Do the bankruptcy laws abuse authors’ rights?

Q. The bankruptcy of Triskelion Enterprises, LLC, to which I had sold a romance, has brought to light an outrageous abuse of authors’ rights by federal bankruptcy judges. Many publishing contracts—I’ve sold eighty novels, so I’m very familiar with these– include a clause stating that, in the event of the publisher’s bankruptcy, all rights in the contracted work revert to the author. I discovered that bankruptcy judges routinely void this clause and allow the trustee to sell our contracts, en masse, to the highest bidder. Their rationale is that bankruptcies are adjudicated under federal law, whereas contracts are governed by state law, and federal bankruptcy law takes precedence. Thus, in addition to losing the money due us from royalties, authors are stripped of creative control over our books. This could happen to any author, with any publisher, as well as to composers, lyricists and illustrators. We get no say over who buys these contracts, and there is no guarantee this will even be a legitimate publisher. One can easily imagine situations in which our work would be distorted and our reputations harmed. This is a situation that can only be rectified by an act of Congress, and I urge everyone to write his or her senators and congressperson urging that they sponsor a bill barring bankruptcy judges from voiding these contract clauses.

A. Although I understand your annoyance and share your dismay that the termination clause is unenforceable as a matter of law, I disagree with several of the underlying assumptions of your letter.

  1. Judges are not negating the provision of their own accord but are applying basic constitutional principles. Bankruptcy, like the First Amendment, is a right that is guaranteed by the United States Constitution (Article 1, Section 8). There are many examples where federal law trumps state law (civil rights, New Deal legislation, gun control, abortion, auto gas emission limits). To argue against this requires an argument based on some other constitutional principle rather than a dislike of the result. I don’t see that other constitutional principle here.
  2. Courts are not discriminating against authors or other creative individuals when they rule that the typical termination clause in publishing agreements is unenforceable in a bankruptcy proceeding. Similar clauses exist in many contracts that do not involve publishing companies or creative individuals and, with limited exceptions, those contracts are not permitted to automatically terminate either. Lacking this discrimination or another appropriate reason (see point 5 below), I see no valid reason why we as authors should seek special treatment.
  3. Your concern that authors have no say over who buys their contracts ignores the fact that authors do have the right to present their views to the bankruptcy court in the same manner as others who have contracts with the bankrupt company, even though it is a right that few avail themselves of. Your concern that authors’ works could be distorted by the acquiring company overlooks the fact that it is legally bound by your contract’s provisions in the same way that the original publisher was; thus you have the same rights against the new company as you had against the old in the event it distorts your work or otherwise breaches your contract.
  4. I fail to understand how you lose creative control over your books. Your book has either been published already or not. If it has been, there is no creative control left to be had. And if it hasn’t been, you have two options: you can return your advance and not deliver the final manuscript (if you don’t like the new publisher) or you can hold the new publisher to the provisions all authors should have in their contracts that prohibit the publisher from making changes in your manuscript (with certain limited, specified exceptions) without your consent.
  5. I’m not unsympathetic to the difficulty that the ordinary author has in obtaining proper legal representation in a legal proceeding and being able to afford top-notch (or any other) counsel. But these are problems that most citizens have every day in legal proceedings of virtually every type and is not peculiar to our situation as authors. For us to argue for a special privilege simply because we are writers is without doubt appropriate in certain situations (such as censorship, journalist “shield” laws and the like), but I don’t consider our losing money or property because we entered into a business transaction with a company that ended up in financial difficulty to be among them.

Thanks to Gayle Ehrlich of Sullivan & Worcester LLP, Boston, Massachusetts, for her advice concerning federal bankruptcy law. Please note the more detailed discussion of bankruptcy law and author-publisher contracts in my column in the Summer 2006 issue of the Bulletin.

(Originally published in the Fall 2007 issue of the Authors Guild Bulletin. © Mark L. Levine)

Answers to questions on this site are general in nature only. You should consult a lawyer for information about a particular situation. For more information about book publishing contracts and issues, see Levine’s book.

What should I watch out for in the “competitive books” clause?

Q. Is there anything I have to be particularly careful about in the “competitive books” clause?

A. Yes. Lots.

The most important is to make sure that the prohibition on competitive works applies only to competitive books. Otherwise, your publisher might be able to prohibit you from publishing certain magazine articles and very likely could prohibit you from licensing an “app” on the same subject to app publishers.

But the following points are important too.

  1. Narrow the section’s scope as much as possible by carefully defining what kind of book would be competitive, e.g., “a book on the same subject directed to the same audience and treated in the same manner and depth.”
  2. If the book is fiction, try to get the clause deleted altogether. Many publishers will insist on it only for nonfiction books.
  3. Add a sentence saying that books featuring the same character (in the case of fiction) and sequels are not competitive.
  4. Add a sentence saying that the prohibition will not apply to books offered to the publisher under the contract’s option clause and declined by the publisher.
  5. Try to have the section apply only for a limited number of years, e.g. three or four. This is often a way to bridge disagreements between you and the publisher about other aspects of the clause, and more publishers will agree to this limitation than one would expect.
  6. Especially if you are unable to limit the time period during which the section applies, provide that it applies only when a specified number of books have been sold within the most recent two six-month royalty reporting periods. Or only when the amount of money you received in royalties during those periods exceeds a specified amount. These numbers, whether of books sold or royalties received, should be significantly higher than those used for out-of-print determinations. There is no good reason for a publisher to insist that the low numbers in a typical contract’s out-of-print clause should prevent you from publishing another book on the same subject that could reach new readers and earn you significantly more money than you’re getting under the existing contract. The same point — setting more stringent sales criteria — should also apply to your right to license an app on the same subject as the book if the publisher refuses to limit the section’s scope to books.
  7. If you publish under more than one name, specify that only books published under the name on the book under contract are covered by the section.
  8. Provide that if the right to publish print-on-paper books reverts to you while the publisher retains e-book rights (or vice-versa), then copies published in the reverted medium will not be considered competitive under the non-compete section. This situation could occur if your contract has (as it should) separate out-of-print provisions for your e-book and print-on-paper editions. One way to phrase this point contractually might be to say “This Section [insert section number] does not apply to the exercise of any rights granted in this Agreement which revert to the Author in accordance with the provisions of this Agreement.”

(Originally published in the Fall 2011/Winter 2012 issue of the Authors Guild Bulletin. © Mark L. Levine)

Answers to questions on this site are general in nature only. You should consult a lawyer for information about a particular situation. For more information about book publishing contracts and issues, see Levine’s book.

Is there a standard definition of “electronic rights”?

Q. Is there a standard definition of “electronic rights”?

A. No, not for “electronic rights” nor for the many different rights encompassed in that term. (Some contracts use “multimedia rights” instead of “electronic rights,” but there is no agreement on what that term means either.)

Most electronic rights definitions used in publishers’ contracts are too vague or too broad or both. As a result, authors and agents must negotiate appropriate definitions for these subsidiary rights on a case-by-case basis.

Authors should define each electronic right they are granting narrowly and specifically. Properly done, this will enable authors to know precisely what rights they are granting to their book publishers and which they are free to license to software companies, electronics and games companies, apps and educational developers, and other non-book companies in order to exploit non-e-book electronic rights to their work.

If, despite negotiations, the contract you sign with your publisher still contains broader definitions than you’d like, be sure to add a provision that any rights not exercised by your publisher or one of its licensees (as to any language, medium, format or territory) within x years after initial publication of your manuscript (in any form) shall revert to you upon written notice to your publisher. Such a reversion clause should always be included by authors when agented rights (e.g., translations and movie rights) have been granted to the publisher. But it is particularly important when dealing with broad electronic rights clauses because no one—not the publisher, the author or the agent – can anticipate all the possible uses of rights granted in such broad clauses. As recent history suggests, many have yet to be invented.

(Originally published in the Spring 2011 issue of the Authors Guild Bulletin. © Mark L. Levine)

Answers to questions on this site are general in nature only. You should consult a lawyer for information about a particular situation. For more information about book publishing contracts and issues, see Levine’s book.