Friday, February 25, 2022

Book Publishing Contacts: What Publishers Don't Want You to Know

By Lloyd Jassin

Did you know that most traditional print publishing contracts are life of copyright agreements? That means the writer - and their heirs - will be legally bound to their publisher for the life of the author plus 70 years.

Literary Agent Giving Author Book Contract to Sign

Read This Before You Sign a Publishing Contract

What can go wrong with an author-publisher relationship that runs for the full term of a book's copyright? Plenty. Common disputes involve nonpayment of royalties, failure to publish, failure to exploit audiobook or foreign translation rights, burdensome non-compete clauses, nonpayment of royalties, and bankruptcy.

These risks are manageable, provided you deal with them during the contract stage of the relationship.  Once you pass the romance stage of the relationship with your publisher, you have less flexibility and it's much more expensive to to address these risks.  

Because the right to terminate or cancel a contract is not automatic, you need to plan your exit in case your relationship with your publisher sours. Unless your contract allows you to terminate in the event of publisher misconduct or breach, you are left with bad and worse choices: (a) ask a court to rescind the contract , or (b) wait 35 years to exercise your inalienable right of termination under the Copyright Act. 

Rather than relying on a lawsuit to get back your rights (courts prefer money damages over contract cancellation), if a publisher fails to publish within a contractually agreed time limit, there should be a mechanism for exiting the agreement. Similarly, if certain secondary rights (e.g., audiobook, foreign translation) go unexploited, those rights should revert to the author upon request. 

What to Expect When Negotiating a Book Contract

Bear in mind a publisher's standard form agreement is not chiseled in stone. Publishers regularly revise their contracts when asked to do so. The key is knowing what to ask for.

Preceding the actual book contract is the term sheet. Key terms are the grant of rights, payment, payout, royalty rates, delivery and publication date. The term sheet, which informs what goes into the contract, is the business deal. What follows is a tailor made contract incorporating those terms.  

In exchange for a down payment on future royalties, publishers receive the exclusive right to print, publish and sell the book in the territory (US? World?) for the full term of copyright. That's the deal. A good contract does not include film or television rights. 

To decode a deal term sheet or a book publishing agreement, some authors turn to literary agents, who receive 15% off the top for guiding you in the perilous 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. 

The Role of a Publishing Attorney

Book contract negotiation is not a zero sum game. It's a collaborative process between an author's attorney (or literary agent) and the publisher's contracts manager. 

A publishing attorney will give the proposed contract a thorough review.Their initial task is to determine if the deal terms are fair. They do this by comparing your contract to similar contracts. They are also there to help their clients think through the offer and its possible ramifications. While "How much of an advance will I receive?" is an important question to ask, it's not necessarily the most important question. In addition to rates and royalties, using a checklist similar to the one below, they will review everything from the grant of rights to the termination clause. Where there are differences, they will try to find a middle ground that respects both parties' legitimate interests.

Taking boilerplate provisions for granted can have serious consequences. 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. While major publishers are not out to screw you, they will maximize their gains at your expense. Smaller publishers? Some are gems, while others are opportunistic predators who over promise, and under deliver. Some will even ask you to foot the bill for editing, production and marketing.  . 

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, and save thousands of dollars in legal fees later on.  

For those who have already signed a publishing agreement, a publishing lawyer can help you understand what limitations the agreement places on you, and determine if those limitations are enforceable or can be neutered.  For example, a publishing attorney can advise you whether a next book option is enforceable, or simply an unenforceable "agreement to agree." Similarly, they can counsel you on termination for cause options, or termination as 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.  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?
      2. If a legal entity, you will be asked to sign an inducement letter; a form of 
          personal guarantee.  
      3. Description of work (synopsis)
          -Tentative title, # of words, # of photos, intended audience
          -Attach book proposal

II.   Grant of Rights and Territory

      1. Is it a license of certain rights or an assignment of all rights? 
      2. Term or time period (term or years or in perpetuity?)
      3. Geographic scope
           a)     World?
           b)     Limited?  (e.g., U.S., its possessions & Canada)
      4. Exclusive rights granted
           a)     Primary rights
                  -Trade paperback
                  -Mass market
          b)     Secondary (subsidiary rights)
                  -Periodical rights
                  1) First serial (serialization of portions of a book before publication)
                  2) Second serial
(serialization of portions after initial publication)                              -Book club
                  -Live state / dramatic rights
                  -Film/TV rights
                  -Video Recordings / Audio Recordings
                  -Other digital versions (apps, enhanced eBooks)
                  -Podcast / Radio rights
                  -Merchandising (commercial tie-in) rights
                  -Emerging and future technologies (new ways to monetize)
                  -Foreign translations rights
                  -British Commonwealth rights
        c)    Rights Reserved by Author (What the author gets to hold back) 

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 you granted the publisher?)
                 -Who pays?
      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
          d) When must the publisher either accept or reject? 
          e) Good faith duty to edit
          f) Return of the author 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.  Joint author or work-for-hire?
      4.  Reserved rights
            -Film, television, live stage usually retained by the author. 
      5.  Who owns the title? (By default it's often the publisher)

V. Author’s Representations & Warranties
      1. Author sole creator
      2. Not previously published; not in 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. Limited only to material delivered by 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? Is it held in an interest   
      bearing account?  For how long?
      4. Are you named as an additional insured on the publisher's liability                          insurance?
      5. Does the publisher have the ability to settle claims without prior approval of         the author?  Be scared. Very scared.  But, there are workarounds.

VII. Publication
      1. Duty to publish within [X] months of delivery & acceptance?
          a) Force majeure (acts of G-d)
                 - Any 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?
          c) Changes in manuscript
      6. Initial publication in specific format?  Volume form? eBook? 
VIII.  Payments, Payout & Royalty Rates
      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
                 -Trade paperback
                 -Mass market
                 -Foreign translation
                 -British Commonwealth
                 -Future technology rights
.                 -Audio rights
                  -Podcast rights
                 -Motion picture/TV/live stage
     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 net is the same as 10% of the list
          b) At an average discount of 40%, 16-2/3% of net is the same as 10% of the list
          c) At an average discount of 20%, 12-1/2% of net is the same as 10% of the list
       6. Recoupment of advance 
       7. 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 (good 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 limit on time 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 author have right to terminate if 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. Does it even make sense for a fiction writer to agree to a non-compete?
XIII. Out-of-Print = Reversion of Rights
      1. How defined? (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 duty to account and audit clause survive termination?
XII. 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 (Lieber and Lewis) 
Illustrator: Lauren Stout
Date: 1922

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