Is Your Publishing Contract eBook & iPad Ready?
A special report for Authorlink by Attorney Lloyd J. Jassen (aka Copylaw)
May 2010 Edition
Why is Arthur Godfrey smiling? In 1949 the CBS pitchman knew that the medium changes the nature of what, and how, we communicate. And, his attorney knew that advances in new technology, in this case, the 7-inch Microgroove single, would challenge the way old entertainment contracts for 12-inch records were interpreted.
Old Wine in New Bottles
Just as in the 40s and 50s, with rapid advances in new technology, old contracts are being dusted off and language scrutinized to answer the question "Who controls new rights created by recent technological developments?" Due to ambiguities and omissions in many older publishing agreements, "Who controls enhanced eBook rights?" has become a controversial topic, subject to differing interpretations.
Exemplifying the digital rights controversy is the December 11, 2009 letter from Markus Dohle, CEO of Random House, in which he boldly asserted that RH controlled the vast majority of digital rights to its backlist. This assertion precipitated a collective "Yeah, right!" from film and literary agents across the globe. This article, among other things, looks at how courts interpret pre-digital age contracts.
To be clear, Mr. Dohles claimed ownership of backlist digital rights is based on a very favorable (for RH) interpretation of pre-digital age contracts, in which RH received for the term of copyright, the exclusive right to publish and sell works contracted for in book form.
Are 360 All Rights Deals in the Our Future?
What is also significant about RHs pronouncement, is that it may presage a new, more muscular approach to contract negotiation by the big six publishers. Specifically, I refer to 360 deals, common today in the music industry. With a 360 deal a publisher would receive a percentage of earnings from ALL of the authors activities, instead of just book sales. Traditionally, motion picture, television, dramatic and merchandising rights, as well as lecture fees, were off limits to publishers.
Has Random House Reinvented the Way We Read Publishing Contracts?
Random Houses grab for digital rights follows a well-established pattern in the entertainment industry. Cases addressing whether older entertainment industry contracts granted rights for new uses such player piano rolls, radio, motion pictures, television, videocassettes and eBooks are plentiful. Like Random House, motion picture studios once claimed that they already had the right to exhibit films on television, and to distribute them as home videos. While the cases are not uniform in their holdings, rest assured, there are basic principles of contract interpretation that can guide us.
How to Interpret Old Contracts
When a contract is ambiguous, the job of ascertaining the parties intent may, ultimately, be left to a court to decide. Since contracts are not drafted in a vacuum, courts look at industry practice. In the case of eBook and enhanced eBooks, courts will ask whether distribution of books in digital form was recognized by knowledgeable people in the industry when the contract was drafted. Courts will also look for any provisions that tend to limit the exclusive right to publish . . . in book form." For example, did the author negotiate a reserved rights clause? To be clear, the majority of courts have held that a grant of future technology rights cannot be inferred from an agreement, unless the technology was known at the time of the grant.
When a contract is susceptible to two reasonable interpretations, the Restatement (Second) of Contracts, states that the agreement should be construed against the party who drafted the language. Since Random House was in a stronger bargaining position, unless it could be shown that the author (or agent) had an equal hand in drafting the agreement, RHs backlist contracts would be interpreted by courts in a light most favorable to the author.
Unfortunately, there are no neat definitions for what many are calling enhanced eBooks. In the old days (i.e., six months ago), so-call enhanced eBook rights fell within the meaning of the terms interactive or multimedia rights. Whereas, an eBook and a book are both linear narratives, an enhanced eBook is a horse of a different color. Since the sale of film or television rights which are generally retained by the author — could be impacted by a grant of multimedia rights, as a rule, agents and knowledgeable publishing attorneys, strike all reference to interactive or multimedia rights from publishing contracts. Few publishers balk at this. As an alternative, if a publisher does balk, most accept language that limits the grant, e.g., Multimedia rights shall not include traditional motion picture, television or video rights in linear form or audio rights. Another contract fix is written approval by the author, prior to turning their book into a multimedia derivative work.
While RHs pronouncement does violence to federal copyright policy that protects authors from the unintentional grant of the exclusive rights to their works, under the 1909 Copyright Act, it was much easier to inadvertently transfer ones copyright rights than it is today. Unlike today, under the old 1909 Copyright Act , which still applies to works published before 1978, an exclusive license could be implied from the conduct of the parties
Where the Random House agreements Mr. Dohle cites to contain future technologies clauses, RH's claim is much stronger — although, not all courts have enforced these provisions. For example, in Tele-Pac, Inc. v. Grainger, a New York court held that the license to distribute films for broadcasting by television or any similar device now known or hereinafter to be made known did not encompass videocassette rights. The Appellate Division of the New York Supreme Court, rejecting the lower courts attempt to equate broadcasting with the grant of videocassette rights, held that distribution of a film by videocassettes was not analogous to broadcasting by television.
If a court were to adopt the Tele-Pac analysis, it might determine that an e-Book is not analogous to a bound volume, just as a film is not a videocassette. Whereas a plausible argument can be made that e-Books and books are two distinct media, a compelling argument can be made that an enhanced eBook and bound book are two very distinct media — the latter having more in common with film and television adaptation rights, rights traditionally retained by the author. Interestingly, where an author retains enhanced eBook rights, a question exists as to what contractual limits, if any, exist on the authors ability to synch audio, video and still images with the books text.
Whereas the display of the verbatim text of a book on a screen is an eBook, an enhanced eBook (whether an iPad, app, or website combining text, graphics, audio and/or video) is a derivative work and is a matter for informal or formal negotiation.
Today, most print publishers are only in a position to exploit non-interactive rights. Most will be satisfied to obtain what is know as either display or verbatim electronic rights, as opposed to interactive or multimedia electronic rights. Ultimately, authors will have to decide how much faith to place in their publishers ability to produce and market so-called enhanced eBooks. Alert authors, before taking that leap of faith, however, should modify their publishing agreements so their ability to exploit lucrative film and television rights (in partnership with others) is not inadvertently undermined.
Lloyd J. Jassin is an attorney and co-author of The Copyright Permission and Libel Handbook (John Wiley & Sons). A former publishing executive, he has represented publishing clients for many years. He can be reached at Jassin@copylaw.com. The Offices of Lloyd J. Jassin are located at The Actors Equity Bldg., Suite 400, 1560 Broadway, New York, NY 10036, 212-354-4442 (tel.), 212-840-1124 (f). Follow him on Twitter at www.twitter.com/lloydjassin.
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