Q.When do I need permission to use someone else’s material?
A. The answer is simple: whenever the failure to seek permission will result in copyright infringement. Since 1976, U.S. copyright is automatic when an original work — text, art, photos or music — is created and fixed in a copy or recorded for the first time. Neither registration nor copyright notice is required. Reproducing someone’s copyrighted work without their permission — even if you give them attribution – is infringement. It is safest to assume, therefore, that you must get permission from the copyright owner for all material – text, quotes, lyrics — unless the material falls into one of the following two narrow categories:
Public domain material. Public domain material includes items that cannot be copyrighted (ideas, titles, names, short phrases, and slogans); works whose copyright expired and/or was not renewed (including all work created before January 1, 1923); most federal government documents (but not those created by private contractors); and many state government documents and publications.
“Fair Use.” You also don’t need permission if your use of the material qualifies as “fair use” under Section 107 of the Copyright Act. In general, however, fair use always is a short excerpt used in connection with genuine criticism, parody, or teaching. Use of material in a review or scholarly article is fair use; use in novels is not. (For example, including lyrics from the Rolling Stones in your novel is not fair use.)
In theory, getting permission should be easy – just find out who owns the copyright and ask. In practice, however, it can be tough. Publishers are easier to track down than authors, and they usually can put you in touch with the author. Libraries have many directories available, such as the Literary Marketplace, to help you find publisher’s names and addresses. The U.S. Copyright Office (loc.gov) also will research copyright ownership for a fee.
Many copyright owners use licensing agencies to handle permissions such as the Copyright Clearance Center (http://www.copyright.com). You can locate song lyric ownership through the American Society of Composers, Authors, and Publishers (ASCAP) (http://www.ascap.com/index.html ); Broadcast Music Incorporated (BMI)
(http://www.bmi.com/home.asp); The Harry Fox Agency, Inc. (HFA) (http://www.nmpa.org/hfa.html); and SESAC (http://www.sesac.com).
Unfortunately, getting permission from an agency usually involves paying at least a nominal fee. In many cases there will be no fee, or a nominal fee charged by the owner, but in other cases the fee will be prohibitive for your projected use.
What if you can’t locate the owner? The simple answer is, you can’t use the material. It’s no defense in an infringement claim that you couldn’t locate the author. Instead, try to find some other excerpt that suits your purpose.
Q. Should writers and authors carry special liability insurance?
A. It depends on the type of book. Fiction is safest, although if you write true-crime novels, you might be sued for defamation, invasion of privacy, or violation of the right of publicity. Non-fiction book are more likely to be sued for copyright infringement.
Although all but the smallest publishers carry a media liability (“errors and omissions”) insurance policy, these policies protect the publisher, not you — unless you are specifically added as an “additional insured.” Depending on your negotiating power, some publishers will do this without cost to you, while others will refuse the request or require you to pay for the an endorsement to their policy.
Of course, if both you and your publisher are sued (the usual situation) then, to the extent the publisher defends the case, you also will benefit. There may be a conflict of interest, however, between you and the publisher, or the publisher may settle, leaving you alone in the lawsuit. Furthermore, most publishing agreements require the author to indemnify the publisher for all claims and damages resulting from a breach of the author’s warranties. As a result of this indemnification clause, you will have to pay not only your own attorney’s fees, costs, and any judgment, but also those of the publisher.
Ideally, authors should have their own media liability insurance policy. Unfortunately, the premiums are likely to be $3-4,000 for $1 million protection with a $5,000 deductible. You can contact any general insurance broker to get quotes for media liability insurance, or go directly to companies that specialize in publisher’s insurance, such as Argo Insurance (http://www.publiability.com). Because of its cost, most fiction writers will forgo liability insurance. If, however, your book has a high risk factor because of its subject matter or characterization, it may be worth investing in it. You’ll sleep better at night.
Many writers also believe – wrongly – that they can limit their liability by incorporating or forming a limited liability company. Although doing so will protect you from certain contract claims, in most cases you still will be personally liable for copyright infringement, defamation, or invasion of privacy.
Q. I fired my agent. What happens if an offer is made on my book?
A . Start with the general rule: an agent is entitled to receive a commission on royalties on publishing contracts she negotiated during the term of the agency agreement — even after the agency agreement is terminated – but NOT from royalties resulting from a publishing agreement signed AFTER termination of the agency. This means that if an editor to whom she sent your book makes an offer after you terminate her, you may hire another agent to negotiate the contract (or negotiate it yourself), even though it was through your original agent’s effort that the book was placed with that editor.
Now, for the exceptions, in order of likelihood. First, some agency agreements have a clause requiring you to pay a commission on royalties from publishing agreements made during a period of time after termination (usually six months), if the purchasing publisher had originally been solicited by your agent. This provision often is unenforceable because of poor contract draftsmanship by the agent, but any writer with such a clause should get a list of all such publishers from the agent upon termination .
Second, some literary agencies include in their agency agreements (or in the publishing contracts they negotiate) an “interminable agency” clause. Rather then limit their right to representation during the term of your agreement, such clauses grant the agent an exclusive, irrevocable right to represent your work for the entire term of those works’ copyright. The agency will be entitled to a commission on your work even after it goes out of print from the deal the agent negotiated, and a new publisher republishes it. After your death, your executor would have to keep track not only of which of your works are still under contract, but will also have to determine whether an agency has an interminable right to represent any of your out-of-print works. Your agency may merge, dissolve, or change names, providing more complications for your executor. If you have such a clause, you should ask your agent to give you a written release from its terms.
Third, some agents use the phrase “agency coupled with an interest” in their agency agreements. This is a bit of legalese intended to make the agency relationship irrevocable (again!). Ordinarily, a principal (you) may terminate an agent “at will” (or at the end of a contract term), and the agency also terminates automatically on the death or disability of the principal. This clause, however, grants the agent the exclusive, irrevocable right to represent your works for the entire term of those works’ copyright. This means that even if you terminate the agency, and the rights to your book revert back to you from the publisher, you are obligated to pay the agency a commission forever for all future sales, even if the agency did nothing to cause that sale. It could even mean you would be paying two agency commissions, which could amount to thirty percent or more. This also would apply to your heirs. Again, if you have such a clause in your agreement, you should ask your agent to give you a written release from its terms.
Bottom line: read – and understand — your agency agreement.
Q. May I use real people, or characters based on real people, in my writing?
A. Well, maybe. When you write about real, live people you expose yourself to legal liability? even if you tell the truth. And simply changing the names is no solution if the person can be identified by circumstances, appearance, or setting. Yes, disclaimers may help, but you can’t rely on them. Let’s take a quick look at the law of defamation, privacy, and the right of publicity:
Defamation. Defamation is written or spoken injury to the reputation of a living person or organization. Injury to reputation generally is considered to be exposure to hatred, contempt, ridicule, or financial loss. Libel is the written act of defamation; slander is the spoken act. Whether libel or slander, the defamation must be “published” – communicated to someone other than the subject of the defamation. Truth IS an absolute defense to defamation: if what you say is true, it cannot be defamatory. Another defense to defamation is proving that the statement was an opinion, not an assertion of a fact. In fiction writing, a publisher can be liable for a defamatory statement only upon a showing of negligence, and public figures have an even higher standard: they must show that the defamatory statement was published with “actual malice.”
Right of Privacy. Privacy law consists of four distinct “torts” or legal wrongs: intrusion upon seclusion; appropriation of name or likeness; public disclosure of private facts; and publicity placing a person in a false light. Generally only the latter two — public disclosure of private facts, and “false light,” are relevant for writers.
Public disclosure of private facts occurs when a writer discloses private and embarrassing facts about a living person that are not of “public concern,” such as details of a person’s sexual problems, physical, or mental ailments. For example, publicizing the fact that your brother-in-law has failed to pay his mortgage for three months, although true, would be an invasion of his privacy. Matters of public record, even if private, are not protected by privacy law. If a writer publishes a story disclosing facts obtained from a police publication or a court opinion, the matter is of public record and no lawsuit will be successful. Public figures (politicians, movie stars, professional athletes, etc.) have a somewhat lessened right to privacy because of the public’s legitimate interest in their affairs. For example, a magazine may publish a profile of a politician without fear of being sued for invasion of privacy.
“False Light” privacy lawsuits occur when a writer publishes facts about a person that creates a deliberately false and misleading impression, such as when a newspaper publishes a story about convicted felons and includes the name or photograph of an innocent person. Once again, there is an different standard for when the published material is in the public interest or about a public figure. In such cases, the public figure must prove that the publisher acted with malice or with reckless disregard for the truth.
Right of Publicity. Most states now have laws that protect living celebrities, and in some states, recently dead celebrities like Elvis Presley, from the commercial exploitation of his or her name, likeness, or persona. News stories, biographies, and fiction, however, are protected by the First Amendment. To the extent you portray a celebrity in such works without defaming him or his family, you need not seek the celebrities’ permission. You would, however, need permission to exploit purely commercial “spin-offs” of your work, such as t-shirts or posters.
If you have any doubt about the use of real names in your work, consult an publishing attorney BEFORE publication.
Q. Should I Register My Copyright?
A. Although registration isn’t necessary to obtain copyright protection, registration is a prerequisite to filing a copyright infringement suit. In addition, the law confers certain benefits to copyright owners who formally register, specifically additional money damages and attorney’s fees will be available to the copyright owner in court actions. Book-length works are generally registered at publication; shorter works are seldom registered unless there is an infringement.
Q. What Can NOT Be Copyrighted?
A. You can’t copyright ideas, titles, names, short phrases, and slogans, no matter how original or unique (some of these can be trademarked, but that’s another story). Also procedures, designs, concepts, charts and tables of common authorship, etc.
Q. When Can I Register My Copyright?
A. Registration may be made at any time within the life of the copyright. Unlike the law before 1978, once a work has been registered in unpublished form, it is not necessary to make another registration when the work becomes published. Usually this is done only if the work is substantially altered in its published form.
Q. What is self-publishing?
A. In traditional royalty publishing, the publisher screens books for quality and marketability and then, at its cost, handles editing, manufacturing, marketing, promotion, sales, warehousing, and fulfillment. The author receives a royalty on sales. The self-publisher, by contrast, undertakes all of these tasks at his/her own cost, but keeps all revenue.
Q. What is “vanity” publishing?
A. Vanity publishers, for a fee, will print and bind a book, register its copyright, provide an ISBN number, and offer a “package” of services including “promotion” and “marketing.” Despite their claims, these publishers will NOT get your book into bookstores, nor will the books be reviewed. They do, however, put your book on their web site and in their “catalog.” (When was the last time you shopped for a book in a vanity press catalog?) Although it would seem that vanity publishing is easier than self-publishing, you will be overcharged and the tasks will not be done any better (and usually worse!). Keep in mind that vanity publishers will publish anyone, regardless of the quality, and thus a stigma is attached to their products. To avoid this stigma, many vanity publishers call themselves “subsidy” publishers, which they are not. True subsidy publishing is a hybrid of traditional and self-publishing: the author pays a fee to the publisher but the publisher also contributes a portion of the cost, and thus is selective in what is published.
Q. What is print-on-demand publishing?
A. New technology has brought more printing options. Print on demand (POD) books are stored digitally; when a customer or a bookstore orders a copy, the POD publisher (e.g., iUniverse, Booksurge) uses its technology to create a copy, thus eliminating the cost of inventory and returns. POD is substantially cheaper ($99-$500) than paying for a print run, so it’s a good alternative if you plan to sell only in small, sporadic amounts. Unfortunately, POD print and graphics are often fuzzy and less readable than traditional printing, and the books carry a high retail price. As with vanity publishers, there is no marketing or promotional effort. If you are interested in POD, be sure you are aware of precisely what rights you are giving to the POD publisher, and for how long. Will you be able to terminate the contract and get the full rights returned to you in the event you sell your book to a traditional publisher?
Q. What is a “Literary Executor?”
A. You may have heard the term “literary executor,” which is not actually a separate statutory or legal office. (An “executor” is a person responsible for settling a deceased person’s estate.) A “literary” executor is simply a co-executor whose responsibility is limited to your literary works. Very often, there is no need to name such a separate individual – your general executor (usually a spouse or other relative) is also the person you would wish to be in charge of your literary works pending their distribution to the beneficiary. But if you believe that managing your literary works requires experience in publishing and literary contracts, you should consider naming a literary executor.
Q. Can I legally protect my pen name, or the name of my mystery series? What about my web site?
Many novelists use pen names or pseudonyms and many also have a “branded” series of mysteries, usually named after the chief character (e.g., Noreen Wald’s “Kate Kennedy South Florida Senior Sleuth” series.) What such writers have in common is the need to protect the goodwill and value of their pen name and/or series. To accomplish this, writers must understand both copyright and trademark law.
When filling out a copyright registration form (Form TX), the Copyright Office allows you or your publisher to list either just a pen name or your real name. The difference in protection is that if you use your real name, protection for the work extends for your life plus seventy years; if you use a pseudonym, the term of protection is 95 years from the publication of the work, or 120 years from the creation of the work, whichever period expires first. If, however, after filing the original application in a pen name, the author’s identity is later revealed in the records, the term reverts to the life of the author plus 70 years.
Under U.S. copyright law, however, names, slogans, and titles cannot be copyrighted. This means that copyright will NOT prevent others from using your pen name, or the name of your mystery series.
Pen names and series names, however, are entitled to protection under state laws governing unfair competition and under the federal Lanham Act, which prohibits “false designations of origin, false descriptions, and dilution.” These laws give you the right to bring a civil action against someone appropriating your pseudonym or series title.
Further, if a pseudonym or series name becomes identified with the person using the name and/or the books and other products authored under the name, it may be entitled to protection under trademark law, although generally this is limited to the sale of ancillary products. If you think your pen name or series name is entitled to trademark protection, you should consult an intellectual property lawyer; also see my article, “Do You Need A Trademark?” at www.publishlawyer.com/carousel9.htm, which explains these concepts in greater detail.
CAUTION: If your pen name also is the name of a living individual, you must either obtain that person’s consent or file a disclaimer stating that the name is not that of any real person. Pen names also cannot be registered if they are the name of a deceased President of the United States during the life of the President’s widow except with the consent of the President’s widow.
What about your web site name? Internet domain names are treated differently under the law. Registration of your domain name by the Internet Corporation for Assigned Names and Numbers (ICANN) is separate from trademark registration. Nevertheless, you may be able to register your domain name as a trademark, provided the name is being used in connection with a site that is offering a service or product.
Q. Can you tell me, once and for all, what exactly is “fair use?”
A. This is the single-most asked question of publishing lawyers. Thanks to the wonderfully dense language of Congressional bill writing committees, and the courts’ interpretation of their efforts, it is difficult to answer.
Section 107 of the U.S. Copyright Act provides that “the fair use of a copyrighted work . … for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.” Note that fair use is confined to these specific categories. Section 107 nevertheless has been used to justify many instances of uses outside the categories, and generated numerous court cases. (Adding to the confusion is the unfortunate belief of many writers that reproducing short excerpts of someone’s copyrighted work — without permission – automatically qualifies as fair use merely if attribution is given).
Section 107 further provides four “factors” to determine whether a specific use is to be considered a “fair use.” These factors are:
the purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes;
the nature of the copyrighted work;
the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
the effect of the use upon the potential market for or value of the copyrighted work.
Much clearer, right? Of course not. These factors, however, will determine whether your use of someone else’s material will be judged an infringement – or not. For example, say you wish to use some Rolling Stones lyrics in your novel – perhaps a verse at the beginning of each chapter. Let’s examine the factors:
Is the purpose commercial or nonprofit? Definitely commercial, and the commercial purpose is not in one of the specified categories (e.g. a review in a newspaper).
The nature of the copyrighted work? Song lyrics, a prime example of a work designed to be protected.
The amount and substantiality of the portion? Depends on how much of each song you use. Let’s say just one line – a small percentage.
The effect of the use on the potential market? (most important). Probably very little, since the lyrics have already been published and can be found all over the Internet (on commercial sites, no less).
The result? The four factors are split. Because the use does not squarely fit within any of the Section 107 categories, however, typically a court would find that, on the whole, the four factors weigh against a finding of fair use (and that is why your publisher will demand that you obtain permission for the lyrics).
The Internet, of course, has brought new confusion to the issue. Abuse of the fair use exception abounds, but that won’t help you in the event you are sued. Until the day when either Congress or the courts clear up this picture, play it safe – either don’t use even small portions of other persons’s work – or obtain permission.
Q. What is cross-collateralization, and is there a cure?
A. Cross-collateralization is an accounting concept (stay with me here) used in publishing agreements (and also commercial loans). It refers to the right of the publisher to charge your royalty account for any amount owing to the publisher under any other agreement. Unfortunately, many writers fail to understand the impact cross-collateralization can have on their royalty income.
Let’s say you have just submitted your third novel, KILLING MADLY, to your publisher. Your first novel, KILLING SPREE, sold well, but your second, KILLING FRENZY, earned out only $10,000 of its $12,500 advance.
Under the terms of your current publishing agreement, you are to receive a $15,000 advance for KILLING MADLY, upon acceptance. But when the check comes, it’s only for $12,500 – the publisher has deducted the $2,500 shortfall from KILLING FRENZY. (Alternatively, the publisher might pay you the full $15,000 advance, but after it is earned out, it deducts the $2,500 from future royalties.)
Why? Because you have this clause (or one like it) in your publishing agreement: “all Works covered by this Agreement or any other agreement between Publisher and Author shall be considered one account and shall be accounted for jointly or collectively.”
What could you have done about it? Ideally, you could have struck out the offending clause, usually found under headings such as Payments, Royalties, Overpayment, or Accounting. Some publishers, however, won’t delete it, so you’ll have consider the negotiating points and issues:
If this is your first agreement with the publisher, the clause won’t matter until and unless you sign another agreement with the publisher. You probably can allow the clause in the first agreement, then push hard to have it deleted in the second contract. Keep in mind that, unless your first book was somewhat of a success, it’s doubtful you’ll get a second contract from that publisher anyway. You also might try to “cap” the cross-collateralization to a specific dollar amount, e.g., that no more than X amount can be setoff from any one contract.
If you are offered a multi-book deal, consider whether keeping the clause will leave you better or worse off versus signing individual deals. In other words, is the guarantee of publication from this publisher enough to outweigh the fact that one ordinary book may soak up the benefits of commercial success in another book? You might be better off selling to different publishers. You also might try putting time limits on the operation of the cross-collateralization clause: In other words, let the publisher cross-collateralize only after an eighteen month or two year period from the release of each book. This should at least prevent any amount being take out of an advance for the next book.
You could try limiting the cross-collateralization to specific editions of a book – i.e, only hardcovers can be cross-collateralized against other hardcover editions, not trade paperback.
The key, as always, is reading and understanding all of the clauses in your publishing agreements – even the ones that, at first glance, may seem innocuous.
Q. I know some writers have formed limited liability companies (LLCs). What’s the advantage?
A. An LLC is a sole proprietorship or partnership with the advantage of limited member liability and flexible tax structure. Although a single-member LLC by default is treated by the IRS as a sole proprietorship (income and expenses are reported on Form 1040, Schedule C) you also may have your LLC treated for tax purposes as a corporation (either a “C” or and “S”).
Advantages and Disadvantages of an LLC:
Income taxes. If you elect to have your LLC taxed as a C corporation, tax rates are lower than individual rates, but when you withdraw corporate profits as stock dividends, there is a double taxation: it is taxed again at your personal rate. The sole proprietorship or S corporation LLC, however, “passes through” all income to the member, thus eliminating double taxation entirely, but you cannot retain earnings in your corporate account for future use.
Employment taxes. As a sole proprietorship LLC member, you must pay the self-employment tax of 15.3% on salary or earnings. If you elect corporate status, the corporate FICA and Medicare tax contribution, plus the employee’s FICA and Medicare tax contribution, are equal. In some circumstances, however, owner-employees of a non-corporate LLC (single-member or partnership status) may end up paying more employment taxes. For example, if a member of a non-corporate LLC earns $65,000 in salary and is distributed $35,000 of the LLC’s profits, a 15.3% tax would have to be paid on the full $100,00. By contrast, if your share of S corporation income is $100,000 in 2008 and you perform services for the corporation reasonably worth $65,000, you will owe the 15.3% self-employment tax on the $65,000 but not on the remaining $35,000. (You also could choose to pay yourself a salary of $65,000 and withhold 15.3% from your salary checks; the result is the same). This is because the rules on the self-employment tax for S corporations are well established: as an S corporation shareholder, you pay the self-employment tax on money you receive as compensation for services, but not on profits that automatically pass through to you as a shareholder. CAUTION: The IRS has ruled (Revenue Ruling 74-44) that payments received from an S corporation in lieu of payments of “reasonable” compensation to owners performing services for the corporation ARE wages, subject to employment taxes. Check with your tax advisor before taking this step.
Fringe benefits. An LLC choosing C corporation status may deduct retirement benefits, medical insurance premiums and reimbursements, qualified education costs, disability and group term life insurance up to $50,000 per employee, and employer-provided transportation benefits. A sole proprietorship LLC and S Corporation LLC may deduct 100% of health insurance premiums, but there is lesser deductibility of fringe benefits and smaller retirement plan contribution limits and plan flexibility.
Fees and Paperwork. There are initial and annual fees to the state where you set up your LLC, and your state may impose a minimum tax on your LLC, no matter how much (or how little) income you have. If you choose C or S corporate status (or are a multi-member LLC), a separate tax return will be necessary, and you can count on a larger bill from your accountant.
Limited Liability. Being an LLC will protect you personally from certain creditor’s claims against the LLC. Freelance writers, however, rarely accumulate much business debt – and most lenders will require that you personally guarantee the payment of an LLC loan in the event of a default or bankruptcy. More importantly, even if you assign your copyrights to a limited liability company, you cannot avoid copyright infringement, defamation, or invasion of privacy lawsuits – as the author, you always can be sued individually for these “torts.” Likewise, publishers routinely require authors to personally pay the publisher in the event of a defamation or copyright infringement claim resulting from the author’s writing.
In summary, there are some tax and fringe benefits to be gained by choosing to form an LLC and electing corporate status, especially if you generate high income and can afford expensive benefits and high pension contributions. Likewise, if you self-publish and accumulate large debts in the name of your writing business, the limited liability of the corporate entity may be useful.
Q Tell me about legal issues in literary agency agreements.
A. First, you should be aware of the difference between an “exclusive agency agreement” and an “exclusive right to sell” agreement (such as a real estate broker listing agreement). Most literary agents use the former. Under an exclusive agency agreement, you still may make a deal with a publisher on your own without paying your agent (although you probably will want to refer the publisher to your agent for negotiation anyway). By contrast, an exclusive right to sell agreement means that you have to pay a commission even if you make the deal by yourself.
Second, some literary agencies include in their author-agent agreements or in the book publishing contracts which they negotiate an “interminable agency” clause. Rather than limit their right to representation during the term of your agreement, such clauses grant the agent an exclusive, irrevocable right to represent your work for the entire term of those works’ copyright. This is inappropriate and can cause you and your heirs needless trouble. The agency will be entitled to a commission on your work even after it goes out of print from the deal the agent negotiated and your new agent sells the work to another publisher. After your death, your executor would have to keep track not only of which of your works are still under contract, but will also have to determine whether an agency has an interminable right to represent any of your out-of-print works. Your agency may merge, dissolve, or change names, providing more complications for your executor.
Similarly, a few agents use the phrase “agency coupled with an interest” in their contracts. This is a bit of legalese intended to make the agency relationship irrevocable (again!). Ordinarily, a principal may terminate his or her agent at will (or at the end of a contract term), and the agency terminates automatically on the death or disability of the principal. This clause, however, grants the agent the exclusive, irrevocable right to represent your works for the entire term of those works’ copyright. Even if you terminate the agency, and the rights to your book revert back to you from the publisher, you are obligated to pay the agency a commission forever for all future sales, even if the agency did nothing to cause that sale. It could even mean you would be paying two agency commissions, which could amount to thirty percent or more. This also would apply to your heirs.
Third, some literary agency agreements give the agent power to sign contracts and checks on the author’s behalf. This clause always should be deleted; if necessary, you can give your agent this power when and if there is a good reason to do so, such as your unavailability for a period of time..
Finally, your agent should not be permitted to “assign” (transfer) your agency agreement to another agency without your permission. Likewise, you should not be transferred to another agent within the same agency without your permission.
Q. What should I know about “out of print” clauses?
A . Your grant or assignment of copyright to your publisher generally is limited only by this clause. It therefore is critical that “out of print” be defined reasonably, especially now that digital and on-demand publishing can make the literal meaning of the clause obsolete. Ideally, the definition should be pegged to the publisher’s marketing efforts, not just to the book’s availability—when the book no longer is in the publisher’s catalog and/or available through major chains, it should be considered “out of print,” regardless of whether it still can be bought online.
Unfortunately, many out of print clauses are vague, suggesting only that when a book is no longer “available,” the author may ask it be declared out of print, and the publisher must respond within a certain time frame – usually six months – by either issuing a new edition or returning the rights to the author. But although there may be no print copies available (and the book remaindered), if the publisher’s web site or Amazon still lists an e-book version or POD version, it’s technically available.
Some other variations of the clause may state that a book is declared “out of print” if there are fewer than a certain number of books left in circulation, or if your royalties fall below a certain amount for one or more accounting periods, or if less than a certain number of e-books or POD books are sold in a year.
All the above versions of out of print clauses should be anathema to any author. It’s not in your best interest to have your rights tied up by a publisher who’s no longer doing anything with them. Once a publisher no longer actively is marketing your book and the book has stopped selling in decent quantities, your best bet is to get the rights back and either resell the rights to a new publisher (difficult, but not impossible), self-publish the book (POD publishing is great for this), or cut it up and sell the serial rights to magazines or anthologies, or so on.
Therefore, when negotiating your publishing agreements, try to get the following clause, or some close version into the contract (or modify the publisher’s clause accordingly):
“Out of print” is hereby defined as the Work not being available in the United States through regular retail channels in an English language print edition (not print-on-demand or other electronic means of reproduction) and listed in the Publisher’s marketing catalog. If at any time the Work is out of print during the term of this Agreement, Author may terminate the Agreement by written request to the Publisher. Within thirty (30) days of receipt of the request, the Publisher will return all rights in the Work to Author, subject to any prior grants of rights authorized and the continuing right to retain Publisher’s share of any future proceeds from those grants. If Publisher fails to provide a written reversion of rights, Author may record this page of the Agreement with the United States Copyright office in lieu of such written reversion.”
Q. My publishing contract provides that I “indemnify and hold harmless” my publisher from all claims. That sounds drastic.
A. It is. Unfortunately, indemnification and warranty clauses in book contracts frequently are skimmed over and not fully understood by authors, agents, or editors. These clauses set forth the respective responsibilities of the parties in the event of claims against the author and publisher for defamation, copyright infringement, invasion of privacy, violation of rights of publicity, and other “torts,” or civil wrongs. Drafted by the publisher’s lawyers, they often are overbroad and publisher-slanted to a ludicrous degree.
In general, the warranty clause is the author’s promise to the publisher that her work is original, and further does not defame (libel) any individual, nor invade anyone’s right of privacy or right of publicity. To give this promise teeth, the publisher also includes an indemnification clause, which is the author’s agreement to reimburse the publisher for any damages suffered by the publisher if the author’s warranties are false. This is required even though all but the smallest publishers carry “publisher’s perils” insurance policies that will cover the publisher for such claims.
What can you do about it? Ideally, you should get the following underlined words inserted in the standard indemnification clause: “The Author will indemnify the Publisher against any loss, injury, or damage (including any legal costs or expenses and any compensation costs and disbursements paid by the Publisher) occasioned to the Publisher in connection with or in consequence or any breach of the Author’s warranties and which the Publisher is not able to recover under its insurance policies.” In most cases, this will dramatically reduce your potential liability.
Unless you are a best-selling author, however, it can be difficult to get this change: Many publishers and editors treat their indemnification clauses as sacrosanct, handed down, Moses-like, from “Legal.” There are some changes, however, to which many publishers will agree. Most successful authors should be able to get their publisher to make them an “additional insured” on the publisher’s insurance policy. This means that the author, as well as the publisher, are covered by the publisher’s insurance policy. In that case, unless your actions were intentional, the most you could be personally liable for in the event of a lawsuit would be a share of the insurance policy’s deductible amount (typically, not more than $10,000).
Other realistic requests you can make: 1) ask that a “best of your knowledge” standard be added to your warranties. This will protect you from inadvertent errors or omissions. 2) Ask that your indemnities take effect only upon a final judgment — insert the words “finally sustained” after the word “damage” in the above sample clause. By doing so, you will ensure that you will not have to pay the cost of frivolous lawsuits. 3) Ask that your publisher be required to give you notice of any claim and consult with you before settling any claim.
Q. Tell me about option clauses.
A. These clauses traditionally give publishers the right to either buy or make an offer for the author’s next book or books. Of course, if your novel sells well, there’s something to be said for loyalty to the press that helped you get there. Publishers and agents alike complain that writers tend to jump ship after they’ve helped make the writers successful. The option clause, therefore, is a bit of an insurance policy for the publisher that you have to give them another shot after they invested in you. It’s not usually an evil clause in its intent, but there are too many situations where the clause becomes impractical.
The problem is that when you enter into the publishing agreement, you don’t know whether your current book will sell well, and whether the publisher will do a good job editing and marketing it. Further, what if your next book isn’t appropriate for this publisher? You decide to write a sweeping historical thriller, and your current publisher specializes in cozies. You’d have to show your historical to them, and they could hold you up from submitting it to appropriate publishers.
Best advice – eliminate the option clause entirely. Many authors are surprised to learn that publishers will agree to delete it – but you have to ask! If you can’t eliminate it, however, make sure it imposes no real burden. Get rid of any contract language requiring you to submit a completed manuscript, rather than a proposal; lengthy (more than 60 days) consideration periods for the publisher; and a requirement that you offer your next book to the publisher on the same terms as the current book. (What if your first book is a bestseller and now you can command a much higher advance and royalties?)
Ideally, you should aim at setting up a very limited period during which the publisher may bid on your next book (“right of first negotiation”), and permitting you to sell the book to other publishers if the publisher isn’t interested. And don’t accept any clause that stipulates you can’t accept an offer from another publisher if it’s not on “better terms.” That may sound logical, but what if Publisher A offers you more money up-front, while you trust Publisher B to do a better job at marketing? Or perhaps you’d prefer to try a smaller publisher that can’t pay as much, but can show you more personal attention. You should always have the right to refuse your publisher’s offer, no matter what the terms are, if you choose. All the first option should do (if you have to include it) is give the publisher a right to read the work and make an offer.
You’ll also want to restrict the definition of “next work.” Make sure it’s limited to the next work in the same genre, or in the same series, or the next work that’s in categories the publisher deals with. And make sure the option is for no more than one book.
Even a well-restricted clause can be an annoyance because it wastes your time. So think long-term, and never be afraid to negotiate.
Q. I turned in my book’s manuscript on time three months ago, but my editor still hasn’t “accepted” it. What are my rights? And can my publisher make changes without my approval?
A. As always, your publishing agreement controls. An industry-standard publishing agreement typically gives the publisher the right to accept, reject, or ask for revisions in your manuscript. But keep in mind that the editor who acquired your book may not be the same editor who sees it through to publication; we all know that editors change publishing houses frequently. If a new editor comes in before your manuscript has been accepted, he or she might just sit on your book while pet projects take priority. You need some assurance that the publisher: a) won’t unreasonably delay production of the manuscript or payment of your remaining advance by never getting back to you about what changes the editor wants; and b) can’t reject the manuscript outright without giving you a chance to revise the manuscript.
The solution is to insert a contact clause such as this: “Within 45 days of its receipt of the complete manuscript of the Work, the Publisher shall notify the Author in writing whether or not the Work is acceptable to Publisher. If the Work is not acceptable to the Publisher, the Publisher shall give the Author a request for changes and/or revisions. The Author shall have 60 days from the Author’s receipt of such a request to deliver to the Publisher a revised Work that is acceptable to the Publisher. The Publisher shall advise the Author within 45 days of its receipt of the revised Work whether or not the revised Work is acceptable to Publisher. If the Work as resubmitted is deemed unacceptable, the Agreement shall be terminated at the option of either party and neither party shall have any further liability to the other. If the Author does not receive any notice from the Publisher within the 45-day periods set forth above, the Work shall be deemed to have been accepted.”
Although some publishing agreements already will have a time limit for the publisher’s acceptance, they will require YOU to notify an editor and/or an executive of the house that “failure to respond shall be deemed acceptance.” If so, make sure you follow the specified procedure: Failure to do so will leave you in limbo.
Also, who gets the final say on the manuscript after acceptance? Some contracts allow the publisher to make changes “provided the meaning of the text is not materially altered.” In whose view? Generally, a publisher should only have the right to make copyediting changes. You should have the right to approve all material changes to the manuscript before publication.
Q. Should I negotiate the date of my book’s publication?
A. Yes! There always should be a limit to the amount of time a publisher has to publish your work. If no time frame is specified, you run a significant risk: What if the publisher runs into monetary problems, or reorganizes the types of books they publish? Or maybe they’re not even really sure if they want to publish it anymore, but they’ve already paid your advance, so they think they should hang onto it just in case. And rarely, a publisher may buy a book that stands to compete with a book they’re about to publish (or have already published), then purposely hold it, or fail to market it, because it may interfere with the success of the other book.
Your publishing agreement should stipulate that the publisher has somewhere between 12 and 24 months to release the book after the publisher has accepted the manuscript (you also should have a time limit for manuscript acceptance — see “Manuscript Acceptance and Revision” in the June/July 2007 issue of The Third Degree). Always aim for the shortest time possible while understanding that you probably don’t want the publisher to rush your book to print in less than six months. First novelists should be aware of the many steps that need to be taken care of before a book is released: editing, copy editing, typesetting, proofreading, cover design, endorsements, catalog inclusion, listing with Books in Print, press releases, advance review copies to the trade, etc. Twelve to 18 months, at maximum, is plenty of time.
Sometimes the problem isn’t even the publisher’s “fault,” but a shift in the market. For example, many thrillers about terrorism were delayed after 9/11. Then there are the “force majeure” (“Act of God,” unavoidable catastrophe) problems: What if the publisher’s building burns down, or there’s a flood, earthquake, hurricane, or other such emergency that forces the publisher to delay your book’s production? In such cases, the author always should have the right to take the book back if the publisher doesn’t show plans to get the book released right away once the immediate problem has ended.
Here’s a contract clause that will accomplish this goal:
“If the Publisher does not publish the Work within the time specified above for reasons other than first serial or book club use, delays of the Author in returning the copyedited manuscript or proofs, the Author’s failure to comply with requests made by the Publisher’s counsel or delays, caused by circumstances beyond the Publisher’s control, and if the Publisher at any time thereafter receives written notice from the Author demanding publication, the Publisher shall within 90 days of the Publisher’s receipt of such written demand either publish the Work or revert to the Author in writing all rights to the Work granted to the Publisher in this Agreement, subject to any outstanding licenses, which shall be assigned to the Author, and the Author shall retain any advance payments made under this Agreement prior to such reversion as liquidated damages for the Publisher’s failure to publish the Work.”
Q. What rights should I grant to my publisher?
The standard book publishing agreement “Grant of Rights” clause commonly takes all “print” rights plus certain specified “subsidiary” rights – foreign, translation, book club, electronic, film & television, audio, dramatic, and periodical. Don’t skim over these clauses — they are the most important elements of your publishing agreement. Examine them closely, and, if necessary, consult a publishing lawyer or literary agent.
Unless there is a specific reason not to do so, you always should try to retain as many subsidiary rights as you can, keeping in mind that certain rights are considered “non-negotiable” by publishers – typically, audio, electronic, and book club. On the other hand, even first novelists should be able to retain either film/television, or foreign/translation, or both. Film/television rights, of course, allow your book to be made into a movie or television show. These are rights I always advise authors to keep for themselves. They can be worth a sizeable chunk of money, and under the typical publisher subsidiary rights clause, if the publisher makes the sale, the proceeds of the sale are split 50/50 between you and the publisher. Further, under a typical literary agency agreement, you also will owe your agent 15% of your 50%! Finally, if the publisher controls the rights, it makes all the decisions; you don’t get to negotiate the terms.
On the other hand, if you retain film & television rights, and a movie studio or producer makes an offer, you or your agent get to negotiate the deal, and you don’t owe the publisher any money.
Foreign publication rights give the publisher the right to license your book to foreign publishers (“foreign” being defined by the “Territory” in the agreement). Translation rights give the publisher the right to have the book translated into other languages. Should you give these rights to the publisher? Some publishers do aggressively pitch their books to foreign publishers, so they may be in a position to make more sales than you or your agent could. In that case, it’s not bad to split the money—they do the work, and you just collect extra checks. If you don’t have an agent, though, you have to do the legwork and contact foreign agents or foreign publishers yourself. In some cases, the publishers will come to you: if your book does very well in the United States, chances are “scouts” will be watching to offer you a deal to print the book abroad (in English or translated into other languages).
The main problem is that it’s hard to determine how aggressive your publisher may be with exploiting foreign rights. The secondary problem is that if you let the publisher keep foreign rights, they’re the ones who get to negotiate and determine the deals, and you have to agree to them. They could agree to sell French rights to your book for $100, and you couldn’t turn it down.
Bottom line: make sure you understand the rights you are giving your publisher, and don’t be afraid to negotiate.
Q. Tell me about royalties in book contracts.
A. Royalty rates may vary wildly in the contemporary book publishing industry; however, typical hardcover rates are 10% – 15%, with “break points” that escalate the royalty as more copies are sold; e.g. 10% on the first 5,000 copies, 12 1/2% on the next 5,000, and 15% thereafter. Mass market paperbacks generally have between a 6% and 9% royalty, sometimes at a “flat” rate without break points. Trade paperbacks (large format) formerly carried the same royalty rate as hardcover, but unfortunately this no longer is true. Many of the big publishers, such as Simon & Schuster, now give trade paperback the same royalty range as mass market.
More important than the percentage amount, however, is what the percentage is based upon. Fiction publishers generally use an author-friendly list or cover price formula, with some major exceptions, like Sourcebooks, which uses a “net receipts” formula. This formula is based on the publisher’s actual receipts after discounts, rather than the cover price. Under such a formula, you will receive less royalties – often half as much — as a “cover price” author would receive from the same amount of sales.
The deep discount. Most publishing agreements provide that an author’s royalty is reduced for certain “discounted” sales — sales at greater than the publisher’s “normal wholesale discount” or “greater than a 50% discount.” The reduced royalty rate for deep-discount sales may be either one-half the stipulated royalty or a percentage (7 percent to 10 percent) of the publisher’s net receipts. Originally, this clause was meant to apply to non-returnable quantity special sales that a publisher made at a high discount to purchasers outside normal book-purchasing channels (such as premium sales, export sales, direct-mail sales, or sales on a non-returnable basis). But guess what? Many publishers now apply the clause to normal bookstore and wholesale sales. Since many –sometimes most– books are sold to bookstores and to Amazon at a discount rate of 55 percent, and to big discounters like Wal-Mart, Target, and clubs like Costco, at over 65%, this clause in effect guarantees that the author’s royalty rate always will be reduced. (Discounts also can be considerably greater for mass market paperbacks, e.g., 60 to 65%.)
The solution? Some writers and agents request a copy of the publisher’s current discount schedule before agreeing to royalty schedules – but the publisher can change the schedule. Instead, try to increase the percentage above which your royalties reduce, the higher the better. In the example above, changing the percentage to 56% would protect you from a reduction for sales to Amazon and some of the bookstore chains, but not from the big discounters. A better alternative is making sure the clause only applies to its original purpose – “special” sales. To do this, add language to your discount clause specifying that your publisher will be able to apply the reduced royalty rate only to “sales outside normal wholesale and retail trade bookselling channels.”
Q.Tell me about royalties for subsidiary rights.
Authors (and even agents) sometimes overlook subsidiary rights royalty clauses. This can be a big mistake; significant revenue can be derived from such rights. First, a definition: Subsidiary rights (often called “subrights) are any right to use content from your work that is subsidiary to the primary right of print publication, including magazine articles, film and video, audio, foreign sales and translations, DVDs, book clubs, electronic rights, reprints, merchandising, etc. Any rights which you have not retained may be exploited by your publisher, either by itself (the big publishers usually have their own audio and electronic publishing divisions), or by licensing the rights to other companies.
If your publisher exploits subrights itself, you should expect a percentage royalty, just as with your print rights. The amount of such royalty and what it is based on (net receipts vs. list price, see my previous Q&A about royalties) always should be reviewed. Typically publishers will insist on net receipts AND a flat royalty rate (e.g. 10% for electronic or print-on-demand, although the cost of production is lower than print). Don’t be afraid to negotiate these terms.
For subrights such as foreign, film, or audio rights retained by the publisher and licensed to a third party, the standard royalty to the author is one-half of the net receipts from such licenses, with some exceptions. (For example, first serial rights should be 90% to the author, 10% to the publisher.) It therefore is critical to define “net receipts” carefully to eliminate any creative bookkeeping by the Publisher. Ideally, the definition should be this simple: “Net Receipts” refers to all funds received by the Publisher for the sale or license of the Work.”
For all subrights, the author should insist that advances received by the publisher from the licensee also are split, and further require that the author’s share of any advance received by the publisher for a subrights license be remitted to the author within thirty days of receipt.
Publishing agreements also often have “special categories” of subrights – basically ways to cut the author’s royalties further. For example, book club rights – in many agreements, an author’s share of royalties on sales to a book club is not the standard one-half of net receipts, but instead a percentage of the author’s normal print royalty rate (often 50%). The theory behind this is that the publisher is receiving from the book club publisher a lower rate than from bookstore sales. This is true, but on the other hand, the publisher has no costs, either – the book club publisher prints and markets its own edition. And in some cases, the book club publisher is actually owned or controlled by your publisher! Therefore always try to get book club rights included with the other licensing subrights – you then will receive one-half of the publisher’s net receipts instead of a small royalty.
Subsidiary rights royalty clauses should never be ignored; make sure you understand what you are giving up and what you are gaining, and don’t be afraid to negotiate.