General Practice, Solo & Small Firm DivisionMagazine

Volume 17, Number 3
April/May 2000



The foundation of the publishing industry is, clearly, written work. As a result, the most common legal issues that arise in the publishing context involve copyright law-who owns a work of authorship, how it can be protected, and how much of someone else's work can be used in other contexts. Any lawyer representing either a writer or a publisher needs to be sensitive to these issues and how they interact.

Copyright protection prevents the copying of a work of original authorship, and this protection gives the owner of these rights a lead in the market because competitors are required to develop independently material that is similar in concept. In the web-speed world that we inhabit, copyright protection is all the more important. Infringement is easily accomplished through the Internet, which provides worldwide desktop access to every possible kind of material. Thus, failure to enforce an author's rights in copyrighted works is an unnecessary and costly loss to both writers and publishers, making it more important than ever to ensure that copyright issues have received adequate consideration.

Copyrights are governed by the Copyright Act of 1976, 17 U.S.C. § 101, et seq. A copyright protects original works of authorship that are fixed in a tangible medium of expression against unauthorized copying (17 U.S.C. § 102). Once a work has been written, painted, recorded, or captured in any form that can be perceived, reproduced, or otherwise communicated, either directly or through the use of a machine or device, it is automatically protected by federal law (17 U.S.C. §§ 301(a), 401(a), 405(a)).

Copyright Ownership and Protection

Significantly, copyright ownership of an original work does not foreclose the independent original authorship of another original work that embodies the same ideas. Thus, copyright law recognizes that two authors who have independently created the exact same work can each have a perfectly valid copyright in their own work. The fact that someone else independently created the exact same work does not affect the copyright's validity because, unlike the situation with patent law, novelty is not required-all that is required is that the work be the author's own original creation.

Under copyright law, the author of a work is the sole owner of the copyright in that work, absent a later transfer (17 U.S.C. § 201). Copyright ownership gives the owner a statutory monopoly for the life of the author plus 70 years or, in the case of a work for hire, 95 years from the first publication or 120 years from creation, whichever is earlier (17 U.S.C. §§ 302 (a)-(c)). The monopoly consists of an exclusive right to reproduce, display, and prepare derivative works based on the original work, and to distribute copies of the copyrighted work to the public (17 U.S.C. § 106). Copyright law does not protect any "idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied" (17 U.S.C. § 102(b)). It protects only expression, and only against copying.

Copyrights can be jointly owned (17 U.S.C. § 101). In general, all that is required is that each contributor qualify as an "author" under the Copyright Act, and that each contributor intend, at the time the work is created, for the individual contributions to be merged to form a single work, although some jurisdictions also require that each joint author's contribution be independently copyrightable. If the copyrighted work is a joint work, then each author has an independent right to exploit the work, including licensing it, without having to obtain the consent of the other joint author(s). The only obligation the joint author has is to account to the other joint author(s) for their pro rata share of the profits from such exploitation. Most publishers insist on acquiring exclusive rights from an author, so it is important to consider whether there may be any joint authors who must also consent to any assignment of rights.

Works for hire. Authors do not always own the copyright in the work they create. In particular, a "work for hire" can be created where (1) an employee creates a work within the scope of their employment, or (2) a work is specially commissioned and fits certain enumerated categories, such as part of a motion picture, an instructional test, a translation, or an atlas, provided that the hiring party and the writer agree in writing that the work is to be considered a work for hire (17 U.S.C. § 101). If a work is a work for hire, the employer, not the author/creator, is the owner of the copyright (17 U.S.C § 201(b)). In such a case, the writer does not have the power to grant rights in the work to a publisher; indeed, any grant would be an infringement of the hiring party's copyright. Therefore, if the work is a work for hire, it will be unpublishable by the writer unless an appropriate license or assignment is obtained.

Works for hire can arise in a variety of ways. For example, a salaried employee for a newspaper may want to publish a book collecting all of the employee's columns. Absent a license from the newspaper, however, this book might be considered a copyright infringement because the columns were most likely created as works for hire. Another common situation is where a writer is hired to write something and then has a dispute with the commissioning party. The writer's ability to publish the work independently may depend on whether a work for hire relationship was created.

Legends and registration. While it is true that a work is automatically protected upon creation, using an appropriate copyright legend (e.g., © 2000 Fannie Mae, All Rights Reserved) can help to protect an author's exclusive rights in his or her work (17 U.S.C. § 401(b)). Even more beneficial is registering a copyright with the Registrar of Copyrights. Registration is a prerequisite for any suit for copyright infringement (17 U.S.C. § 411(a)).

Timely registration (within three months of first publication) also entitles a copyright owner to recover statutory damages (an amount of damages fixed under the Copyright Act) and attorney fees (17 U.S.C. § 412). These benefits can be very important, particularly where it is likely to be difficult to prove actual damages, or where the attorney fees are likely to be significant.

Fair use. Although it generally prohibits copying of another's work, the Copyright Act does allow others to use copyrighted material in a reasonable manner without the copyright owner's consent, so long as such use constitutes a "fair use." In evaluating whether a use qualifies as a fair use, courts consider such factors as (1) the purpose and character of the defendant's use; (2) the nature of the copyrighted work; (3) how much of the original work has been taken; and (4) the impact of the defendant's use on the market for the original work. Generally, any use of a work for criticism, comment, news reporting, teaching, scholarship, or research is likely to qualify as a fair use (17 U.S.C. § 107). Nevertheless, whenever preexisting materials are to be used in a work, the nature of the use should be evaluated carefully.

Contracts and Copyrights

Although copyrights are exclusive in nature, they are not indivisible. Instead, they may be thought of as a bundle of rights that may be assigned, licensed, or sold as the original owner sees fit (17 U.S.C. § 106). Moreover, the grant of some rights to another will not deprive the owner of the remaining and untransferred rights in their work.

Publishers and writers define the division of these rights through contractual negotiations. The typical publishing contract is composed of a number of standard provisions. The specific terms of those provisions, and which party they favor, will of course depend on the parties' relative bargaining power. The following is a brief discussion of some of the most significant provisions in any publishing contract.

Rights. The grant of rights in a manuscript-essentially the grant from the writer to the publisher of the right to publish the work-is obviously the most important set of provisions in a publishing contract, as it defines exactly what the publisher may do to exploit the work. Any publisher will seek to obtain the broadest rights possible to the work, if not an outright transfer of the entire copyright. Whether the publisher is able to achieve this objective will depend on the parties' relative bargaining power. An important point to remember is that under the Copyright Act, the author reserves any rights that are not explicitly granted in the publishing contract (17 U.S.C. § 204). Nevertheless, it is often a good idea to include a provision stating that any rights not specifically granted to the publisher are reserved to the author. This is particularly true given that the grant of rights is usually for the duration of the copyright in the work.

In addition to the grant of the right to publish the work, the contract also may include what is known as a subsidiary rights grant-the right to exploit or license the exploitation of the work in other forms. Such rights may include paperback and book club rights, serial rights (the right to license the appearance of excerpts from the book in magazines and newspapers), translation rights, motion picture and dramatic rights, and, increasingly, electronic rights. Subsidiary rights can be extremely lucrative, in some cases accounting for most of the income that a work generates. A major consideration for a writer is a publisher's ability to exploit successfully any subsidiary rights that are granted, and, accordingly, the resulting revenues from that exploitation.

With the advent of new media and technology, electronic publishing rights have become a particularly desirable and valuable type of subsidiary right. Although electronic rights, including the right to publish a work on the Internet, on a CD-ROM, or in an electronic database, might once have been considered as falling within the scope of provisions purporting to transfer all rights to a work in all media, "whether now known or hereafter discovered," recent federal court decisions have held that electronic rights are retained by the author unless they are specifically transferred to the publisher (Tasini v. New York Times Co. Inc., Civ. No. 97-9181, 97-9650, 1999 WL 753966 (2d Cir. Sept. 24, 1999)). Thus, any contract should specifically address the issue of electronic rights and whether any such rights are transferred to the publisher.

Satisfactory manuscript. Another clause that appears in virtually all publishing contracts is one requiring the submission, by a certain date, of a manuscript that is satisfactory to the publisher. Under common law, "satisfaction" means the publisher's own subjective and personal satisfaction. Although a publisher has an implied duty to act in good faith in deciding whether a manuscript is in fact satisfactory, it may take financial considerations into account in making this decision. A publisher also may consider whether publishing the writer's manuscript would put it at risk for invasion of privacy or copyright infringement claims.

The publisher's duty of good faith means that the publisher has to provide the writer with a detailed explanation of any problems with the manuscript that the publisher believes render it unsatisfactory and also provide an opportunity for the writer to correct those problems with editorial assistance. A writer should be wary of any attempt by the publisher to contract out of these obligations, and ideally should try to obtain a specific contractual right to receive editorial assistance and to revise the manuscript before the publisher rejects the work as unsatisfactory. An established author may be able to have a provision added specifying what constitutes an acceptable manuscript, either based on a reasonableness standard or on the writer's previously published works.

Deadlines. Publishers often require that a manuscript be submitted by a specified deadline, especially if the subject matter is related to ongoing events where time is of the essence. The contract typically will provide that if the manuscript is not submitted by a specified date, the publisher has the right to serve the writer with a written notice of noncompliance, with the writer being allowed a grace period in which to deliver a satisfactory manuscript.

If the writer fails to do so, the publisher can terminate the contract and demand that the writer repay all advances. One important question is the effect of a deadline extension on the publisher's ability to claim a breach by the writer if a later deadline is not met. The publisher may want a provision in the contract stating that a waiver of a deadline does not deprive the publisher of the ability to enforce subsequent deadlines.

Advances, expenses, and royalties. A writer's primary concern is usually the "advance" payment, which may be the only money he or she earns from the book. Obviously, how large an advance the writer receives will depend on the relative bargaining power of the writer and publisher, particularly as there is no "standard" advance. Rather, the amount generally will be based on a percentage of the expected royalties for the work.

A large advance may give the publisher a greater incentive to promote the book in order to recoup its investment. It also can have marketing value, encouraging book clubs, magazines, and paperback publishers to give a book serious consideration. Of course, a writer will always attempt to secure an advance that is nonrefundable. Advances, however, are usually recoupable, meaning that royalties are set off against the advance until the advance is repaid. The advance is typically paid in installments as the manuscript progresses.

A publishing contract should contain a provision specifying how and when the writer will be reimbursed for expenses incurred in writing the book, particularly where the writer is not getting an advance. Any concerns that the publisher may have about possible abuse can be addressed by requiring the writer to provide documentation for all expenses, a monthly or quarterly expense report, or by requiring prior approval for major items such as airfare or hotel accommodations.

As with most provisions, the relative bargaining power of the parties will affect the size of a writer's royalty payments. A writer might try to obtain a clause providing that all rights to the work revert to the author if the publisher fails to pay any portion of the royalties owed to the writer at any time. It is common for the royalty rate to increase in stages as sales of the book pass a certain level. Normally, the publisher retains any royalties, as well as income from the sale of subsidiary rights, until the amount of the advance has been recouped. If the advance is not ultimately recouped, the writer is usually allowed, by contract or by practice, to retain the unearned portion of the advance, unless the writer has breached the contract.

The publisher will virtually always insist that the writer warrant that he or she has not entered into any other agreement concerning the work, and that the work does not infringe anyone's copyright, contain illegal matter, libel anyone, or violate anyone's property or privacy rights. The writer also will be asked to warrant that the information contained in the book is not injurious to the user and will not give rise to a nondefamation tort claim. Sometimes, a writer will attempt to limit this warranty by, for example, stating that the information is not injurious where it is used properly, or that he or she was not negligent in preparing the information.

Usually the publisher's lawyers try to control the defense of any litigation brought against the publisher and/or writer by a third person. If the lawsuit involves an area covered by the writer's warranties and indemnities, the writer runs the risk of paying all legal expenses, as well as the amount of any settlement or judgment. To give the writer some control over the litigation and to reduce his or her potential exposure, it is a good idea to include a provision in the contract that (1) allows the writer to select counsel; (2) allows the publisher to select the lawyers but giving the writer a right of approval, such approval not to be unreasonably withheld; and/or (3) gives the writer the authority to approve any settlement. As a practical matter, however, if the writer does not have much money the indemnity provisions may prove worthless to a publisher who assumes primary financial responsibility for any litigation.

Some publishing contracts also include a provision stating who bears the costs of any actions for infringement of the copyright in the book, who will control such litigation, and who will have settlement authority. The most flexible arrangement provides that if the parties jointly agree that an action should be brought, expenses are to be shared; or if one party individually wishes to commence a suit, the expenses are to be borne by that party.

Gina A. Hough is associate general counsel of Fannie Mae in Washington, D.C., where she specializes in technology and intellectual property law. Claudia Ray is a special counsel with O'Melveny & Myers, LLP, resident in the firm's New York office, and a member of the firm's Copyright, Trademark and Internet Practice Group.

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