Sunday, August 19, 2018

The Biggest Mistake New Publishers Make

 How a Non-Assignment Clause Can Hinder Growth

When the owner of a book publishing company decides to sell their company, they will need to establish the value of the business they have built. The sale price will be based on the company's discounted cash flow, the goodwill associated with the company's trademarks, and the soundness of its author agreements. 

This article is about the most costly mistake neophyte publishers make - a simple drafting mistake that can preclude the business's eventual sale. 

A well-drafted publishing agreement allows for the sub-licensing of rights and the assignment of the contract itself.  However, when starting out, some cash-strapped publishers rely on contracts found online or slavishly copy ones found in a book.   

Avoid the Non-Assignment Clause in Book Contractse

Don't Let a Bad Contract Ruin Your Publishing Company

Publishers should think twice when agents and authors ask to insert a non-assignment clause in their contract. Be mindful that altering boilerplate provisions,  including warranty and indemnity clauses, can have profound real-world consequences.
 
When a non-assignment clause is imposed upon you by an agent or attorney, try to mediate its impact by carving out an exception for the sale of substantially all of your company's assets or the sale of the company to a related company. If you begrudgingly agree to a non-assignment clause for a particular transaction, do not use that agreement as a template for future deals. 

Aside from creating a unique brand, protecting your intellectual property, and insuring against media perils, investing in a well-drafted publishing agreement is the best way to add value to your company. Not only will it protect you against unnecessary legal risks, but it will allow you to reap what you have sown.   


Lloyd J. Jassin is a publishing attorney and entertainment lawyer.  He counsels clients on contracts, licensing, copyright, trademark, unfair competition, defamation, right of privacy, and general corporate law matters. His practice includes drafting and negotiating publishing and entertainment industry contracts, intellectual property due diligence, trademark prosecution, dispute resolution, and litigation. A Benjamin N. Cardozo Law School graduate, he is co-author of The Copyright Permission and Libel Handbook (John Wiley & Sons).  He can be reached at 212-354-4442 or via email at Jassin@copylaw.com.


Related Blog Post

A Helpful Checklist for Book Contract Negotiations

Contact:


Law Offices of Lloyd J. Jassin
The Paramount Building
1501 Broadway, Floor 12
New York, NY 10036
212-354-4442 (tel.)
jassin@copylaw.com (email)
www.copylaw.org


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Friday, October 28, 2016

I'm a Copyright Attorney, Not a Sorcerer (Updated 2022)

Steal Not this Book
 
Modern Day Book Curses
Several weeks before her death, I watched Bonnie Foreman laughing and joking as she downloaded a pirated copy of my book, The Copyright Permission and Libel Handbook: The Cursed Edition. She read a lot and drove too fast. I said I'd give her six weeks to live. The autopsy carried out on her body was inconclusive. But, here's what I can tell you. She expired around page 36. Somewhere between out-of-print works and special fair use situations. Curse or coincidence? I cannot say for sure. I'm a copyright attorney, not a sorcerer. But I know it wasn't the copyright notice that did her in.

When confronted with a book curse, we are forced to reflect on our mortality. Three thousand years after the pharaoh's death, the Curse of Pharaoh Tutankhamun still conjures up fear (unlike an FBI anti-piracy warning or copyright notice). While a three-thousand-year-old curse may retain its potency, copyrights wither and fall into the public domain a mere 70 years after the creator's death. From the standpoint of being an effective deterrent, it doesn't help that copyright notices resemble frown emoticons resting on their side.   

Book Curses the Forerunner of Copyright Damages

Do you wish to protect your intellectual property but don't have the means to hire a lawyer? Gory, gruesome, nasty, cautionary, score-settling book curses were once used to stop literary thieves and plagiarists in their tracks. Unlike the copyright notice, which simply proclaims "I own this" (with reservations), curses make it abundantly clear that some profound form of adversity or misfortune will befall the person who ignores it.

While there are some issues to iron out, I have come to believe that a mix of legislative solutions, works licensed under Creative Commons licenses, and cursing offers a workable solution to an internet that wants to be free and authors who want to eat. 

Cloistered monks, ancient rabbis and old sorcerers wrote the following ancient warnings. While dormant for years, these precursors of the modern copyright notice are a creative and cost-effective way to protect your intellectual property.    

In Biblioclasm, a book about the magic powers of the written word, the author identifies the following as the most famous literary curse. It still has what it takes.
"And if any man shall take away from the words of the book of this prophesy, God shall take away his part out of the book of life, and out of the holy city, and from the things which are written in this book." -- Revelations, 22:19

Aleppo Codex
The Christian church didn't have a monopoly on literary curses. Medieval Jewish scribes issued stern warnings against modifying even a single letter of the Hebrew Bible since each of its 304,805 letters had divine meaning. For example, the following lines, written C 984, appear at the end of the Moshe Ben-Asher Codex, the oldest medieval Hebrew bible:

"Whoever alters a word of this mahzor or this writing or erases one letter or tears off a leaf . . . may he have neither pardon nor forgiveness; neither let him behold the beauty of the Lord. He shall be like a woman in impurity and like a leprous man, who has to be locked up so that his limbs may be crushed, the pride of his power broken, his flesh consumed away that it cannot be seen, and his bones that were covered made bear."
The Ben-Asher curse focuses on the integrity of the text, not theft. Under copyright law, the exclusive right to alter or adapt the text resides with the author, in this case, Yahweh. Elsewhere in the Codex, atop certain pages, it reads, "Sacred to Yahweh, not to be sold or defiled." Disgorgement of profits (a copyright remedy) better fits this type of crime than broken bones or necrotizing fasciitis. Parenthetically, the Nazi face-melting scene from Raiders of the Lost Ark has my vote for the most iconic scary movie scene in cinematic history.  

Curses and Copyright Notices 


Medieval colophons, the antecedent to the copyright notice, initially appeared as concluding statements at the end of a book or manuscript. They provided information about the scribe or copyist, the date and place of copying, and contained either a blessing or a curse. To thwart piracy, printers' marks appeared at the dawn of Western typography. So, while a direct connection between the colophon (and printer's mark) and the copyright notice may appear fuzzy, the common assertion of ownership rights and the threat of consequences for those who publish "impudent frauds" cements the connection in my mind.

Curses and copyright notices should be displayed prominently in a manner that stands out from the accompanying text.  In the Encyclopedia of the Book (Oak Knoll/British Library), Geoffrey Glaister explains that by the early 16th Century, the practice of placing a colophon at the end of a book was largely abandoned. Instead of the scribe's name appearing at the back of the book, the printer's name (and its royal license to sell the work) appeared on the title page where it could be more easily seen.  Today, copyright law provides more potent penalties against willful or knowing infringers than innocent ones. 


Similarly, with a curse, knowing you've been cursed makes the curse more potent. Although, many "sorcerers claim that curses can be just as effective without the victim's knowledge of them." See Mystica. Whether you are an "Eye of newt and toe of frog" practitioner, or a pragmatic publishing type, I  recommend you display your disclosures prominently.  

By the early 18th Century, secular threats of legal action largely supplanted curses. With the passage of the Statute of Anne in 1709, England's first copyright act, the regulation of unauthorized copying was transferred from god's jurisdiction to her Majesty's courts. In 1802, the U.S. Copyright Act, inspired by the Statute of Anne, was amended to require notice to be placed on each copy of a work.

Like colophons, copyright notices generally appear on the title page or reverse of the title page of books. The copyright symbol, the familiar © followed by the date and name of the owner (not necessarily the author), often comes with a fey warning, not a curse. Here's a mildly threatening one:

ALL RIGHTS RESERVED. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without the prior written permission of the publisher.
Not too scary. Compare the painfully polite "All Rights Reserved" statement in use today with the average illuminated manuscript curse. If you absconded with a late medieval psalter or made an unauthorized copy, you (and sometimes your forebears and children) were forever cursed. In contrast, a copyright notice is a yellow blinking light at the corner of Purchase and Purloin Streets. Copyright notice or curse? No contest.

According to Drogin, the oldest known book curse appears on 
cuneiform tablets found in the biblical city of Ninevah. Like today's authors, Babylonian King Assur-bani-pal (668–626 BC) wasn't just concerned with protecting against theft but receiving credit for his work. Droit Moral is the French term for moral rights, which includes the author's right to defend the integrity of their work and the use of their name. King Assur-bani-pal personal cuneiform tablet collection bore the following warning: 
"Whosoever shall carry off this tablet or shall inscribe his name on it, side by side with mine own, may Ashur and Belit overthrow him in wrath and anger, and may they destroy his name and posterity in the land."
King Assur-bani-pal

Clearly, the profound fear of being forgotten loomed as large in Babylonia as in Hollywood today. Removing the name of a king from a cuneiform tablet meant he never existed. Much the same can be said for failing to credit a screenplay writer whose livelihood (and footnote in history) depends on the works that bear their name.

Whether a curse or a copyright notice, these admonitions are powerful starts to the reading experience. Where does the power come from? Fear.
"May whoever destroys this title, or by gift or sale or loan or exchange or theft or by any other device knowingly alienates this book from the aforesaid Christ Church, incur in this life the malediction of Jesus Christ and of the most glorious Virgin His Mother, and of Blessed Thomas, Martyr. Should however it please Christ, who is patron of Christ Church, may his soul be saved in the Day of Judgment."
Before Gutenberg invented the printing press, between the 5th and 13th centuries CE, books were precious handwritten objects coveted by the wealthy elite and marauding Norsemen. The heathen marauders targeted Christian churches, killing defenseless monks and hauling away intricately detailed illuminated manuscripts containing equally detailed book curses. As the monks of early Christian Ireland discovered, a curse is unlikely to have a persuasive impact if the marauder can't read. But if you use a curse and a chain with a heavy rod to lock your psalter to a desk, you are more than twice as safe as you would be with either of them alone. 

In the 16th Century, book curses underwent a change, becoming more secular, foreshadowing the birth of copyright as a device to secure the sale of copies and protect the livelihood of authors and publishers  German renaissance artist Albrecht Dürer invoked the wrath of the crown, not god, declaring in 1511:

Dürer's Engraving of  Erasmus

"Hold! You crafty ones, strangers to work, and pilferers of other men’s brains. Think not rashly to lay your thievish hands upon my works. Beware! Know you not that I have a grant from the most glorious Emperor Maximilian, that not one throughout the imperial dominion shall be allowed to print or sell fictitious imitations of these engravings? Listen! And bear in mind that if you do so, through spite or through covetousness, not only will your goods be confiscated, but your bodies also placed in mortal danger."
A copyright notice threatens economic harm, while the strategy behind the black art of the curse is to attack the infringer's mind  Dürer's transitional curse succeeds at both tasks. 

Conclusion 
 
Tensions between copyright law and freedom of speech aside, magic offers an intriguing pre-movable type solution to a 21st Century dilemma. On January 1, 2024, Mickey Mouse will pass into the public domain. With Disney unable to extend the copyright term, one can imagine Mickey bedecked in a magic blue hat with white stars and a crescent moon conjuring up an army of battling brooms to delay the move into the public domain. Unlike a copyright, a curse has no expiration date.  


©ðŸ’€ 2016 - 2022 Lloyd J. Jassin  All Rights Reserved. 

Disclaimer & Curse: This article is not designed to give specific advice concerning specific circumstances  Readers are strongly cautioned to consult an attorney or practitioner of the dark arts  This article may be reproduced in whole for non-commercial purposes, provided the author and website are credited  If you violate these term you will be seized by the neck like a bird, your head cranked off, and your carcass hung up to drain*.

*Adapted from a curse on the tomb of the courtier Biw at Sakkara, circa 2260 B.C.






Lloyd J. Jassin is a publishing attorney and head of his private practice, concentrating on legal issues affecting authors, literary agents, publishers, and composers  He began his career in book publishing, working for companies such as Prentice Hall / Simon & Schuster and St. Martin's Press in publicity and marketing, which may explain his affinity for trademark law  He's the coauthor of The Copyright Permission and Libel Handbook (John Wiley & Sons). 

Contact:   Law Offices of Lloyd J. Jassin, The Paramount Bldg., Floor 12, 1501 Broadway, NYC, 10036, (tel.) 212-354-4442; (email) jassin@copylaw.com,  Follow on Twitter: http://twitter.com/LloydJassin

Resources


The 'Weird Tale' Behind the Malcolm Ferguson Book Plate 
The Story of St. Columba: A  Modern Copyright Battle in Sixth Century Ireland
Books in Chains by the Late William Blades (1892) (full text version)
Biblioclasm:  The Mythical Origin, Magic Powers & Perishability of the Written Word (Rowman & Littlefield) by Marc Drogan.
Books and their Makers in the Middle Ages  (Putnam) by Geo. A. Putnam
Questionable Utility of Copyright Notice: Statutory and Nonlegal Incentives in the Post-Berne Era by TP Arden - Loy  U. Chi  L.J. 1992





Threatening Bookplate via 'Confessions of a
Bookplate Junkie' Blog


















Friday, July 29, 2016

What You Need to Know Before Hiring a Ghost Writer

"I can never understand how two men can write a book together; to me that's like three people getting together to have a baby." -- Evelyn Waugh

Nearly 50% of marriages end in divorce. Creative partnerships fare no better. Creative partnership breakdowns, however, can be averted by a well-drafted collaboration agreement that anticipates potential conflicts.

Good Contracts Make Good Writing Partners

Collaboration agreements define the parties' goals, rights, and remedies and anticipate what could go wrong. While there is no single reason for their failure, creative partnerships often fail due to poor communication and unrealistic expectations, compounded by the lack of a solid agreement reflecting the parties' intentions.

If you do not believe a collaboration agreement is necessary to avoid the despair and disappointment of a failed collaboration, bear in mind that many publishers require you to have one.
  
How you deal with author credit, compensation, expenses, copyright ownership, and approval of business and creative decisions depends on the parties' leverage and sense of fairness.
 

Who Owns the Work?

People jointly creating a work with the intent their contributions be merged into a single work are often caught unaware of the consequences of working without a written agreement. In the absence of a formal written agreement, the law of joint authorship fills in the gaps. In such instances, copyright law presumes equal ownership and royalties. Judges do not apportion a larger or smaller revenue share based on the collaborators' contributions, experience, or reputation. Expenses and profits are split 50/50 - unless otherwise agreed to in writing.

 
If legally determined to be a joint work, each author is treated as the owner of the entire work. Either may exploit the work.  However, a coauthor can grant non-exclusive licenses to copy, distribute, adapt, display and perform the work, subject to a duty to account to each other. Imagine a situation in which a film studio expresses interest in adapting a jointly authored biography of President Zelensky of Ukraine. The studio will demand the exclusive right to adapt the book to avoid two competing biopics. Without a written agreement addressing ownership and control, an uncooperative co-author (or a deceased co-author's estate) can prevent the licensing or sale of motion picture or other rights.

Ghost Written & "As Told To" Books 
 
If the objective is to strengthen your personal brand or create brand awareness of your business, a work for hire agreement is an acceptable way to own and control the content you've contracted for. There are two sets of circumstances that determine if a work qualifies are a work for hire: (i) an employee acting within the scope of their employment; and (ii) there's an agreement that states the work is a work for hire owned by the party that commissioned it. The influential Second and Ninth Circuits, for example, require that a work for hire agreement be signed for work begins. 
 
Just like collaboration agreements, no two ghostwriter agreements are alike. While a writer for hire may give up copyright ownership, what form of credit they receive  (discussed below), how revenue will be shared, and what happens if the hiring party decides to abandon the project is subject to negotiation. 
 
A ghostwriter agreement should clearly state what is to be delivered and when. In addition to word count, delivery dates, and revisions, you must define precisely what you need from the writer. Is it a warts and all, non-idealized memoir? Or is the ghostwriter's job to put the best face on your story without resorting to blatant deception? It's a good idea to attach a book proposal to the agreement or reference it. This establishes a standard under which the ghost writer's performance can be judged. More about this topic later.

Compensation is generally in progress payments tied to satisfactory (and timely) delivery. Typically, a portion of the writer's fee is paid on signing. Milestone payments are contingent on the subject finding the work acceptable.   

Case & Comment. Consider the failed collaboration between Fay Vincent, the former commissioner of baseball, and writer David Kaplan. Because they were friends, Kaplan "did not believe a formal agreement was necessary." Orally they agreed they would share credit and split the income 60/40, with the lion's share going to Vincent. Kaplan's faith in the project was amply rewarded - a least initially. Little Brown offered to pay the authors an advance of $300,000, one-half payable upon signing their publishing agreement. After 90% of Vincent’s memoir was written, Vincent got cold feet and terminated the publishing agreement. Under Little Brown's publishing agreement, they were required to return their advances. Vincent repaid the entire $150,000 to Little Brown, allowing Kaplan to keep $60,000. The issue before the court was whether Vincent could prevent Kaplan from publishing the manuscript. See Kaplan v. Vincent, 937 F. Supp. 307 (SDNY 1996).  Kaplan argued that he and Vincent were joint authors, allowing him to grant non-exclusive licenses. Because of the conflicting evidence of the parties' intent at this stage of the litigation, the court denied Kaplan's motion for a summary declaratory judgment on the issue of joint authorship. Likewise, the court dismissed Vincent's motion to dismiss, in which Vincent claimed he did not contemplate joint authorship. What began informally ended badly because of the lack of a collaboration agreement.

The Deal Terms

Below are the major elements of a collaboration agreement.  Whatever your negotiation style, don't lose sight of the fact a workable agreement is often a reasonable agreement. 

Responsibilities. If you are writing a nonfiction work,  you need a book proposal to secure an agent or publisher. A nonfiction book proposal is usually written with the understanding that substantive work on the actual manuscript will not begin until there is an offer from a publisher. Typically, the proposal includes a detailed overview of the book, the author and writer's credentials, the competition, and information about how the book can be marketed, plus one or two sample chapters. The proposal is the bait used to solicit interest from publishers.

 A nonfiction book proposal is usually written with the understanding that substantive work on the actual manuscript will not begin until there is an offer from a publisher.  Typically, a writer will predicate completion of the manuscript on a minimally acceptable advance.  

Fees & Royalties.  If the advance falls short of the parties' expectations, one party can defer all or part of their compensation from the monies advanced.  Once advance has been recouped from sales and licensing revenue, the person who deferred can start getting paid, perhaps on more favorable terms than if they had not deferred payment. Deferring payment is also a way for the subject of a book to obtain the services of a more experienced writer without having to go out of pocket for a large sum.   
 
Payment of the advance is tied to delivery requirements.  For example, a book publishing contract may specify 50% will be paid on signing, 25% on delivery of the first half of the manuscript, and the balance on delivery and acceptance of the complete manuscript. A missed deadline can result in the cancellation of a book contract and demand for the authors to repay the advance. 

Keep in mind even those who do not qualify as joint authors for copyright purposes (for example, individuals who made an important – but not copyrightable -- contribution to a book) may still share in the profits and control of a work through an appropriate contractual arrangement.   

Credit. By some estimates, up to 70% of nonfiction books are ghostwritten. It is widely believed that Theodore Sorenson wrote John F. Kennedy's Pulitzer Prize-winning book, "Profiles in Courage,” for which JFK took both the prize and sole author credit.

Writing credits take various forms.  Typical writing credits include: "by Subject and Writer" or "Subject with Writer" or "as told to Writer." By definition, if a book is ghostwritten, sole authorship credit for the work will be in the subject’s name only. When the writer's name doesn't appear on the cover, all of the career-building goodwill inures to the putative author.  That lays the foundation for a ghost requesting a higher fee.  When both parties are credited, the size and prominence of their names, and their order, need to be negotiated. 

Work for Hire.  work for hire means that the hiring or commissioning party is the author and owner of the work.  There are two instances in which a work for hire can occur: (a) a specially ordered or commissioned work; or (b) a work created by a regular employee in the course of their employment. This definition is an oversimplification of what constitutes a work for hire. However, before you start working with a friend or a freelancer, it is crucial to clarify in writing if the work is intended as a work for hire. Include language in the agreement that explicitly states that the work is for hire and legal ownership vests in you. The agreement should include a backup assignment/transfer of copyright to cover all bases.  

Death & Disability.  What happens if someone dies, becomes disabled, or the parties determine that they just can't work together any longer? If a textbook, or other work that is regularly revised, it's a good idea to include a provision giving the surviving author the sole right to revise the work.  In the textbook arena, it's common to include a provision that reduces the royalties paid to the non-participating author.  A well-drafted collaboration agreement will also address if the person hired to work on the revision receives author credit.  

Final Approvals. Control of business affairs (e.g., who is responsible for seeking out and approving book deals?) and editorial matters (e.g., who has the authority to approve the final draft of the work or authorize revisions?) are critical issues. Unanimity may be required for certain decisions (e.g., approval of the initial publishing contract).  Suppose one party retains approval rights over the manuscript. In that case, the other party should try to impose reasonable limitations, such as a chance to correct the manuscript within (e.g., 30) days after receipt of the other party’s comments.  Requiring the party with approval rights to provide detailed editorial reasons for any dissatisfaction establishes objective criteria by which the writer can revise and have their contribution judged. 

Representations & Warranties.  From a ghostwriter, or "as told to" writer's perspective, the subject should represent and warrant that they will: (i) provide access to pertinent documents, e.g., diaries, memorabilia, legal or other documents; (ii) provide reasonable access to themselves; (iii) use their best efforts to provide the writer with access to other individuals as may be required to write or finish the book; and (iv) cooperate in good faith with the writer in pursuing a publishing deal.  Special attention should also be paid to the indemnity clause.  An indemnity is a promise to reimburse the other party should they breach their warranties. 

Reciprocal representations and warranties include: (i) no contractual commitments (e.g., a confidentiality agreement) exist that will interfere with the ability to perform their obligations; (ii) their work is original and will not violate any copyrights, rights of privacy, and publicity, or constitute a libel against, or violate any other common law rights or other rights of any person or entity.  

Suppose liability arises because of a contract breach. In that case, the non-breaching party should be reimbursed for costs and expenses (including reasonable attorney's fees), and damages paid out to others.  From the writer's perspective, material written or provided by the subject should be excluded from the writer's representations and warranties.   
TIP.  Since verifiable truth is a complete defense to libel in the United States, the agreement should require both parties to retain copies of all recorded interviews, transcripts, books, notes, letters, emails, and other research materials used to prepare the book. If there is a lawsuit, you may be required to prove the truth of the published statements. (see §9.12.1, The Copyright Permission and Libel Handbook (John Wiley & Sons).
Confidentiality & Non-Disparagement Clauses.

Confidentiality clauses are huge issues for celebrities and other public figures. Here's the confidentiality clause from the unsigned collaboration agreement between Fay Vincent and David Kaplan discussed above:  
All material, whether oral or written, contributed by either party for use in the manuscript, including materials and information provided before the execution hereof, shall be considered confidential. Neither party shall use any of such material or the facts or the information contained therein that have been provided with the parties' collaboration except as permitted hereunder or under an agreement with a third party to which both parties have previously agreed in writing, without the express prior written approval of the other party. In no event shall any confidential material otherwise be used by the party that has not furnished the same in the event there is any termination of the agreement. Specifically, Kaplan agrees not to participate in interviews, write any articles or books, or take any actions in or by which he discloses in any manner any of the unpublished information furnished to him hereunder, or any portion thereof, in connection with the work which is not publicly available or independently discovered by Kaplan, including any non-public aspect of the relationship of the parties involved in the preparation or the writing of the Work and/or its adaptation for use in any media whatsoever ....
I recommend that my clients include a non-disparagement clause in their agreements. For example: 
You agree that you will not (nor will you cause or cooperate with others to) publicly criticize, ridicule, disparage or defame Subject, his family, his business associates, company, directors, officers, shareholders, employees, agents, or attorneys, with or through any written or oral statement or image, whether or not they are made anonymously or through the use of a pseudonym. 
Nondisclosure agreements usually contain an exception, allowing one to share or discuss the agreement with their literary agent, attorney, tax preparer, or as compelled by a court or government agency (e.g., the IRS).  
 
 Conclusion

Collaboration and ghostwriter agreements are preventative medicine. Although collaborators might not feel comfortable discussing copyright ownership, death, disability, compensation, and related issues, a well-drafted agreement can limit your distress and save you thousands of dollars in lawyer fees if a dispute should arise.       

© 2013 - 2016.  Lloyd J. Jassin  
     
Related Blog Posts
 
 
Disclaimer: This article discusses general legal issues of interest and is not designed to give any specific legal advice concerning any specific circumstances. It is important that professional legal advice be obtained before acting upon any of the advice contained in this article.

About the Law Offices of Lloyd J. Jassin.  At the Law Offices of Lloyd J. Jassin, we provide more than legal advice. We offer a broad understanding of the industries in which our clients operate and a network of contacts within the publishing, entertainment, and licensing communities. Clients gain access to all of the knowledge, counsel, and advocacy that the firm can provide. View Lloyd's complete profile

Contact: Law Offices of Lloyd J. Jassin, The Paramount Bldg., Floor 12, 1501 Broadway, NYC, 10036, (tel.) 212-354-4442; (Email), or visit: http://www.copylaw.org. Follow us on Twitter: http://twitter.com/LloydJassin.
Friday, May 20, 2016

Simon & Schuster Slapped with eBook Royalty Class Action Lawsuit

A book is a book, except when it comes to eBook royalties. That's the premise of a class action lawsuit filed on Thursday, May 19, 2016, in the Supreme Court of the State of New York by class representative Sheldon Blau, MD.   

The lawsuit alleges Simon & Schuster has been cheating its authors by improperly categorizing eBook transactions as "sales" rather than "licenses."  

The distinction is significant, because the royalty rate for sales is much lower than the rate for the license of rights.  If categorized as a license the author receives 50% of net receipts, rather than 25% of net typically paid to authors for the "sale" of an eBook.

A book is a book, except when it comes to eBook royalties
According to a report in Law360, an unnamed spokesman for Simon & Schuster told Law360 that the division that published Dr. Blau's book, was sold (or was it licensed?) to another company in 1998, and that the publisher never published a digital edition of the book.

The eBook royalty class action looks back approximately six years, the statute of limitations on contract actions in New York State.  It alleges Simon & Schuster engaged in a "pattern and practice of paying Plaintiff and others similarly situated royalty payments for the distribution of licenses for electronic books, or "e-books," at a rate for book "sales," or some other lower rate than that required for "license" transactions."

This issue arose, in a different context, in F.B.T. Productions v. Aftermath Records, a 2007 federal lawsuit brought by Eminem's management company against his record label over digital royalty rate splits.  Like the music industry, book publishers have taken the position that digital downloads should be accounted for as sales not licenses.

In its 2010 decision, the F.B.T court held that digital downloads should not be treated as auditable physical units for royalty accounting purposes.   The Ninth Circuit ruling was important for the recording industry, because recording artists (like book authors) receive 50% of the record company’s net receipts from rights licensed to third parties -- as opposed to 12% to 20% of the retail price when a recording is "sold."

In the wake of the Eminem decision, most publishers amended their contracts, so the sale or license of  an "eBook" is unambiguously treated as a sale.   The lawsuit, therefore, challenges the publisher's interpretation of their legacy or backlist contracts.