CHAPTER 5
The Fine Print of Publishing Contracts
Lawyers have often been accused of creating a language that only they
can understand. This legalese forces the layperson to hire a lawyer just to decipher documents written in this funky little language. It took three years of law school and many years of drafting hundreds of contracts for me to approach these documents with ease.
The contract terms discussed in this chapter are common in most self-publishing contracts. Publishers all use slightly different verbiage, so one termination clause may differ slightly from another, though they mean essentially the same thing. The idea here is to help you understand the various terms in the contract of any publisher whose services you’re considering so you know what you’re signing before you sign. Surprises are fun, but not in publishing contracts.
Read this carefully right now, and then read it again: If a publisher refuses to let you see a copy of a publishing contract before you provide them with a copy of your book, run away as fast as you can. The strategy behind this nondisclosure is that the company gets you all jazzed up about your publishing adventure until you’ve bought into the program; then they let you see the contract. By then, you may be so eager to start the process that you overlook possible contractual issues.
Now that we have that out of the way, here are descriptions of the general provisions found in most self-publishing contracts.
Parties to the Contract
This will always be you (the author) and the publisher. This introductory language identifies names that appear throughout the contract. The author will often be referred to as “Author,” and not by his or her name. The publisher will often be referred to as “Publisher” or “Company,” and not by its name. Your manuscript will usually be referred to as “Book” or “Work,” and not by its title.
License of Rights
This is one of the most important provisions in any publishing agreement because it states the precise rights the author licenses to the publisher during the term of the contract. In most self-publishing contracts, the author grants either an exclusive or a nonexclusive license during the contract term. An exclusive license prevents anyone who is not the license holder, including the author, from publishing the author’s book in the format for which the right is being licensed. A nonexclusive license allows others, such as the author or other publishers, to sell, distribute, and publish the book during the contract term.
If you have your book published as an e-book, you will grant the publisher either an exclusive or nonexclusive right to publish and sell your book in an electronic format, which typically includes a downloadable e-book or another file type that can be read on an e-book reader, such as the Amazon Kindle.
If you publish your book as a paperback or hardcover, you will grant those specific rights. Granting paperback rights does not automatically grant hardcover rights. Contract language that describes “all print rights” includes both paperback and hardcover rights. Some publishing contracts are for “worldwide” rights. During the term of the agreement, the publisher can sell your book anywhere in the world in the format(s) you’ve agreed upon.
Some publishers ask only for rights to sell the book in the United States, Canada, and the United Kingdom. Under such an agreement, the author would still have the right to sell, distribute, and publish the book anywhere else in the world.
Print and electronic rights are the only rights that should ever be granted in a contract you sign with any self-publishing company. Stay away from a contract that grants the publisher “all rights whatsoever,” which would include subsidiary rights, such as movie, television, radio, or stage play rights. Some companies take a percentage of any fees derived from an author’s sale of subsidiary rights. Still other companies build in a contractual right to sell the subsidiary rights and then keep a percentage of the sale.
Stay away from any publisher that demands an option (also known as a “right of first refusal”) on any other books you may write. It’s one thing if you sign a deal with a major publisher and receive payment up front, but it’s an entirely different matter in the self-publishing world.
Many self-publishing contracts specifically state that the publisher is not claiming an interest in any rights other than those directly related to the publication of your book (and then only those that allow them to print and distribute the book on your behalf). Such statements are not required in a contract, but they do make your rights indisputable. I prefer such language myself, and we include this clause in all of our publishing contracts.
Term and Termination
The term and termination provisions are just as important as the license of rights. The term provision defines how long the contract will last. The termination provision describes what either party must do to cancel the contract, and when in the process they must do so. The term and termination sections are often written together as one provision. It is important to read the license of rights and the term and termination provisions together to determine whether a contract is author-friendly.
Look for contracts that have terms that do not lock the author into a contract for a long period of time. The most author-friendly contracts will have one of these terms:
If a publishing contract you’re considering doesn’t have a term like one of these three, think long and hard before signing. (You probably shouldn’t sign at all). If you attempt to terminate a contract that doesn’t have a term like one of these, you’re going to wish you’d followed my advice.
There are, of course, a few exceptions to these general rules. The goal is to always have the least number of restrictions on your rights, freeing you to search for a better publishing deal with a traditional publisher or other self-publishing company.
Below, we look at a few general rules to consider when comparing termination clauses.
Avoid contracts that permit a publisher to retain nonexclusive rights after termination.
I’m not talking about contracts that permit the publisher to sell its remaining inventory of your book after termination. There are few cases that I can imagine where a self-publishing company would even have more than a few copies of your book in stock.
Rather, I’m talking about unacceptable situations such as those illustrated in these two scenarios:
The problem with both situations is that the author isn’t in full control of his or her rights. Suppose a major publisher, such as Random House, wanted to purchase rights to your book and, before approaching the publisher, you had signed a contract containing either of the aforementioned clauses. Although you’d have the right to sell to Random House the right to publish your book, your old publisher’s nonexclusive rights would remain effective. Once Random House learned about this publisher’s rights, it might lose interest. At best, Random House would first have to purchase your publisher’s nonexclusive rights before it could purchase any licensing rights from you.
From your ex-publisher’s perspective, the nonexclusive right is worthless unless a traditional publisher decides to publish your book. When Random House enters the picture, your ex-publisher’s rights become valuable. Your ex-publisher may try to sell its nonexclusive rights to you or to Random House, or it may print as many books as it can sell. You want to avoid a situation where your current self -publisher is suddenly a factor in your negotiations with a traditional publisher.
Nonexclusive contract provisions, which are present in many self-publishing contracts, should be addressed in one of three ways:
The reality is that it will be difficult for you, if not impossible, to get larger self-publishing companies to modify language in what are typically standardized online contracts. Some smaller self-publishing companies, however, may agree to modify these types of terms in order to get your business. Since the first edition of this book in 2004, many of these unfavorable types of termination clauses have disappeared—even from some of the more predatory companies—but I still see these from time to time with very new or very small self-publishing companies.
Avoid contracts whose terms extend for the term of the copyright.
If you learn only one lesson from this book, remember this: never, ever, under any circumstances, enter into a contract containing a term that equals the term of the copyright. A copyright term lasts for the life of the author plus another seventy years. This term allows the successors of the copyright holder the copyright’s benefits for years after the copyright holder has died. Once you sign a contract that has a term that extends for the life of your book’s copyright, you’ve lost control over your work forever.
I rarely see this, but one company that has it in every contract I’ve seen is Morgan James. Here’s the exact term from the Morgan James contract:
The Term of this Agreement shall extend through the full term of the copyright in the Work and all renewals thereof, or until the termination of this Agreement in accordance with Article Six, whichever is sooner. Upon the expiration or termination of the copyright, this Agreement shall automatically terminate. 46
If you see similar language to this, cross that company off your list immediately.
Pay special attention to terms that renew automatically.
Some publishing contracts have an initial term of a specific number of years that automatically renews on a year-to-year basis until terminated. Oftentimes, termination requires the author to give notice at least a specific number of days (usually 30 to 90) before the expiration of the initial or renewal term.
In theory, there’s nothing wrong with this requirement—but in practice, it can prove tricky. Let’s say you signed a one-year agreement on January 1, 2014, which renews automatically on a yearly basis unless terminated ninety days before the expiration of the initial or renewal term. If you want to terminate the agreement after the first year you must give notice at least ninety days before the date of December 31, 2014, or by September 29, 2014. If you gave notice on November 15, 2014, the publisher could require you to honor the automatic renewal term through the end of 2015.
Automatic renewal clauses exist for your convenience as much as for the publisher’s. Without the clause, the publisher must stop selling your book and remove it from its website at the end of the initial or renewal term. To resume sales and earn more royalties, you would have to notify them of your desire to extend the contract. Most self-publishing companies include renewal clauses, and the best way to avoid a problem is to schedule a reminder on Outlook or a similar calendar system before the deadline passes.
Author Warranties
Author warranties are promises the author makes about the submitted work. These warranties are usually the most intimidating provisions of any self-publishing contract because of their lawyerly sounding language. Author warranties can be summed up like this: don’t break the law or violate anyone else’s rights with your book and you’ll be okay.
Below are eight author warranties commonly found in self-publishing contracts. Not all publishing contracts contain all eight warranties, nor will the language match exactly, but the information below should give you the gist of what each means.
“Author is the sole author and proprietor of the work.”
You cannot make this representation if another contributor has any interest in the book, except in cases like hiring a ghostwriter or illustrator, where you have a written agreement with the other writer (or illustrator) in which he or she has agreed that you are the sole author and owner of the work.
“Author owns all rights in the work free of any liens and encumbrances and has full authority to enter this Agreement.”
This type of clause expands on the previous one. The author makes a representation to the publisher that no one else has made or can make a claim to any of the rights. For example, let’s say that someone sued you for copyright infringement and the case was ongoing at the time you signed the publishing contract. The lawsuit would be an encumbrance, because you would not have the ability to sell your work in its present condition until the lawsuit was favorably resolved.
“The work is original and has not been previously published.”
This one is self-explanatory. Here the author represents to the publisher that the work being submitted was created by the author and not another person, and the work hasn’t been published anywhere else. In many contracts today, however, the “not been previously published” part of this clause likely has been removed by the publishers given the likelihood that the author has published all or parts of the work on blogs or with another self-publishing company. If you have published the work previously and there is a representation clause with such language, make sure you inform the publisher so that this clause can be amended.
“For work not in the public domain, legally effective written licenses have been secured.”
This section means that you are warranting that you’ve obtained legal permission to use any work not in the public domain. If a work is in the public domain, the copyright protection has expired, been forfeited, or is inapplicable.
“No part of the work, including the title, contains any matter which is defamatory, unlawful, or which in any way infringes, invades, or violates any right, including privacy, copyright, trademark, or trade secret of any person.”
It’s easier to break this one down with examples. If your book claims that your neighbor, John Smith, is a child molester, that would be defamation— unless the claim is true. Truth is always a defense to defamation. (However, truth may not prevent someone from suing you, requiring you to incur legal expenses for your defense—even if you ultimately win. More about this later.)
If your book instructs people how to blow up government buildings, most publishers consider this instruction to be unlawful, regardless of your First Amendment rights.
If you put your girlfriend’s private diary in your book without her permission, you are violating her right to privacy and infringing on her inherent copyright of her diary. (Remember, to be protected under copyright, the work just has to be put down in some kind of form where it can be read, heard, seen, etc. It doesn’t have to be registered with any government entity.)
If you take a portion of this book and use it in your book without obtaining my permission, you’ve infringed on my copyright. If your book has Harry Potter as a character, you’ve infringed on J. K. Rowling’s copyright and trademarks.
Stating that a character drank Coke or appeared on CNN isn’t considered infringement. If, however, you print Coke’s recipe in your book, you’ve infringed on Coke’s trade secret. Likewise, printing Coke cans in your book without permission would be a possible trademark infringement.
“The publication doesn’t breach any oral or written agreement the author has made with anyone else.”
You are confirming that you don’t have any other agreement with any publisher or third party that would preclude you from publishing your book with the publisher whose contract you’re about to sign.
“The representations and warranties will be in full force and effect on the date of publication.”
You are promising that all representations and warranties made will be as true on the publication date as they are on the day you sign the contract.
“The warranties survive the term of the Agreement.”
This means that if you defamed someone in your book, and that person sues the publisher several years after your publishing agreement has expired, you will still be liable for the representations and warranties you made.
Publisher Indemnification Warranties
When you indemnify a publisher, you are saying that if any warranties you made turn out to be false, you will cover all of the publisher’s legal expenses if it gets sued. Here are three typical indemnity clauses you may see in publishing contracts:
“The author indemnifies and holds the publisher harmless from any losses, expenses, or damages arising out of or for the purpose of resolving or avoiding any suit, demand, etc., as a result of the author’s breach of the representations and warranties.”
If you used someone else’s copyrighted material in your book, all legal expenses incurred by the publisher in defending a copyright infringement lawsuit, any damage awarded by a court, and any settlement amount the publisher makes to avoid a lawsuit will ultimately be paid by you. It’s simple: make sure your representations and warranties are true, or prepare for a legal mess should a third party sue.
“The publisher can extend the benefit of the author’s representations, warranties, and indemnities to any party affected by the author’s breach.”
If the publisher sells your book through Amazon.com and the person defamed in your book sues Amazon, the representations, warranties, and indemnifications you made to your publisher will also cover Amazon. You’ll be responsible for Amazon’s costs, attorneys’ fees, losses, damages, and more.
“Author has to pay legal fees, costs, etc., to defend any suit brought against the publisher as a result of the author’s breach of any representation or warranty.”
This language is usually included in the first indemnification clause mentioned earlier. The publisher may choose to set it apart so that it’s crystal clear that the author is responsible for the publisher’s legal fees and expenses if the author breaches representations and warranties.
Permission and Releases
“The author, at the author’s own expense, agrees to obtain from any person or entity from whom, in the publisher’s opinion, permissions, releases, or licenses shall be required in order to exercise the rights granted hereunder . . .”
You will find this type of provision in every publishing contract, whether self-publishing or traditionally publishing. The author must agree that if the publisher requires the author to get permission to use or quote someone else’s intellectual property, the author is responsible for obtaining that permission.
As a practical matter, most self-publishing companies will never look at your work close enough to spot content that requires permission. If you’re working with a highly skilled editor who is on the ball, your editor will query instances of possible copyright infringement. That said, these editors are likely not lawyers trained to vet manuscripts, and you won’t get legal advice. What you will get is an opportunity to prevent a potential legal issue.
One of the biggest misunderstandings I see regarding permissions is when authors assume that a photo they found online is not copyright-protected. Just because you can save a picture you find through a Google search onto your computer doesn’t mean that the picture is in the public domain.
Another example of when permissions may be needed is if your characters work at XYZ Café, and XYZ Café happens to be a real restaurant in the city in which the story takes place. The publisher may require you to secure written permission from the establishment’s owner to use the café’s name. However, this is sort of a gray area because, unless there is something happening in your book at XYZ Café that puts the real XYZ Café in a bad (and false) light, you may not need to obtain permission.
Traditional publishers have teams of lawyers who vet manuscripts. In self-publishing, you’re ultimately responsible for the legal health of your manuscript. If you have questions about permissions or releases, you should hire a lawyer to help you through this process.
Use of Author’s Name and Likeness
Granting a publisher the right to publish your book doesn’t automatically give it the right to use your picture or name on its website or a third party’s website (like Amazon.com), or in retail stores where your book is for sale. This right must be specifically granted.
“The author grants the publisher and its licensees the right to use the author’s name and likeness in the sale, promotion, and advertising of the work . . .”
This clause gives the publisher permission to use your name and picture in the marketing and promotion of your book—but only in the ways specified in the contract. Read the terms closely to make sure you understand what you’re granting permission for.
Publisher Bankruptcy
The clause below is very common in all commercial contracts. So, do not freak out if this is in your publisher’s contract—they probably aren’t on the verge of bankruptcy. But, it’s good to know what would happen to your files and book rights if that happened. A few companies covered in the last edition of this book filed for bankruptcy and are now out of business.
“If the publisher commences bankruptcy proceedings, all rights to the work shall immediately revert to the author.”
This clause protects the author. All assets of a publisher filing for bankruptcy become the property of the bankruptcy trustee. Without this clause, the license you gave to the publisher under the publishing agreement also becomes the bankruptcy trustee’s property. This would create problems for the author because the author would then have to deal with the court-appointed person handling the publisher’s affairs.
In some bankruptcy situations, the publisher reorganizes and continues to run the company. Bankruptcy clauses in publishing contracts, however, don’t differentiate between the various types of bankruptcy. In theory, the second the publisher files for bankruptcy protection, all of the author’s rights immediately revert to the author. In reality, the clause may not be enforceable. The automatic stay provision of the bankruptcy section of the US Code (11 U.S.C. §362[3]) controls what would happen in a situation like this. The provision states that upon filing for bankruptcy, a stay applies to any act to obtain possession of property of the estate or to exercise control over property of the estate. Of course, a creditor can always apply for relief from the stay, but an unsecured creditor like an author? Good luck. When a publisher files for bankruptcy, most bankruptcy trustees return the rights to the author in exchange for the author’s agreement to drop any claims for all unpaid royalties or other monies due.
Notices
Notice provisions explain how the author and publisher must provide notice of events or situations requiring notice, such as termination of the contract. Some termination clauses require notice by certified mail only. Others permit notice by fax, email, or regular mail.
“All notices required or permitted under this Agreement must be sent via email.”
If a contract requires delivery of notice in a specific manner, you must follow that manner for the notice to be effective. If your contract includes the above clause and you call to cancel your agreement, that notice is not a legally effective termination of the contract.
Governing Law, Venue, Attorneys’ Fees
These individual clauses are sometimes combined under one clause. If your contract lacks a separate clause, look for relevant language in the “General Provisions” or “Miscellaneous” contract clauses. In the example below, I use Wisconsin and Dane County (Madison and surrounding suburbs) as the venue. The counties and states will reflect the location of the publisher. The clause may read like this: “This Agreement will be construed and controlled by the laws of the State of Wisconsin, and each party consents to the exclusive jurisdiction and venue by the state or federal courts sitting in the State of Wisconsin, County of Dane. If either the publisher or author employs an attorney to enforce any rights arising out of or relating to this Agreement, the prevailing party will be entitled to recover reasonable attorneys’ fees and costs.”
Let’s break this up to review each point.
Governing Law: “This Agreement will be construed and controlled by the laws of the State of Wisconsin . . .”
Should a legal dispute arise, the court will use Wisconsin’s case law and statutes to interpret the provisions of the contract. Usually the laws of the state where the publisher or its lawyers are located will be used to interpret contract terms. Why? Because the publisher’s lawyers are familiar with the laws of the state in which they already practice. The publisher won’t be billed extra fees while its lawyers learn the nuances of another state’s laws.
There are times when a publisher may choose to have the contract governed by the laws of another state because a particular state may have a statute or law more favorable to the publisher. Note that the publishing contract clauses discussed in this book cover basic contract law principles and are not particular to any state.
Venue: “. . . and each party consents to the exclusive jurisdiction and venue by the state or federal courts sitting in the State of Wisconsin, County of Dane.”
This provision specifies that if one party sues the other party for a contractual breach, the lawsuit will be brought in the state or federal court located in the state identified in the agreement—in this case, a federal court in Wisconsin or a state court in Dane County. Without the author’s consent to a specific venue in the state of the publisher’s choosing, the publisher could have a difficult time suing the author in that state. By agreeing to sue and be sued in the state of the publisher’s choosing, the author cannot sue the publisher in the author’s own state (unless it’s the same state) because once the publisher’s lawyers move to dismiss the author’s action and present the contract to the court, the author’s case will be dismissed, assuming the contract is valid and enforceable (e.g., not signed under duress, fraud, etc.).
Attorneys’ Fees: “If either the publisher or the author employs attorneys to enforce any rights arising out of or relating to this Agreement, the prevailing party will be entitled to recover reasonable attorneys’ fees and costs.”
I call this provision the “keep-it-honest” clause because it makes a party think twice before filing a lawsuit. If you bring a weak case and lose, you will likely pay 100 percent of the publisher’s attorneys’ fees. The reverse is also true. These “prevailing party” clauses are fair.
Some publishers try to sneak in language that says (1) the author pays the publisher’s attorneys’ fees regardless of the case’s outcome, or (2) if the publisher prevails in a lawsuit it can recover its attorneys’ fees, but the same does not apply to the author. Many publishers get away with this tactic because people don’t bother to read these clauses before signing the agreement.
Most self-publishing contracts don’t have such unfavorable language as the two examples I’ve just given, but I’ve seen these exact clauses in other commercial contracts. If you run into an unfavorable attorneys’ fees clause, ask that this clause be removed. Some publishers may agree to remove it, as litigation under these contracts is not common. If the publisher refuses, then it’s time to find another publisher. Reluctance to ch