The Future of Publishing: Know Your eBook Rights

 

Do publishers control eBook right to their legacy titles?

"Arguably, yes, but not for much longer."
-- Lloyd Jassin

 

 On September 28, 2010, Publishers Weekly and the Book Industry Study Group held a seminar at the Random House building entitled The Future of Publishing: Know Your eBook Rights.   It was moderated by Jim Milliot of PW.  I was honored to be on the dais with Paul Aiken, Exec. Dir., Authors Guild; Neil de Young, Exec. Dir, Hachette Digital; and  Scott Waxman, Waxman Literary Agency.  The following concerns future technology rights and the threat copyright termination -- and Andrew Wylie -- pose to legacy publishers.

JIM MILLIOT (PW): Great. Thanks very much. Lloyd?

LLOYD JASSIN: If Paul (Aiken) is a glass half full kind of guy, then you’ll slit your wrists after I’m done speaking. (laughter) I’m Lloyd Jassin and I want to thank Publishers Weekly and the Book Industry Study Group for inviting all of us here. Because I’m an attorney, I evoke a lot of hostility so let me lay a little foundation.  

While I am an attorney I also consider myself a part of this industry. I started out in book publishing 25 years ago, originally at St. Martin’s Press, and then Simon & Schuster. I was a director of publicity for a division of S&S that published long-shelf-life branded nonfiction, which was a good idea then and is even a better idea now for a variety of reasons dealing with electronic publishing. So I’m an exile from publishing. I then went to law school and worked in television and syndication distribution, doing a lot of trademark licensing. I’m also an author. I currently have a boutique law firm, and I represent franchise authors, midlist authors, some literary agencies, midsized book publishers, and the like. So I don’t see things just through the eyes of an attorney/advocate, or a publisher/author. I think I see things a little differently. Plus I have a lot of friends in the music business and we all know what’s happened to them.

So if somebody asked me about the future of book publishing, which I think is the subtext of this morning’s discussion, I’d say, to paraphrase one of my music business friends, “the future of publishing is bright, but the future of the ‘Big 6’ publishing industry is cloudy.” I think publishing has always been in disaster mode, and it will reassess and reform and maybe get smaller, but it’ll adjust to the changes. So big publishing is in peril; you don’t need me to tell you that. But I don’t think it’s just the recession, I don’t think it’s just disintermediation. It’s the fact that, in large part, older contracts didn’t contemplate the digital future. That is an error that you can lay at the feet of the publishers, because they drafted those contracts, and future technology clauses have existed for at least a hundred years. I handed something to Paul that he probably is familiar with, which is Mark Twain’s contract, in his handwriting, which talks about future technologies. So it wasn’t that they didn’t know about future technologies. It’s just that the lawyers were asleep at the wheel, in my opinion.

So respectfully, and it’s very respectful because I’m here at Random House, I disagree with Marcus Dohle, Random House’s CEO’s statement that the vast majority of backlist contracts granted Random House e-book rights. I believe he wasn’t speaking just for Random House but for the industry.  Those contracts need to be reviewed on  a case-by-case basis. Some contracts  granted them e-book rights; a lot of them certainly didn’t. But I think whether they did or didn’t may  actually moot, and what I mean by that is, evenif they did grant Random House and Simon & Schuster and their brethren electronic book rights, they have them only for the short term, not the long term. The Copyright Act giveth and it taketh away, and already, and with greater velocity in two years, authors will be able to exercise their statutory termination rights. These are rights found in the Copyright Act that allow authors who didn’t know their worth when they negotiated their publishing contracts 35, 56, 75 years ago, the right to go back and negotiate  a better deal. Is it fair to publishers? It’s really not a question of fairness; it’s the law. And wherever you come out on this issue, the copyright termination provisions of the Copyright Act are going to allow authors to reboot their pre-Internet contracts, and clear up any of the ambiguities regarding e-book in the author’s favor.  So, if the question is, do publishers control e-book rights to their legacy titles?  Arguably they do, but not for much longer.

What happens when the right to reprint classic titles is threatened  is the subject of another evening, but what it comes down to is, agents and publishers disagree on two key issues.  Who controls e-book rights? I think the question’s been answered, whether it’s the Rosetta books decision which Random House lost, or the reversion of rights in favor of  heritage or legacy authors. The historical irony is that 301 years ago, the Copyright Act gave authors the exclusive right to control their writings and other intellectual property and authors in turn gave publishers an exclusive monopoly over their works. The reason authors needed publishers was that publishers controlled the printing presses.  That’s what came between readers e and the writers of the time. Now that the printing press is less important and authors can control their own printing presses, I think we’re going to see a dislocation, a disruption, in the way business has been done for a lot of years.

I did the math and 2013, which is first date rights can be recaptured, is two years, 95 days, and approximately 16 hours from now. That’s when the copyright termination or “contract bumping recapture” first time bomb goes off.  It will threaten publishing’s backlist and all of the books on the backlist that begin with the words “Vintage,” “Classic,” ”Heritage”; titles published 35, 56 and 75 years ago are at risk. When a publisher’s backlist has to be renegotiated, it has profound implications for the industry, and makes authors and publishers reassess their relationship. I think what will happen is old contracts will be renegotiated – publishers will  compromise rather than lose authors. And, it’s generally a good idea to leave the dance with the party you came to the dance with, so while authors have the ability to put a knife to the throat of publishers—it’s the Copyright Act that allows them to do that—I think there’ll be accommodations. If you synthesize  this, agent Andrew Wylie, by settling for a 40 percent royalty on backlist titles for his legacy authors, makes me question his negotiation skill. It could be that Random House had pictures of him in a compromising position in Frankfurt. I don’t know.  Perhaps, he didn’t consult his  attorney before accepting Random House’s offer.  Why?   In in two, three, four years, all the rights he bargained away are going to revert to his authors.  Before long, it’s going to be a 50 percent – or better – deal that authors and agents will be striking.  Maybe Mr. Wylie  got large advances in exchange, and it’s a short-term license, so there are lots of ways that you can work things out. Forty percent wouldn’t look so bad to me if I got several million dollars up front. Money today versus money tomorrow. 

[The full interview will run in the Spring issue of The Authors Guild Bulletin]


Resources

The Copyright Termination Time Bomb

Halloween Copyright Suit: Albert Einstein Costume Case

Did Albert Einstein's right of publicity go to the grave with him? 

That's what a Halloween what a costume manufacturer alleged in a declaratory relief action recently filed in New York federal court.  The suit was brought to challenge Hebrew University of Jerusalem's claim that using Einstein's name, image and likeness for a "Heroes in Disguise" costume kit , without their consent violated Einstein's postmortem right of publicity. 

Forum Novelties claims that Einstein's right of publicity, which Hebrew University allegedly obtained under Einstein's will, was not descendable since Einstein did not exploit it during his lifetime.  Einstein who once said, "Why is it that nobody understands me, and everybody likes me?," would likely consider Forum's argument nonsensical, as he clearly knew his identity had commercial value beyond his field of professional activity.

Like copyrights and trademarks, the right of publicity can be assigned or licensed, or in the case of Einstein, a former New Jersey resident, bequeathed by will.  Eighteen states recognize a right of publicity that continues after death - some have statutes that cover both the living and the dead, and others, like New Jersey, recognize a common law right of publicity.

Some states have a controversial requirement that the deceased personality must have exploited their right of publicity during their lives.  Professor J. Thomas McCarthy, in his well-regarded treatise, The Rights of Publicity and Privacy (2d Ed), states that the "overwhelming majority rule under either statute or common law is that the right of publicity . . . is not conditioned on lifetime exploitation."

First Amendment Defense

Separate and distinct from the failure to exploit during his lifetime defense, Forum also lays a foundation for a First Amendment defense.   In its complaint it refers to the Heroes in Disguise kits as "intended to be worn by children acting in historically based school plays and in every day play."  Free speech concerns often factor into right of publicity cases.  In this instance, Forum is hoping that the court will see its Einstein disguise kit not just as a commercial product, but as an expressive or communicative work, like a biographic book or film conveying some historical fact.  Whether a mixed use disguise kit used in connection with Halloween "trick or treating" and school plays, takes the use out of the realm of commercial speech, remains to be seen.

While filed in the Southern District of New York, the case ultimately turns on New Jersey law.  New Jersey was the place where Einstein last lived, as such, that state's law governs the postmortem right of publicity issue.  Had Einstein last lived in New York, he would have had no descendible right of publicity, as New York does not recognize postmortem publicity rights. 

New Jersey has a well developed body of right of publicity law.  In fact, New Jersey was one of the first states to recognize a right of publicity.  In Edison v. Edison Polyform Mfg., 67 A. 392 (N.J. Ch. 1907), the court granted Edison an injunction, restraining the use of his name and likeness in the corporate name and in advertisements for a company that sold pain killers.   In Edison, the court reasoned that "[i]f a man's name be his own property ... it is difficult to understand why the peculiar cast of one's features is not also one's property, and why its pecuniary value, if it has one, does not belong to its owner, rather than to the person seeking to make an unauthorized use of it."  Another famous New Jersey  lawsuit, which involved a photograph of an Elvis look-alike entertainer, held that  New Jersey recognized a  postmortem right of publicity.  Presley's Estate v. Russen, 513 F. Supp. 1339 (D. N.J. 1981) (Presley imitator's live concert "experience" neither social commentary nor parody).  In dicta, Russen touched on the lifetime exploitation issue, but according to McCarthy, did not resolve it.

Trademark Claim

In addition to the right of publicity, Albert Einstein, like Marilyn Monroe, Babe Ruth and Al Capone, is a federally registered trademark.  Right of publicity and trademark claims often overlap.  Hebrew University owns several Albert Einstein federal trademarks (Reg No. 3591305) for among other things, clocks, bumper stickers, socks, imitation luggage, cookie jars, flower pots, toy butterfly nets and sweatshirts -- but curiously, not sweaters, for which he is closely associated.

In order to prevail on a federal trademark claim, Hebrew University must show that Forum's use of the words "Albert Einstein" is likely to create confusion as to the origin or source of the costumes.  In its complaint, Forum attempts to deflect federal trademark or Lanham Act claims for public confusion, by emphasizing the ample use of disclaimers, such as its house mark and its "Heroes in History" trademark on the packaging.  

Where the commercialization of celebrity rights seems to be forever expanding, the Forum case is a rare, somewhat risky, preemptive attempt to expand the bounds of permissible use of a celebrity's name and likeness.  Exploitative or informational?   A First Amendment protected costume or an advertisement in disguise?  Whatever the court decides, Einstein is clearly a bankable cultural icon worth fighting over.
     
Forum Novelties, Inc. v. Greenlight, LLC and Hebrew Univ. of Jerusalem (10 Civ. 9414, SDNY), filed 12/17/10


Related Links

New York Post

Jassins Settle Claims Against Original Dixieland Jass Band

Happy Holidays!

(or a Transparent Attempt to Fair Use Dr. King's Words About Faith, Love & Jazz?) 
 

 Jim Morrison is not the only musician who has been pardoned this holiday season.  In ceremony on Friday, which exuded warmth and openness, the Jazz world and Jassins came together and reconciled a 95-year dispute over the derivation of the term "Jazz".
Sometime between 1916 and 1918 the Original Dixieland Jass Band (aka Stein’s Original Dixieland Jass Band), in a lame attempt to obviate the likelihood of confusion with the name Jassin, dropped the word “Jass” from the band's name and replaced it with the confusingly similar word “Jazz."   

The word "Jazz" stuck, and recording artists and companies and have used the term Jazz to describe what one commentator called "an ever changing and evolving musical style." 

The name Jassin had been used in commerce since at least as early as 1910 -- prior to the date the ODJB adopted the mark.  I was adopted with knowledge of the A. Jassin & Sons butcher shop, purveyors of fine meats and poultry on the Lower East Side of Manhattan, which purveyed, among other things, flanken and short ribs to a professional klezmer musician named Sol.  

As such, Bix, Fats, Bird, Miles, Trane, Dizzy, Monk, Satchmo, Duke and the Count's widespread misappropriation of "Jass" (and related terms), has long constituted trademark infringement, unfair competition, false endorsement, under §§ 43(a) & (c) of the Lanham Act, as well as misappropriation of the right of publicity, and other nasty stuff.  By engaging in this wrongful conduct, they have reaped ill-gotten profits, but given us so much.  

In the spirit of the holidays, which brings pardons to turkeys (can you actuallty pardon a turkey if it hasn't committed a crime?) and dead rock stars, I hereby release any and all claims the Jassins currently have, or may have in the future, against the jazz community relating to the use of "Jass" (or any confusingly similar term) in connection with the advertising,  marketing, promotion and performance of jazz music.  Perhaps, Dr. Martin Luther King said it best:

"Everyone has the blues.  Everyone longs for meaning.  Everybody needs to love and be loved.  Everybody needs to clap hands and be happy. Everybody longs for Faith.  In music, especially that broad category called Jazz, there is a stepping stone towards all of these."

Martin Luther King, Jr.,

in his opening address

to the 1964 Berlin Jazz Festival 

+

Happy Holidays!

 Law Offices of Lloyd J. Jassin

 

Firing Your Literary Agent

Ask a Lawyer:

What to do When Your Literary Agent Stops Communicating With You? 

Q: I can't stand my agent. She doesn't do anything, I mean anything. How do I get out of this contract? 

A:  If your agency agreement is for a set duration, your agent may have a claim if you terminate it before the contract expires. 

Illustration by Lauren Stout from Lawton Mackall’s Bizarre

If your agent begins negotiating with a publisher before your agency agreement
expires, your agent may have a valid claim to a commission if the deal arises post-termination. Make sure your agency agreement has a sunset clause. This heavily negotiated clause states that it's not commissionable if your agent doesn’t secure a contract within X days of expiration. Does the agency agreement require your agent to report to you writing where (and when) they sent your book proposal, who rejected it, and where it is still under consideration? Make sure it does. If they didn't submit it, they shouldn't take a commission. 

Consult a publishing attorney before you fire your agent (or hire a new one). If you don’t, you could wind up paying double commissions. If you wish to leave your agent but stay with your publisher, complications may arise. Take the cross-collateralization clause. A cross-collateralization clause allows your publisher to recoup an outstanding advance from one book with the revenues from a later book. If you wish to stay with your existing publisher, you don't want royalties payable on your next book used to offset an unrecouped advance. Your options may be limited. 

Just because you haven't signed an agency agreement, doesn't mean you aren't contractually bound to your agent. Most book publishing contracts contain an agency clause. To the surprise of many, it's not drafted by the publisher but inserted into the publishing agreement at the agent's request. The agency clause, which states the agent's commission, directs the publisher to pay all monies due you to the agent. The typical agency clause also gives the agent the power to make business decisions for you. Ideally, you will have signed an agency agreement, which, rather than the agency clause, controls.   

The Takeaway

Don’t sign what you don’t understand -- whether it’s a literary agency agreement, film option, or publishing agreement. Hire a publishing attorney.  They will point out the double dips and overreaches (does the agreement contain a  "coupled with interest" clause?). Every game needs a referee. Even if you have an agent, you need a lawyer.  

You can follow Lloyd Jassin on Twitter at www.twitter.com/lloydjassin

Disclaimer: This article is of a general nature and is not intended as legal advice.  It does not create an attorney-client relationship or any other expectation or representation. 

BIO
Lloyd J. Jassin is an attorney who focuses on publishing, entertainment, and intellectual property law.  His professional career began in publishing, where he worked for Simon & Schuster, St. Martin's Press, and Macmillan.  At S&S, he was Director of Publicity of the Prentice Hall Reference Group. Before forming his firm, he was an IP associate with Cowan, Liebowitz & Latman. Prior, he worked in television syndication / legal affairs at Viacom International.   He is co-author of The Copyright Permission and Libel Handbook. You can contact him at jassin@copylaw.com, visit his blog at http://www.copylaw.org/.

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Music & Publishing Industries Suffer Setback in Digital Download Case

 

Copyright Alert: 9th Circuit Holds Digital Downloads are Licenses Not Sales

FBT Productions LLC v. Aftermath Records (9^th Circ. 2010)



What should musicians and authors be paid for digital downloads?  In a decision with implications for the publishing industry the Ninth Circuit Court of Appeals recently ruled that rapper Eminem’s production company was entitled to 50% of his record label’s revenue from digital sales. 

The issue in F.B.T. Productions v. Aftermath Records was whether a digital download was a “sale” or a “license.” Like the music industry, publishers have taken the position that digital downloads should be accounted for as sales not licenses.  Typically, the royalty rate paid for subsidiary rights revenue is split 50/50 between the author and publisher, compared to 25% of net paid to authors for the “sale” of an eBook. 



Distinguishing Sales and Licenses

 

In its September 3, 2010 ruling, the court held that digital downloads should not be treated as auditable physical units for royalty accounting purposes.   The ruling is 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. 

The divisibility of copyrights was the theory relied upon by the court in determining that a digital download from the iTunes store was not a sale but a license. 

The Ninth Circuit held:

When the facts of this case are viewed through the lens of federal copyright law, it is all the more clear that Afterrmath’s agreements with the third-party download vendors are “license” to use the Eminem master recordings for specific purposes authorized thereby — i.e., to create and distribute permanent downloads . . . — in exchange for periodic payments based on the volume of downloads, without any transfer in title of Aftermath’s copyrights to the recordings. Thus, federal copyright law supports and reinforces our conclusion that Aftermath’s agreements permitting third parties to use its sound recordings to produce and sell permanent downloads . . . are licenses.

To the extent publishers transfer the right to make digital copies available to a digital download distributor, who then sells direct to consumers, it would, under the holding of this decision, constitute a license.  Digital download distributors do not, to quote the decision, “obtain title to digital files.”  The legal principle is quite simple.  Copyrights are divisible.  They can be assigned for less than their complete term, for a particular territory, and for a particular use -- rather than all rights under copyright.  If iTunes or Amazon or Sony or Kobo purchases an eBook from a publisher and resells it to a consumer, in the Ninth Circuit, it would considered a sale.  On the other hand, if the publisher retains ownership of the files, and receives periodic statements iTunes, et al, the rule of the case, applied mechanically, would categorize revenue from the "sale" of a digital download as subsidiary rights income.  


Many contract templates have already been modified by publishers in anticipation of a decision such as this one.  As such, they are likely immune to the decision's economic impact.  With regard to legacy or backlist contracts, labels and publishers will try to mitigate the impact of this decision by seeking retroactive contract amendments, and, perhaps, waivers of claims for back royalties.

The court regarded the record label’s ability to regain possession of the digital files at any time as a key element in supporting it’s finding that the label did not “sell” anything.

There is no dispute that Aftermath was at all relevant times the owner of the copyrights to the Eminem recordings at issue in this case, having obtained those rights through the recording contracts in exchange for specified royalty payments. Pursuant to its agreements with Apple and other third parties, however, Aftermath did not “sell” anything to the download distributors. The download distributors did not obtain title to the digital files. The ownership of those files remained with Aftermath, Aftermath reserved the right to regain possession of the files at any time, and Aftermath obtained recurring benefits in the form of payments based on the volume of downloads . . . Under our case law interpreting and applying the Copyright Act, too, it is well settled that where a copyright owner transfers a copy of copyrighted material, retains title, limits the uses to which the material may be put, and is compensated periodically based on the transferee’s exploitation of the material, the transaction is a license.

Importantly, if FBT were applied to books, you would find the word “license” multiple time, in, for example, Amazon’s Digital Distribution and Sony’s eBook agreements with publishers. 

Opportunities for Authors & Strategies for Publishers

 There is no way to predict whether the Second Circuit would follow the same line of reasoning as the Ninth Circuit.  Historically, the Second Circuit and Ninth often come to different conclusions via-a-vis new media issues.  No doubt, the commentators will have a day of it.  The decision will be opposed by the music and publishing industries.  Public statements will be made stating that the decision should be limited to the facts of this particular case.  And, while Eminem’s label may threaten to take the case to the Supreme Court, it will likely not act on that threat, as a final adverse judgment (assuming the Supreme Court would hear the case) would be devastating to that beleaguered industry.   

"The Penguincubator"
Dowload or Book Sale?
Penguin's Early B2C Experiment

Like the recent Random House–Wylie dust up, and the Rosetta Books decision, matters such as this are usually settled on confidential terms.  As the  FBT decision is not limited to records, agents and publishers should turn to their lawyers to help them determine what is the best current business practice in view of this important decision.  Consequences?  Agents will be emboldened to demand higher royalties from digital downloads, raising the familiar argument, "There's little direct cost today in getting eBooks into readers' hands.  Give me more!"   The future?  eBook rates for backlist titles (but maybe not for frontlist titles) will rise above 25%, and some wise publisher in the next six months will issue a press release stating that “In the light of dramatic changes that have taken place in the book publishing industry over the past several years, it is only fitting that the authors who comprise our backlist – and their heirs – be paid in accordance with today’s standards.”  

As the Rosetta Books decision illustrated, additional rights beyond primary rights, when sought by a publisher, are subject to separate negotiations and consideration.  If not resolved by a separate agreement, or amendment to the contract, such matters can wind up in court.   Whether this decision helps establish new ground rules for artist and author compensation remains to be seen.  I bet it does. 



How will this affect book publishing?  Will it accelerate the pace of the industry’s transition from a B2B to a B2C model?  Will conglomerates unload (trade) publishing houses?  Will Google start acquiring houses like the TV networks once went after studios?  A Penguincubator on every corner?  Stay tuned. It's not the end of publishing, just another chapter. 



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Twelve Copyright Permission Myths 

Estate Planning for Authors 

THE INFORMATION CONTAINED IN THIS ARTICLE IS OF A GENERAL NATURE.  IT IS NOT INTENDED AS LEGAL ADVICE.  READERS ARE STRONGLY ADVISED TO CONSULT WITH AN ATTORNEY BEFORE RELYING ON ANY INFORMATION CONTAINED HEREIN.  THIS POST DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP OR ANY OTHER EXPECTATION OF REPRESENTATION