book contract attorneys to help navigate the maze of legal jargon and publishing industry argot and advise on negotiation strategies. 

A publishing attorney will study and review the deal terms and make recommendations to the client. Their initial task is to determine if the deal terms are fair. They do this by comparing them to similar terms offered by similarly situated publishers. After both parties agree to the deal terms, the publisher will prepare a contract incorporating those terms, plus the publisher's stock provisions. In addition to helping their client think through the offer and its possible ramifications, an attorney can advise them on what is negotiable and what is not. 

Publishing contracts are chock full of double dips and legal loopholes, and when it comes to royalties, a hall of mirrors where what it says and what it means are often two different things. The big '5' publishers offer royalties based on units sold, adjusted for returns. Royalties for trade paperback books range from 7 - 7.5% of the list price.  Typically, established publishers offer 10% of list price for the first 5,000 hardcover copies sold, 12.5% on the next 5,000 sold, and 15% thereafter. Many smaller publishers base their royalties on "net" which is the amount the publisher receives from booksellers. The standard eBook royalty rate offered by established publishers, and many independents, is 25% of net.

Whether one of the big five New York publishing houses or one outside of the insular world of New York publishing, a well-drafted publishing contract can anticipate potential issues, reduce disputes, improve financial return, and save thousands of dollars in legal fees later on. 

When presented with the contract, you will want to modify specific terms.  In the case of a subject matter expert, business owner, or series author, you want title approval. Yet most stock contracts state the publisher decides the book's title.  Contract clauses are malleable, not words set in stone. A good publishing attorney - or agent- knows the contract managers at the major publishing houses. Logical arguments supporting rational positions and knowledge of industry practice are the underpinnings of most book contract negotiations.

Benefits of Reviewing a Signed Agreement with a Publishing Lawyer

For those who have already signed a publishing agreement, a publishing attorney or literary lawyer can help you understand the deal's limitations and determine if those limitations are enforceable. For example, a publishing attorney can advise whether a next book option is enforceable or simply an unenforceable agreement to agree. For example, a common concern is whether a non-compete clause can prevent an author from writing a new book on a related topic. Similarly, a publishing attorney can advise on termination for cause options or termination as a matter of right under the Copyright Act.  

Tip. If chomping at the bit to sign a contract but cannot afford to hire a lawyer, visit Victoria Strauss' Writer Beware blog - a beacon of light in the "shadow-world of literary scams, schemes, and pitfalls." Writer Beware doesn't offer legal advice, but it does a stellar job exposing and raising awareness of questionable business practices in the world of books and authors.   

Book Publishing Contract Checklist

The following checklist highlights points covered in a typical book publishing contract. In addition, the questions and comments will help guide you through the process of book contract negotiation.

   I.   The Basics

1. In whose name is the contract? Author? A legal entity such as an LLC? 

2. If a legal entity, does the publisher require you to sign an inducement letter? 

 3. Description of work (synopsis)

-Tentative title, # of words, # of photos, intended audience, affix proposal?

II.   Grant of Rights and Territory


      1. Is it a license of certain rights or an assignment of all rights? 
      2. Term or duration (limited term or life of copyright?)
      3. Geographic scope
           a)     World?
           b)     Limited? (e.g., the U.S., its possessions & Canada) 

    4. Exclusive rights granted
    a) Primary rights
    -Hardcover
    -Trade paperback -Mass market -eBook (verbatim text of the work)

    b) Secondary (subsidiary rights)
    -Periodical rights
    1) First serial (serialization before publication)
    2) Second serial (serialization after initial publication) -Book club
    -Live stage or dramatic rights
    -Film/T.V.
    -Video Recordings / Audio Recordings

-Other digital versions (database rights, apps, enhanced eBooks)
-Podcast / Radio rights
-Merchandising / Commercial Tie-in)
-Emerging and future technologies (new ways to monetize)
-Foreign translations rights -British Commonwealth rights

c) Rights Reserved by Author (film, television, live stage podcast, merch)

 

III.   Manuscript Delivery

    1. Delivery requirements
          a) When due? Is the date realistic?
          b) What format? Spacing, margins, etc.
          c) What to deliver?
                 -Index (who pays?)
                 -Number of illustrations, charts, photos (who pays?)
          d) Copyright permissions and releases
                 -Permissions (do they parallel the rights granted to the publisher?)
                 -Who pays? (hint: it's usually not the publisher)
      2. Manuscript Acceptance
          a) Criteria: Satisfactory in "form and content" or at "sole discretion" of the  
            publisher? (Note: historically, this clause has been a litigation flashpoint)
          b) Termination for unsatisfactory manuscript
          c) Termination for changed market conditions (strike this clause)
          d) When must the publisher either accept or reject? 
          e) Good faith duty to edit
          f) Return of the author's advance
                 -First proceeds clause
                 -False first proceeds clause
 
  IV. Copyright Ownership / Who Owns the Title?

      1. Who is responsible for registering the work with the Copyright Office?
      2. Tip. Registration should be done within 3-months of initial publication.
      3. Reserved rights
            -The author usually retains film, television, and live stage. 
      4. Who owns the title? (an essential but often overlooked issue)  

V. Author's Representations & Warranties
      1. Author sole creator
      2. Not previously published; not in the public domain
      3. Does not infringe any copyrights
      4. Does not invade right of privacy or publicity
      5. Not libelous or obscene
      6. No errors or omissions in any recipe, formula, or instructions
      7. Tip. Limit reps and warranties to material delivered by the author 

VI. Indemnity & Insurance Provisions
      1. Author reimburses publisher for costs and expenses
      2. Does indemnity apply to claims or actual breaches?
      3. Can the publisher withhold legal expenses? If so, in an interest-bearing
 account? For how long?
      4. Is the author named as an additional insured on the publisher's liability insurance?
      5. Does the publisher have the ability to settle claims without the author's approval? 
      6. Tip. If a high-risk book, discuss author liability insurance with your attorney

VII. Publication
      1. Duty to publish is usually within 12 or 18 months of delivery & acceptance
          a) Force majeure (acts of G-d) delays that extend the time to perfeBook? 
   
VIII. Payments, Payout & Royalty Rates
      1.  Negotiate a cap on delays
      2. Advertising and promotion
      3. Right to use author's approved name and likeness
      4. Advance Readers Copies for long lead time media
      5. Style or manner of publication
          a) Title consultation or approval?
          b) Book jacket
                 - Right of consultation? Approval?
                 - Inclusion of URL on the back cover
          c) Changes in manuscript
      6. Initial publication in a specific format? Volume form? 
      1. Advance against accumulated royalties
      2. When payable? (in halves, thirds, etc.)
      3. Royalties and subsidiary rights:
          a) Primary rights
                 -Hardcover royalties
                 -Trade paperback royalties
                 -Mass market royalties
                 -eBook royalties
                 -Royalty escalation(s)
                 -Bestseller bonuses
                 -Sneaky royalty reductions
                  1) deep discount and special sales
                  2) mail-order sales
                  3) premium sales
                  4) small printing
                  5) slow-moving inventory
                  6) bundling with other works
          b) Secondary (subsidiary) rights royalty splits
                 -Book club (sales from publisher's inventory v. licensing rights)
                 -Serialization (first serial, second serial)
                 -Anthologies, selection rights
                 -Large print editions
                 -Hardcover
                 -Trade paperback
                 -Mass market
                 -Foreign translation
                 -British Commonwealth
                 -Future technology rights
.                 -Audio rights
                  -Podcast rights (usually retained by the author)
                 -Motion picture/TV/live stage (always retained by the author)
                 -Merchandising
                 -Advertising
     4. Reserve for returns
          a) What percentage is withheld?
          b) Is there a limitation on how long they can withhold reserves?
      5. What is royalty based on? (Retail price? Wholesale price? net price?)
          a) At an average discount of 50%, 20% of the net is the same as 10% of the list
          b) At an average discount of 40%, 16-2/3% of the net is the same as 10% of the list
          c) At an average discount of 20%, 12-1/2% of the net is the same as 10% of the list
       6. 
$$ Bonus (Tied to earning out the advance? Tied to hitting a bestseller list?)

IX. Accounting Statements
      1. Annual, semiannual, or quarterly statements
      2. Payment dates
      3. Cross collateralize (suitable for the publisher, bad for the author)
      4. Audit rights
      5. Is there a time limit on your right to object to statements?
      6. Is there a limit on when you can bring legal action?
      7. Examination on a contingency basis (publishers don't like this)
      8. Pass through clause for subsidiary rights income
      9. Does the author have the right to terminate if the publisher defaults on payments?

X. Revised Editions
      1. If agreed to, how long is the revision cycle?
      2. Who revises if you are dead, disabled, or disinterested?)
      3. Royalty reductions if done by the third party (how much?)
      4. Sale of revised edition treated as a new book sale?
      5. Reviser/Author credit

XI. Next Book Option
      1. Definition of next work
      2. When does the option period start?
      3. Definiteness of terms (i.e., Is the option legally enforceable?)
      4. Different option flavors (e.g., First look, matching, topping)

XII. Competing Works      
      1. How is competing work defined?      
      2. How long does non-compete run?
      3. Any reasonable accommodations?
      4. Why novelist's should object to non-compete clauses
 
XIII. Out-of-Print = Reversion of Rights
      1. How defined? (by number of copies sold over x accounting periods)
      2. Notice requirements
      3. Author's right to purchase digital files, inventory

XIV. Termination
      1. What triggers the reversion of rights?
          a) Failure to publish within (usually between 12 - 18) months of manuscript             acceptance
          b) Failure to account to the author after due notice
          c) Failure to keep the book in print (see Section XIII)
      2. Survival of Author's representations and warranties
      3. Do licenses granted before termination survive?
      4. Does the duty to account and audit clause survive termination?
 
XV. Miscellaneous
      1. Choice of governing law
      2. Mediation / Arbitration?
      3. Literary agency clause
      4. Personal guarantee if the author is a business entity, not a human being.
      5. Reversion of unexploited rights after X years (e.g., audiobook rights)

###
 
Illustration: from Lawton Mackall's Bizarre 
Illustrator: Lauren Stout
Date: 1922

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