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Get it in Writing: Why You Need a Valid Publishing Contract
© Copyright 1998 Lloyd L. Rich
Introduction
The publishing contract is the most important
document involved in the publication process. The significance of the
publishing contract is that it defines the scope of the author's and
publisher's interests and governs their respective rights and obligations, as
well as those of their heirs and successors, far into the future.
The publishing industry is not unique with
regard to formalizing business transactions through a written contract,
however, publishing contracts because of the value of a publishing company's
intangible intellectual property assets may have greater significance than
contracts in other industries. A contract is a valid contract even if it is
only an oral agreement between the parties. However, it is highly recommended
that all publishing contracts be in writing. The main reasons for requiring a
written contract are because (1) an oral contract could lead to problems if the
parties have a disagreement regarding the specific terms of a contract or
whether a contract actually exists; (2) the Copyright Act requires all
transfers of copyright ownership and exclusive licenses be incorporated in a
written document that has been signed by the copyright owner or a duly
authorized agent of the owner; and (3) the Statute of Frauds requirement that
there be a writing for any agreement that is not capable of being performed
within one year from the execution date of the agreement.
Traditionally publishing projects, especially
those involving the publisher and author, have been formalized by a written
contract. However, a written contract has not always been the practice in many
other publishing situations, such as those between the publisher and a writer
who may provide a specific contribution to a book: e.g. a chapter, preface,
introduction, or index; photographers, illustrators, cover designers and other
independent contractors who may be involved in contributing elements to a
project; and writers of magazine articles.
What is a contract?
A valid contract may be either an oral or a
written agreement. The importance of a "valid contract" is that the
terms of the contract will be enforceable if it becomes necessary by a court of
law, while an invalid contract may not be enforceable. Every valid contract
requires at least "one promise" that must be performed and have been
agreed to by the parties. The performance of the promise(s) may then be
enforced by a court for specific performance or a money judgment.
The requirements for a valid contract are (1)
mutual agreement by the parties (2) to an offer (3) that is accepted, (4) and
for which there is consideration. These requirements are usually satisfied as
follows. The "offer" requirement will be met when the author submits
a manuscript or proposal to the publisher requesting publication of his/her work
by the publisher. The "acceptance" requirement will be satisfied once
the publisher has reviewed the manuscript or proposal and has decided to
publish the author's work. The "consideration" requirement will be
satisfied when the publisher promises to compensate the author, such as by
future royalty payments and/or a royalty advance, and by the author agreeing to
deliver an acceptable manuscript to the publisher that will generate sales
revenue for the publisher. Finally, the "mutual agreement" requirement
will be satisfied once the publisher and the author agree to the terms and
conditions of the publishing contract, preferably in writing.
Material Terms of a Contract
Indefiniteness or the absence of material terms
in a contract could be used as evidence that the parties never intended there
be a contract. The greater the number of material terms omitted from the
contract the more likely is the implication that the parties never intended to
enter into a binding contract. However, in the event the content of the
agreement is unnecessarily "ambiguous" or "uncertain" a
court might decide that the parties never entered into a valid contract with
the result that the contract could be considered void and unenforceable upon
the parties. This could be the case even if the parties truly intended to enter
into the contract. The requirement for definiteness and material terms is to
ensure that the court could enforce the contract.
Rule: The contract must be sufficiently
definite as to the material terms or it could affect the validity of the
contract.
Rule: Vagueness with respect to an immaterial
term will not effect the validity of the contract.
The material terms for any contract includes
specific contract language covering the subject matter, payment terms,
quantity, quality, duration, and the work to be done. A valid and enforceable
publishing contract must contain at a minimum the following terms. (1) Subject
Matter -- a description of the work, and if possible a tentative title, would
satisfy this requirement. (2) Payment Terms -- this requirement would be
satisfied by the "royalty clause" describing the royalty percentage
the author will receive from the publisher's sale of copies of the work or by a
"fixed payment clause" enumerating the dollar amount to be paid to
the author by the publisher. (3) Quantity and Quality -- these conditions would
be satisfied by the "delivery clause" describing the length of the
manuscript and other deliverables the author must provide the publisher, and
the "acceptance clause" requiring that the manuscript and other
deliverables must be acceptable to the publisher. (4) Duration -- contract
language stating that the term of the agreement is for the duration of the
copyright, or for any other fixed period of time, would satisfy this
requirement. (5) Work To Be Done -- this requirement would be satisfied by the
clauses describing the author's delivery of the manuscript to the publisher and
the publisher's obligation to publish the manuscript.
It is the publisher's responsibility to make
certain that the material terms are clearly stated and not indefinite or
ambiguous. In the event that a contract is silent with respect to a material
term, or where the material term is discussed but not agreed upon, and such
agreement is deemed by the court not to be a prerequisite for a valid
agreement, the court itself may attempt to imply the missing term. The court
will take this action not because it is reasonable, but because it has surmised
that the parties must have intended that term and only failed to include it in
the agreement.
Types of Publishing Contracts
There are many situations for which a
publishing organization should have a written contract. These situations are
primarily those that (1) involve the creation of copyrightable material,
whether by an author, illustrator, et.al., that is "granted, assigned and
transferred" by the creator to the publisher; (2) result in the transfer
of copyright ownership from the creator to the publisher; (3) have significant
risk for the parties; (4) have the potential for disagreement over oral terms
agreed to by the parties; and (5) are required by law, e.g. Statute of Frauds.
This article will discuss two types of
publishing agreements: those involving the assignment of rights from the
creator to the publisher -- "Assignment of Rights Contract", and
those where copyright ownership initially resides with the publisher --
"Work Made For Hire Contract".
1. Assignment of Rights Contract
The Assignment of Rights Contract might include
any of the following categories of agreements; however, these categories are
not all inclusive. (1) An "Author and Publisher Agreement" whereby
the author explicitly assigns specific rights in his/her work to the publisher
through the "grant of rights" clause incorporated in the agreement.
(2) A "Co-Author and Publisher Agreement" whereby more than one
author, or an author and illustrator/photographer assign specific rights in
their work to the publisher through the "grant of rights" clause. (3)
A "Co-Publisher Agreement" which is a joint venture between more than
one publishing company to publish an author's work. This agreement also
requires an agreement between the author and publishers. (4) A "Subsidiary
Rights Agreement" whereby the publisher licenses a previously assigned
specific right(s) from the author to a third party, such as audio, video,
dramatic, or electronic rights.
The critical contract language in the
Assignment of Rights Contract is commonly referred to as the "grant of
rights" clause. This clause delineates the scope of rights granted by the
author to the publisher. The grant of rights clause may be extremely broad in that
it includes a grant of all the exclusive rights and interests in the author's
work, possibly even including copyright ownership. It could be as limited as to
only include a specific grant of rights, such as to publish the author's work
in a hard cover book format and only distribute the book in North America; all
the other rights in the author's work would be reserved to the author. Or the
grant of rights clause could be somewhere in between. The crucial point for the
publisher to remember is that the publisher will only have the ability to
commercially exploit those rights specifically granted by the author. The
publisher could be found liable for copyright infringement of the author's work
in the event the publisher attempted to exploit rights that were not granted to
the publisher by the author.
Because the copyright is treated as property
under the law, the author may transfer it like any other type of property to
another party. Therefore, the author may assign or transfer the right of
copyright ownership in the work to the publisher. If such an assignment or
transfer occurred copyright ownership would shift from the author to the
publisher, and the publisher would be entitled to copyright register the work
in the publisher's name. The assignment or transfer of copyright ownership to
the publisher occurred with greater frequency under the 1909 Copyright Act than
it does under the 1976 Copyright Act. Today, the more normal situation is for
the author to retain copyright ownership of his/her work and to have it registered
in the author's name.
Although the previous discussion focused upon
an author's assignment of rights to the publisher it is important to remember
that these same issues are relevant for any creative individual who provides
the publisher with copyrightable material.
Rule: The publisher must have a written
contract with all creators of copyrightable material when the creator of the
material is assigning rights to the publisher for the use of the material.
2. Work Made For Hire Contract
Copyright ownership is important to the
publisher because it provides the publisher with complete control of the full
bundle of "exclusive rights" enumerated in the Copyright Act. These
exclusive rights are the rights to (1) reproduce the work, (2) prepare derivative
works, (3) distribute the work, (4) perform the work, and (5) display the work.
Under copyright law, copyright ownership
"vests initially in the author or authors of the work". The Work Made
For Hire Doctrine, contained in the Copyright Act, is the exception to the
fundamental principle that copyright ownership vests initially in the
individual who creates the work. There are two scenarios under which the
publisher could be the copyright owner of the work. The first is when the
author of the work is an employee of the publishing company and is creating a
copyrightable work within the scope of his/her employment, and the second is
when the publisher commissions an independent contractor to create a
copyrightable work. Therefore, if a copyrightable work is created as a Work
Made For Hire and it satisfies the specific requirements set forth in the
Copyright Act for a Work Made For Hire, then the publisher and not the author
will be recognized as both the author and copyright owner of the work. The
significance of copyright ownership is that the publisher, and not the actual
person(s) who created the work, will own all exclusive rights in the work and
will therefore be able to commercialize the work to its fullest extent;
publishing and distributing the work in print and other formats, creating
derivative works, or by licensing or transferring the rights owned by the
publisher to third parties. The Work Made For Hire Doctrine is two-pronged and
provides that a work will be "for hire" if it falls into one of the
following two categories.
(1) Employee Category - The work will be a
"work made for hire" if it is prepared by an employee of the
publisher who is working within the scope of his/her employment. In this
situation, copyright ownership of the work will belong to the publisher unless
the work is created outside the scope of the employee's employment or the
employee's employment contract stipulates that the creation of copyrightable
material is not within the scope of employment. If the creation of the work
falls outside the scope of employment the employee, and not the publisher, will
be the copyright owner of the work.
Rule: The publisher should obtain a written
agreement with any individual where there may be question with respect to an
individual's employment status or whether the employee created the
copyrightable work within the scope of his/her employment.
(2) Independent Contractor — A work will also
be a Work Made For Hire if the independent contractor and the publisher agree
that the independent contractor's work will be recognized as a Work Made For
Hire, and the agreement satisfies the requirements of the Copyright Act. The
Copyright Act requirements will be satisfied if (1) the work was specially
ordered or commissioned by the publisher; (2) the work fits into one of the
nine categories of work enumerated in the Copyright Act - contribution to a
collective work, translation, supplementary work, compilation, instructional
text, test, answer material for a test, atlas, or part of a motion picture or
audiovisual work; and (3) there is a written agreement between the publisher
and independent contractor that specifically states that the work was created
as a Work Made For Hire that is signed by both parties; it is highly
recommended that the parties sign this agreement before the independent
contractor commences with the creation of the work. The publisher must be aware
that if the Copyright Act requirements are not strictly followed, the
independent contractor, and not the publisher, could be the copyright owner of
the work, and that the publisher's rights to exploit the work could be severely
limited.
Rule: For any Work Made For Hire contract to be
valid it must be in writing.
Rule: All Work Made For Hire contracts should
contain a "vesting of rights" clause to protect against an adverse
ruling that a contract failed to satisfy the Work Made For Hire requirements.
Key Contract Clauses
The significance of the "grant of
rights" clause in the Assignment of Rights Contract and the "Work
Made For Hire" clause in the Work Made For Hire Contract cannot be
understated. This is because these clauses provide the publisher with the
rights to use the author's work. However, in addition to these clauses there
are many other contract clauses that are also extremely important to both the
publisher and author. These clauses may include those dealing with delivery and
acceptance, royalty payments, publisher and author representations and
warranties, indemnification, termination, assignments, option for a subsequent
work, competing works, and revisions and new editions. These clauses, as well
as others, may have significant importance to a given publishing project.
Conclusion
The written publishing contract, which sets out
the terms for the publication of an author's work, is the single most important
document in the publishing process. Boilerplate publishing contracts, at least
to some degree should be negotiable, and should represent a balancing of both
the author and publisher's interests. The parties to an agreement should never
forget that once they sign the publishing contract they are bound by its terms
and conditions. Therefore, before signing any such agreement the author and
publisher should fully understand their respective obligations and
responsibilities that are set forth in the agreement.
It has been my experience, based upon more than
thirty years of involvement in the publishing industry, both as a publisher and
an attorney, that "form contracts" are often satisfactory. However,
it is advisable for any publisher who uses "form contracts" or
contracts obtained from their colleagues to have an attorney who is knowledgeable
in publishing law review such agreements. This review becomes even more
important if the publisher decides to revise these agreements based upon the
specific requirements of their business or particular project. Problems
frequently arise when the publisher revises these agreements since it is
possible that these revisions could (1) contradict other clauses in the
agreement, (2) increase the publisher's risk in the project, or (3) decrease
the author's responsibilities and obligations under the agreement. It only
takes one faulty publishing contract - whether it be because a contract is
deemed invalid and unenforceable, results in the loss of exclusive rights or
fails to provide the publisher with copyright ownership - to cause a publisher
problems that might have an adverse impact upon the publishing company's
investment of time and money in a publishing project. Therefore, the publisher
should endeavor with as much certainty as possible that their company's
valuable intellectual property assets and investment in each publishing project
are protected by a publishing contract that meets their company's current needs
and future growth plans, and if necessary will be enforceable by the court.