Quick Contract Guide

Q. I turned in myworkstat 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; 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 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.

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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.

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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 (Print On Demand) 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.”

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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 book 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.

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Q.  Should I negotiate the date of my novel’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. 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.”

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Q. What rights should I grant to my publisher?

A. 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.

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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.”
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