One of the most common and oldest licenses of intellectual property involves a license of a book or some other text or literary work (e.g., article). While the specific nature of the literary work may certainly affect the terms that the parties must negotiate in the license, there are many terms and issues that are common to a license of a literary work. In this chapter, we focus on a license of a book, as may be illustrative of the issues and terms that may arise in licenses involving other kinds of literary works. Authors and publishers often protect their rights by negotiating book publishing licenses. While publishers usually present authors with standard licenses, many clauses are subject to negotiation, depending on the author' s bargaining power. Naturally, the author' s bargaining power corresponds directly with the market' s demand for the particular book or author. Even where the author enjoys relatively high bargaining power, there are several reasons why authors license their book publishing rights to the publisher, as opposed to self-publishing the book.
First, the book publisher may have superior marketing and publicity resources, including access or ability to distribute the book to reviewers, booking author media appearances, and organizing author book tours. Second, book publishers may pay the author an advance for a book publishing license (as much as $8 million in one widely-publicized deal); self-publishing, of course, guarantees no return to the author. Finally, book publishers may help the author exploit subsidiary rights that the author possesses (i.e., audio rights, motion picture rights) in association with the author' s copyright in the book. Of course in licensing their work to a publisher, authors also forgo certain benefits. The most tangible of these benefits may be a share of the potential profits that publishers receive under the licensing agreements in return for publisher' s efforts and risk in agreeing to publish the work. Less tangible-but no less important in many ways- is the loss of the intellectual property right to exploit the work that belonged to the author in the first instance as the creator of the work.
Books generally fall into two categories: trade and professional. Trade books are non-technical general interest books, either fiction or non-fiction, generally sold to the public through traditional means, such as bookstores. Examples of a trade book include the novel Gone with the Wind , or a biography of Franklin Roosevelt. A trade book license may also lead to subsidiary licenses, such as a motion picture license or a television series license. On the other hand, professional books are specialized books, focusing on a particular industry, and generally not sold to the public through traditional bookstores. Examples of a professional book include this treatise. Professional books usually do not inspire motion pictures or musical plays, and thus a professional book does not usually lead to subsidiary licenses. Trade book licenses are the primary subjects of this chapter.
Rights Covered by Literary License
Right of Publication
The rights to the book that the author transfers to a publisher in a literary license are the essence of the agreement. These rights include the right to publish, distribute, and sell the book. Depending on the negotiated terms, the license may also include the right to exploit subsidiary rights of the book, such as the right to distribute the work in a motion picture or some computerized format. The granting of such rights is necessary because under U.S. copyright law, these rights belong to the author.
Format of Book Publication
The license should specify the specific format of book publication. Formats of book publication include hardcover, trade paperback, and mass-market paperback. Naturally, the publisher will seek to maximize the number of formats included in a license or negotiate for broad language that may be interpreted to include various formats. Of course, authors may seek to negotiate for narrow language and fewer specified formats. A grant of the “exclusive right of publication,” would give the publisher both hardcover and paperback publication rights. Specifying the particular formats that the license covers may give both parties more certainty and avoid future confusion as to the nature of formats intended.
Subject Matter of the License
In order to be enforceable, a license should define the work as accurately as possible. The terms of the license must be sufficiently definite to enable a court to interpret the intent of the parties if a legal question arises. Merely stating in the license that the parties desire to publish “a certain work or works” by the author may not be enough for a court to enforce an agreement. Thus, licenses often include the subject matter, the title, and even the approximate number of words in the book. The license may also contain other restrictions on the licensee' s rights to the work. For example, the estate of Margaret Mitchell granted sequel rights to Gone with the Wind to St. Martin' s Press, but the license purposely provides that neither the characters of Scarlett O' Hara nor Rhett Butler may be killed off from the story.
Territory and Language
The book publishing agreement should specify the territories, or countries, where the publisher may publish and sell the book. In the English language alone, book publishing rights may be licensed in the North American market, in the British Commonwealth, and in the English language in the rest of the world. The right to publish the book, or grant a sublicense of the book publication rights, in foreign lands may be quite valuable. Traditionally, the most lucrative foreign licenses are licenses that cover the British Commonwealth (U.K, Australia, and all countries that were once part of the Victorian British Empire), Germany, France, Italy, Spain (including South American Spanish speaking countries), or Japan. An issue related to territorial rights is the question of the language in which the work may be published. A license to publish a book in a foreign language may only extend to one particular territory. For example, the license may stipulate that the publisher may publish the book in Portuguese in Portugal, but not in Brazil. The license should define the territories and languages in question as specifically as possible. Of course, given that the author' s profits- and professional reputation- depend on the competence and success of the publisher, the author may be particularly careful in granting a license for foreign territories. Authors may seek to ensure that the publisher has sufficient resources and experience publishing in that particular territory.
The license should provide the duration of the license. The author and publisher may agree that the license should last for the duration of the copyright. Copyright consists of the life of the author plus seventy years after the author's death in the U.S. and fifty years after the author's death in Canada, where the author is an individual.
Advance and Bonuses
The author and publisher may negotiate an advance for the book publishing license. The advance is money paid to the author, which is recoupable against royalties from book sales and from sublicenses of subsidiary rights. The advance is important to the author because the book may not generate any other money for the author. Additionally, a high advance paid to the author indicates that the book publisher is confident and committed to the author' s work. Theoretically, a publisher who pays a high advance will focus on advertising and promoting the work in order to recoup its investment. The advance can be divided into separate payments. For instance, one-third of the advance may be paid upon signing of the license, one-third of the advance may be paid upon a “satisfactory” delivery of the manuscript, and the final third may be paid upon publication. One of the reasons publishers seek to divide the advance payment is to give the author an incentive to meet deadlines. The book publishing license may also include a provision that provides for bonuses for certain milestones, indicating high book sales. For example, the book publisher may pay the author a $5,000 bonus for each week the author' s hardcover book appears in one of the top five positions on the New York Times, Wall Street Journal, or Publisher' s Weekly best seller list. In addition, the book publisher may pay a bonus to the author if the book is a selection for a high profile book club, such as the Book of the Month Club or Oprah's Book Club. The publisher may want to limit the number of bonus payments to the author by placing a cap on the total amount of bonuses it will pay.
Aside from the advance and any bonuses, an author' s compensation for licensing the book is typically royalties. The royalty rate may depend on the format of the book. Hardcover book publishing licenses have a standard royalty rate, which rarely changes. Most hardcover royalty rates are 10% of the catalogue list price for the first 5,000 copies sold, 12.5% for copies 5,001 to 10,000, and 15% for all copies over 10,000. If applicable, parties should negotiate royalty rates, typically smaller, for mass market paperback, trade paperbacks, book club, mail order, and Canadian sales. A typical royalty rate for trade paperback books is 7% of the catalogue list price for the first 50,000 copies, escalating to 10% or 12.5% of the catalogue list price for all copies over 50,000. The mass market paperback royalty rates are often 7.5% of the list price, which may increase to 10% after selling more than 150,000 copies. Additionally, publishers and booksellers sometimes agree to sell unsold books at a discount. Under such an agreement, the license may provide for a smaller royalty rate for these discounted books. Of course, a publisher may not get consideration for the sale of a book. Publishers sometimes give books away for promotional and publicity purposes; alternatively, sometimes copies of the book may be destroyed by an act of God. In these cases, the author usually agrees not to take royalties. The license will typically specify when royalty statements are calculated and when the royalty statements and payments (if any) will be sent to the author. Generally, book publishers calculate royalties twice a year and pay the author within three months of the royalty calculation. In addition, most licenses include a provision detailing how the author may audit the publisher' s accounting books. Terms of such an auditing clause may include how often the author may audit the publisher, the maximum length of an audit, and who pays for an audit if there is a discrepancy.
The delivery clause in a book publishing license is fundamental to the agreement. Publishers tend to want the license to require a specific delivery date to help the marketing and publishing campaigns for the book stay on schedule. Authors, however, may want a more flexible delivery date in case there is a delay in completing the manuscript. The consequences of a late manuscript delivery is another issue that should be resolved in the book publishing license. Book publishers sometimes terminate licenses if the manuscript is delivered late. A notable example of such termination occurred in 1997 when HarperCollins reportedly cancelled seventy book publishing licenses for late delivery. Not only may publishers want the option to terminate the license for late delivery, but they also may want the author to pay back the advance. Obviously, authors may resist a provision that late delivery of the manuscript is a breach of contract.
Satisfactory to the Publisher in Form and Content
Many licenses contain a clause stating that final manuscript delivery has to be “satisfactory” to the publisher in form and content. If delivery of the manuscript to the book publisher is not “satisfactory” to the publisher, the agreement provides that the author forfeits the advance and must return any advance already received. The delivery of a “satisfactory” manuscript clause has been the subject to some litigation. As no enforceable contract can be illusory, the publisher can not arbitrarily refuse to accept the manuscript. The publisher has to use good faith judgment in determining if the author' s manuscript is “satisfactory.” Good faith may include providing editorial assistance for the book, at least if requested by the author. To qualify as good faith, the publisher must perform editorial assistance merely honestly, and not necessarily expertly. A publisher' s refusal to accept a manuscript as unsatisfactory may be in good faith, as long as the publisher does not use deception, willful neglect, or any other bad faith in its decision. Absent express language in the license stating otherwise, the editorial assistance does not actually have to improve the author' s work. The author may want to negotiate a protective provision in the license in case the book publisher rejects the manuscript as unsatisfactory. For instance, the author may negotiate a “first proceeds” clause whereby the author would keep some of the advance if the manuscript is rejected until the manuscript is licensed to another book publisher. A “first proceeds” clause usually allows the author of an “unsatisfactory” manuscript up to one year to find another publisher before the author has to repay the advance to the original publisher. In addition, the author seek to require the book publisher to notify the author if the manuscript needs revisions before the book is rejected as unsatisfactory. Despite its final form, most publishers will insist on some form of a “satisfactory” clause in the book publishing license.
The license may also provide that the publisher' s attorneys will review the author' s manuscript for legal issues before approving the manuscript. If the license includes such a legal review clause, the author may seek to negotiate to limit the legal review to a reasonable time, so as not to delay possible payment of the remaining advance due upon satisfactory delivery. If the legal review results in suggested changes to the manuscript, the publisher may obtain the author' s permission to make the changes. The reason for seeking the author' s permissions is that editing an author' s work may risk weakening the author' s warranty, which typically only extends to the final work delivered by the author.
In the book publishing agreement, the author and book publisher may lay out which party will have final say over editorial decisions. The publisher may want final editing control over the book. However, the author may insist on having a veto over significant editorial changes to the manuscript. If the license provides that the book publisher needs author consent for editorial changes, the publisher may want the right not to publish the book if the book may violate copyright law or defamation law.
Generally, a book publishing license contains a clause in which the author agrees to secure the necessary permissions for use of other' s works in the author' s book. For instance, the author may use copyrighted material in their work such as song lyrics, or photographs. In order not to violate that third party' s exclusive copyright, the author needs to obtain permission to use these works. Typically, authors secure such “permissions” at their own expense, and give proof of the permissions to the publishers by delivery of the final manuscript.
The book publishing license will likely contain a publication clause. That is, the publisher will agree upon an approximate publication date for the book once the manuscript is approved. Additionally, a book publishing license typically provides that a year will separate the publication of a hardcover and paperback edition of the book. The reason for the gap of one year is typically a compromise between two competing considerations for the author and the publisher. On the one hand, authors want readers to purchase the more expensive hardcover edition of the book, rather than the paperback. Yet, the publisher of the paperback wants to publish the paperback as close to the publicity surrounding the hardcover release as possible. Thus, one year has become the standard industry compromise. Of course there may be special cases and issues. Successful books may remain on the best seller lists for years. Thus, an author who has reason to anticipate such a success may seek a provision that provides that the publisher will not publish a paperback version for at least a year after the book is no longer on the hardcover bestseller lists. No matter what the publication date is, a given publisher, for whatever reason, may never publish the work. The author' s traditional remedy for the publisher breaching the license by not publishing the book has been keeping the advance and having the rights granted to the publisher revert to the author. However, the Southern District of New York has implied that there may be instances where a court may require the publication of a book. To avoid this situation, the parties should put protective language in the license. For example, the license may state that the publisher is under no duty to publish the book, while the author can put language in the license providing a desired remedy if the publisher does not publish the book.
Print Run and Advertising
The book publishing license may provide that the publisher has discretion over the size of the first print run and the initial advertising budget. However, this discretion may not be absolute. There is precedent that the publisher must act in good faith in determining the number of books printed and the advertising budget. The publisher must decide on a first print run and advertising budget that gives the book “a reasonable chance of achieving market success.” This is not to say, however, that authors can determine the promotion strategy for the book, especially when there is a clause in the license giving the publisher discretion over promotional decisions. The book publisher only has an initial duty of good faith to publish and promote the book to give the book a reasonable chance at market success. Once the publisher fulfills that initial obligation, the publisher' s duty to publish and promote the book is merely the standard of good faith business judgment. The book publisher generally has the final say over the price and the “manner” (i.e., interior design, title, jacket cover art) of book publication. However, the more bargaining power of the author, the better the author' s chances of negotiating a right of approval over the jacket and catalogue descriptions and over the cover design.
Out of Print
Book publishing licenses sometimes contain an out-of-print clause, which provides that if the book goes out of print after a specified length of time, the author may ask the publisher, in writing, to print a new edition. If the publisher chooses not to issue another edition of the book, the rights granted in the license can revert to the author. Out-of-print clauses often allow the author to buy any remaining copies of their books at the publisher' s cost. The license should clearly define the term “out of print,” because many books are available to be downloaded from the Internet, and the traditional meaning of “out of print” has blurred.
Warranty and Indemnification
The license may have a clause in which the author warrants, or guarantees, that the author has submitted an original work that is free of libel, copyright infringement, obscenity or other potential legal liabilities to the publisher. Publishers usually require this provision because it is economically unfeasible for publishers to fact check each sentence of all of their books. Even with the author' s warrants, publishers will want the authors to indemnify them against any potential legal liability arising from the author' s work. In turn, authors may want to ask the publishers to add the author to their liability insurance in the case of liability stemming from the publication of the book. The author and publisher may choose to split the deducible in some manner. In the case of serious claims, many warranty clauses also allow the publisher to withhold any royalties in an interest bearing account, until the case is resolved. The license should make clear in the case of a lawsuit, how the author and the publisher will be involved in deciding the legal strategy, choosing legal counsel, and paying legal fees.
Book publishers may negotiate for a non-compete clause in the license that would bar the author from publishing another work based on the same material that the author is writing for the publisher. If the parties to the book publishing license agree to a non-compete provision, they must put it in the license. Otherwise, absent an express non-compete clause, authors may be free to write a competing work for another publisher. Courts construe non-compete clauses narrowly. Therefore, the license should specifically define the terms of the non-compete clause, including the duration. Although the author may not write a competing work for another publisher, the publisher may still publish other books on the same topic, so long as the publisher has a duty to use best efforts to promote and sell the author' s work.
Options - First Refusal and Last Negotiation
The publishers may seek a clause in the license that gives the publisher the right of first refusal over the next work by the author. A right of first refusal usually gives the publisher exclusive right to consider the author' s next work for publication, for a limited time. If the publisher chooses not to exercise its option, the author may submit it to other publishing houses. However, if the author submits his next work to other publishers, the publisher may want the right to match any other publisher' s terms. This is known as the right of last negotiation. Any clause in a book publishing license that gives the book publisher an option for the author' s next work must be particularly careful to avoid vague and unenforceable language. For instance, clauses giving the publisher an option to acquire an author' s book “on terms to be mutually agreed upon” or to use “best efforts” to negotiate a new contract were held to be unenforceable as mere “agreements to agree.”
Book publishing licenses usually have a force majeure clause. Such a clause protects the publisher in the event that the publisher is unable to perform its obligations under the license due to certain agreed upon circumstances outside of the publisher' s control.
Parties to a book publishing agreement believe the author' s promotion will help increase book sales. To this end, the agreement may require that the author be available for media appearances and interviews during the weeks surrounding publication. The publisher may also want the agreement to allow it to use the author' s name, picture, likeness, and biography to help promote the book. Authors can negotiate pre-approval over any use of their name, picture, likeness, or biography in conjunction with publicity for the book. Additionally, the author may want to make certain that any use of the author' s name, picture, likeness, or biography is only to promote the author' s own book, and not other works published by the publisher.
The book publishing license typically provides that authors receive ten free copies of the book. The license also states that authors can purchase copies of the book at an agreed upon discount; the agreement would bar the author from reselling such books.