Tag Archives: Contracts

Option and Right of Refusal Clauses in Book Contracts

A guest post by Scott Boone.

In Nancy DiMauro’s excellent post on reversion clauses from a week or so back, she mentioned the four critical clauses in your book contract: the granting clause, the payment clause, the indemnification clause and the reversion clause. This is the fifth critical clause with which you need to be extremely careful. Nancy knows all about option-type clauses, but she was nice enough not to steal the thunder from my post today.

Option-type clauses are the clauses in your publishing contract that refer not to the work being published, but to the work or works you create after the one being sold in that contract. Essentially, what rights does the publisher have in your next work or works? I’m going to talk about three main types: options, rights of first refusal, and rights of last refusal.

Publishers believe that they will not make any money off your first book. That is the received conventional wisdom. So in publishing you, they are investing in you as an author as much as or more than they are investing in that particular book. If they are going to take that risk and make that investment, they have a legitimate reason for wanting some sort of rights in the works you create after that first book. However, too often, these clauses put all the risk on the author without any risk on the publisher.

There is a question of how enforceable these types of clauses are in court. One that is unlimited in time and scope might stand a good chance of not being enforceable. The more limited in terms of time and scope, the more likely it is to be enforceable. However, you don’t want to put your eggs in that basket. None of them. If you end up in court fighting one of these, then in the big picture you’ve pretty much lost even if the court finds in your favor. Get it right on the front end during the contract negotiation.

So here are the three main types and how you need to think about with each one.

Options

Option clauses give the publisher the right to purchase a later work at already set terms. They do not give the publisher the right to look at them first and make the first offer; instead, the publisher just has the right to purchase your next work on already specified terms. You’ve already agreed to it by giving them an option.

In their worst (and perhaps too common) incarnation, they specify that the publisher has the right to buy your next work on the same terms as the first. This is bad for you for at least two reasons. First, it means you cannot get any better terms, including royalty rates and advances, in your next contract. Remember that with a true option clause, the publisher can exercise it without any need to negotiate with you on terms. Those are already set. Second, if the option clause states that they can purchase the next work on the same terms as the first, those same terms include the option clause. The option propagates forward with each book, with no escape for the author. This can be incredibly insidious, and if you dig deeply enough, you can find horror stories of new authors stuck in these sorts of traps.

Look, it is not uncommon for a new author to get a relatively bad contract as their first contract. But an option clause that locks in future terms means that every contract after that will be a bad contract. Avoid these at all costs.

To make it clear, let’s look at them from another angle. An option clause obligates you but not the publisher. Therefore, you bear all of the risk and the publisher bears none. Let’s say your first book bombs. The publisher is not obligated by an option clause to buy your second book. On the other hand, if your first book is a big success, the publisher can buy the second book without having to give better terms. That’s a risk you bear. So you bear that risk while the publisher bears none.

If a publisher wants to lock in the right to your next work or works at set terms, then make them buy them with a multi-book contract. That way both parties bear some risk and it’s not all on you the author.

So what do you do if the contract you’re offered has an option clause? First, get rid of it. Get them to switch it to a right of first refusal or get them to make it a multi-book contract (if you are happy with the terms). If you can’t get rid of it, then either walk away or try to get the terms for the second work that are much better than the first and make sure an option clause will not be included in the contract for second work.

Further, make sure the clause is more limited than simply “your next work” or “future work.” That would include short stories, books in different series or even in different genres. If you are going to sign one, make sure it is limited to a certain form (long vs. short) and to that genre (or even better that series).

Finally, as with any clause conditioned upon the publisher doing anything, make sure the publisher has an objectively defined timeframe in which to exercise the right before losing that right.

The final word on options: Be very wary. Don’t even think of signing a contract with one unless the terms are good, do not include another option, and improve with the next work.

Right of Last Refusal

The right of last refusal is a clause that gives the publisher the right to match any offer for your future work made by another publisher. It’s a bit deceptive in how bad these are for the author. On first glance, they might seem to be not as bad as a straight option clause, but once we dig into how they work, we’ll see how they can actually be worse.

The right to last refusal basically gives the publisher the right to match any other offer. That means they have the right to buy the book at terms that match the other publisher’s terms.

They don’t seem too bad until you start to think about what such clauses do to your ability to get another offer. Put yourself in the shoes of the editor at the other publishing house. In order to make an offer to buy a book, you have to put in a lot of work. You have to read and evaluate the book. Then you have to champion that book to several other constituencies in house. Are you going to want to invest in that book, both in terms of time and workplace capital, if the first publisher can snipe the book out from under you for the same terms? Not likely.

So, while it appears that a last refusal clause gives you the ability to improve the terms of the next contract by getting a better offer somewhere else, that’s not a very realistic option.

Additionally, because the original publisher does not have to make a yes or no decision as they do with an option clause, you might actually get worse terms in the second contract. An option clause at least locks terms in. If your ability to go anywhere else is blocked because no other editor wants to invest the time to make an offer on a book subject to a last refusal, the original publisher can actually offer you worse terms because they know you don’t have any other options.

The final word on rights of last refusal: Don’t.

Right of First Refusal

The right of first refusal gives the publisher the right to be the first publisher to see your next work and the right to make the first offer on it. Unlike the option clause, the publisher cannot unilaterally purchase your next work. You have to agree to their terms. That’s not a bad deal for you as an author provided the right is limited.

You want a good and prosperous relationship with your publisher that spans multiple books. One in which both of you do well. And if you are writing a series, you really don’t want to switch publishers mid-series.

While the presence of this clause should not cause you to reconsider the contract, you should seek to limit it in at least two ways.

First, you should limit what works it covers. It should specify novels and not short works, unless your publisher does in fact publish short works and on terms you would like. It should also be limited to that specific series, or if you can’t negotiate for limiting it to that series, it should be limited to books in that particular genre.

Second, you should limit how much time the publisher has to respond once you have submitted the new work to them. The traditional publishing process is incredibly slow as it is. You don’t want it slowed down even further.

The final word on first rights of refusal: Fine if properly limited.

The Takeaway

Work to limit a right of first refusal in scope to a particular series or genre and in the amount of time the publisher has to make the offer. Avoid options and rights of last refusal.

 

Guest Writer Bio:
M. Scott Boone lives in Atlanta, Georgia, where he works as a law professor in order to support a clowder of cats. He writes about legal issues affecting writers at writerinlaw.com. When not writing or teaching, he is a self-proclaimed soccervangelist.

Reversion Clauses – or when do I get my story back?

http://www.dreamstime.com/stock-images-recycle-dollar-image26790944There are four critical provisions in your contact: the granting clause, the payment clause, the indemnification clause and the reversion clause. All four provisions work together to set out what you’ve given up (granting and indemnification clauses), what you get in return (the payment clause) and when you get your stuff back (the reversion clause). I’m only going to talk about the last one today but keep in mind that whether a reversion clause is unreasonable depends in large part on what you’ve given away and what you received for it.

What’s the issue?

Your work has value. After all, that’s why a publisher wants it. The value of the work is why you get paid. In return for letting the publisher print your work (and, hopefully from the publisher’s prospective, earn more money off it than they pay you) you give the publisher an exclusive right to use your words anyway that falls into the grant of rights. Start to see the problem?

No?

Okay, let’s look at it this way. I was recently shopping a story to some E-publishers. Before submitting, I checked out the contract terms as stated on the webpage. Buried in the mumbo-jumbo about submission guidelines and other facts was this gem: “Length of grant of publishing rights: Life of copyright.” What the heck?

A copyright lasts your life and another 70 years (in the US and UK. There some other countries which the copyright only lasts 50 years after your death, but it’s still a darned long time.). If you signed a contract with this “reversion” clause your publisher OWNS YOUR STORY for your life, the life of your kids, and a good chunk of your grandchildren’s life. The publisher can do whatever it wants with your story until it has no commercial value (i.e. is in the public domain) and, most likely, not pay you a penny more.

Now do you see the problem?

You might shake your head and say that “well, that was an e-publisher, the traditional houses aren’t like that.” Oh yes, they can be. If you let them. Publishers of all kinds are trying to grab as many of your right as possible, keep them for as long as possible and return as few of them to you as possible. This doesn’t make the publishers “evil.” It just means they are better at looking out for their businesses interests than most writers are. After all, they make money off the stories other people write. Of course, the publisher wants to keep those words for as long as possible.

“But wait!” you say. “Isn’t there something about my getting the rights back if the work goes out of print?”

Most contracts will have a provision that says something along those lines but the words really matter. Ambiguity is not your friend. Reversion clauses often have no definitions or meaningless ones. I’ll just highlight a few terms that MUST be clearly defined. If “out of print” isn’t explicitly defined the publisher can, and likely will, win on the argument that because your book is available on a “print on demand” basis, whether or not any copies are actually sold, the work isn’t “out of print” and the publisher still owns it.

What does “sales” mean? Can the publisher “sell” 1,000 free copies and meet the “Sales” threshold, if your contract even has one? Courts will read an undefined word consistent with its dictionary definition or its “plain meaning” as it is ordinarily used. If “sales” isn’t defined a court will likely rule that giving away free copies is a “sale” as the “plain meaning” of “sale” includes the “transfer of something to the ownership or use of somebody else.” In other words, no money or anything else of value has to change hands for a “sale” to occur. So, many of the new “reversion” clauses won’t let you get your book back until either the copyright expires, or you pay an attorney a lot of money to argue about your contract and rights. Either way, this is a lose-lose situation for the writer.

The “New Normal” of contracts is that if you aren’t careful you may never get your book back, or worse, you might pay the publisher far more than it every paid you to get your story back.

Hand in glove with the “new” non-reversion clauses are “buy back” provisions. Under these provisions you can “early terminate” the contract for a fee. One of the more egregious of these clauses I’ve seen recently was part of a horrible contract where the writer gave up all rights to her story (which was supposed to be put in an anthology) for 7 years for no advance – just a small royalty percentage. The publisher was going to reprint the story as a stand alone arguably under the same payment terms – 7.5% of the price sold. In order to get the story back before the 7 years expired the writer had to pay the publisher a predetermined amount. Given the sales-to-date this meant the writer had to pay the publisher more than 18 times what she received from the sale to get her rights back. Does this sound wrong to you? It should.

Also keep in mind that many established writers are making LOTS of money self-publishing or reselling their back list – books once in print with a publisher that have reverted to the writer. Publishers know this. For obvious reasons, publishers would prefer to keep the bulk of that money too. With a “life of copyright” grant the income from reissuing those older books would go to your publisher if the publisher even felt like reissuing your work.

What should you ask for in a reversion clause?

1. A reasonable term for the publisher to recoup its expenses and make a profit off you. This is going to vary from an e-book only, to paperback, to hardcover publishers. Hardcover publishers have more legitimate expenses in publishing your book than an e-book publisher does. Generally, the more rights you give a publisher the shorter you want the contract’s term to be. Three years is probably reasonable for an e-book only publisher. Seven to ten years may be reasonable for a print publisher.

2. Clear language as to when and how you get your rights back. Again, ambiguity is not your friend.

3. A definition of “out of print” that sets a sales threshold for e-book publishers, and excludes e-books (for traditional publishers), and print on demand copies and audio books for all publishers.

4. A definition of “sales” that excludes the transfer of your work for no monetary consideration and has a specific number threshold.

5. A renewal clause so the publisher can keep using your Work if it is selling and has to pay you a set amount (an additional royalty) for renewing the contract.

6. If there is a “buy-out” provision, a purchase price that takes into account the publisher’s actual costs, potential lost profits and what it paid you. The reality is if your book is selling well with Publisher X you are unlikely to want your rights back. These provisions come into play when you disagree with what your publisher is doing with your work or the work simply isn’t selling.

7. You don’t want a lengthy notice provision. If you opt to take your rights back, you should get them almost immediately upon notice. This keeps the process from being drawn out and keeps a vengeful publisher from trashing your work – bad cover, bad press – while you wait to get it back.

8. The term “Notice” needs to be defined. The Notice of your intent to take your rights back and the actual return of those rights should not be dependent on the publisher’s actions. Let’s say your reversion clause says you get your rights back 30 days after you notify the publisher: what happens if the publisher doesn’t pick up that certified letter or respond to your email? You might be stuck. “Notice” may mean “actual notice” and you may have to show that the publisher actually received your letter or email. All ambiguity does here is open the door to litigation or an extortion attempt by your publisher who now wants you to buy back not just your rights but also all the copies of your book in the warehouse. If you think I’m exaggerating check out Doranna Durgin‘s post on Writer Beware at http://accrispin.blogspot.com/2011/10/guest-blog-post-fitzhenry-and-whiteside.html

9. A provision that automatically reverts your rights if your publisher files bankruptcy, has an involuntary bankruptcy filed against it, has a receiver appointed or makes an assignment for the benefit of creditors. If any of these things happen your publisher has or is likely going out of business. You don’t want to be caught up in lengthy and expensive litigation to reclaim your rights from a Bankruptcy Trustee or receiver. The likely result if you are pulled into the bankruptcy or receivership is that you will have to buy your story back to help pay off your publisher’s creditors. Again, getting enmeshed in a legal fight is something you want to avoid happening.

What’s the solution?

While a new writer won’t often have the clout to get everything he should in a reversion clause educated writers will push the publishers to stop overreaching. You MUST know what your contract says and how it affects you. Consult with an Intellectual Property (IP) lawyer. This is a very technical and niche area of the law. Your agent likely doesn’t have the knowledge he needs to advise you. The average family law or traffic lawyer does not have the knowledge to advise you. I’ve been practicing business law for nearly 20 years and I still check with an IP lawyer. Consult with a lawyer. Yes, we charge a lot. An IP lawyer may cost you $500 an hour or more. But, the alternative is potentially giving away thousands, if not millions of dollars, over your writing career. The expense of a lawyer is worth the investment.

But the most important solution –

Don’t accept bad contracts.

Don’t accept ambiguous contracts.

Don’t accept “reversion” clauses that don’t actually give you the rights back to your work.

Here’s the secret – Shh – You don’t need traditional publishers as much as they need you.  You can self-publish. Publishers need writers to give them content. See, the power has shifted. We can still get our stories to an audience without a publisher. The publisher can’t operate without writers. Don’t get me wrong. I want to be traditionally published. I understand the finances that drive Publishers (e- and traditional) to ask for the provisions they do. But that doesn’t mean I have to accept all proposed terms.

Sometimes walking away is the best thing you can do for yourself, your story and your career.

The bottom line?

Know when and how you get your rights back. If this isn’t clear, hire an attorney to help you understand. If the contact still isn’t clear or acceptable renegotiate it. If you can’t get reasonable terms you may want to walk away.

Disclaimer:

The materials available at this website are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. No attorney-client relationship has been created. Legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer if you want professional advice.

Dispelling the Myths, Part One

A interview post with Jen Greyson.

I think it’s safe to assume most authors would jump at the chance to work with the publisher behind Fifty Shades of Grey, one of the most successful book titles of the past few years. For author Jen Greyson, this was the dream scenario—and it came true! I had an opportunity recently to sit down and ask Jen a few questions about her experience working with the publisher. Read on, and come back tomorrow to hear the rest of the story.

EB: First of all, Jen, could tell us about your first book?

JG: Lightning Rider is about Evy Rivera, the first female time traveler, but she has no idea that she comes from a long line of lightning riders—travelers who use lightning to cross dimensional chess boards and affect history. In fact, none of her living family knows. Their mentors lost them about six decades ago, but they haven’t been looking for a girl… because there’s never been one. Evy’s a badass, complete with lightning bullwhips and an attitude to match. Her first historical alteration takes her back to ancient Spain where her fate tangles with a Roman warrior set on conquering northern Spain. Together they must work to defeat a legendary man in order for Spain to fall. The Roman teaches her how to handle her lightning and there’s more electricity between the two of them than any of her weapons. Her mentors don’t always tell her the truth and Evy has to figure out the hidden agendas before she unmakes the wrong history. (The sequel, Shadow Boxer, is also available.)

EB: How did you attract the attention of your publisher?

JR: After E.L. James landed her seven figure deal with Random House for Fifty Shades, I went looking for the publisher that made it happen. I found the tiny Australian house, The Writer’s Coffee Shop, and send my manuscript in. They loved it and I was really excited to learn the marketing techniques they used to make Fifty Shades a household name.

EB: Talk about the initial contract you received from them, and your initial reaction to it.

JR: The initial contract was surprisingly simple and didn’t have a lot of the clauses I’d heard horror stories about. They asked things that I didn’t agree with and because I’d attended a Superstars Writing Seminar and read a lot of Kris Rusch’s blog, I knew that I could push back on the terms that needed adjusting. But I was also willing to give up some things in order to gain their marketing team.

EB: What did you do next?

JR: I consulted with my mentors about several of the terms and they suggested some new ones to include. I already had a list from reading How to Be Your Own Literary Agent and Kris’s blogs/books, but knew that the negotiation process was critical and I needed to ask for everything I wanted in the first swing to begin the back and forth. Because they were an Australian house, their paperback prices were super high, so we did an ebook only deal. The negotiations were all handled via email with some back and forth. In the end, I was happy with the final terms and it was a fair negotiation with lots of back and forth.

EB: How difficult overall was it to negotiate these clauses? A lot of people believe that first-time authors have no leverage and therefore can’t negotiate much of any significance. How does your experience stack up against that?

JR: I was under that myth too! And honestly, had I not gone to Superstars just a few months before, I’d have signed the original contract. I had my eyes opened at that seminar and really understood the positioning I had and was then in a mental place that I treated it like any other negotiation/business deal I’d have done in the non-publishing world.

In my experience, I was able to ask for what I wanted, and for the most part, got everything I asked for. The publishers were willing to negotiate nearly all the points I wanted. There were also a few that I had to willingly give up, so it was a typical business transaction where each side met in the middle.

I was working with a very small boutique/indie publisher. I would imagine every publisher handles things differently, so my experience may differ vastly from what someone might find with a different house.

Even with this publisher, the negotiations for book two did not go as smoothly, and I ultimately did not accept their second contract because I didn’t feel the terms where acceptable. We negotiated for a couple months and couldn’t come to an agreement… so even with the same author, same publisher, the experiences were vastly different.

Come back tomorrow for the interview’s conclusion.

Jen Greyson picGuest Bio:
From the moment she decided on a degree in Equestrian Studies, Jen Greyson’s life has been one unscripted adventure after another. Leaving the cowboy state of Wyoming to train show horses in France, Switzerland, and Germany, she’s lived life without much of a plan, but always a book in her suitcase. Now a wife and mom to two young boys, she relies on her adventurous, passionate characters to be the risk-takers. Jen also writes university courses and corporate training material when she’s not enjoying the wilds of the west via wakeboard or snowmobile.

Myke Cole – The Gaming Influence

A guest post by Myke Cole

I’ve written a lot about the influence of gaming in my writing. I don’t have anything to say that you couldn’t guess (and that hasn’t already been said a hundred times at least): that gaming taught me to write a story on the fly with my audience trying to sabotage it. That it helped me to freely imagine, that it helped me understand a story inside the confines of a set of rules.

Not to mention connecting me to amazing people and equally amazing ideas, all of which are critical to the building the bedrock where a storyteller sets their roots.

But gaming had an unusually direct effect on my writing more recently. Back in February of this year, there was a minor blowup on the Internets when Games Workshop, the proprietors of the insanely popular Warhammer and Warhammer 40,000 universes claimed copyright over the term “Space Marine.” When the smoke cleared from that particular dustup, they were determined to be no richer for their efforts, serious in their attempts and greatly diminished in the eyes of the fan community.

Let’s just say I wasn’t surprised.

About a year earlier, I had finally developed contacts inside Black Library, the fiction wing of the Warhammer 40,000 universe and was in the middle of what turned out to be a year long process of hammering out ideas to start writing fiction for the franchise.

I was over the moon. I LOVE the Warhammer 40,000 universe. It is one of the most brilliantly conceived and executed speculative fiction concepts I’ve ever come across, and richly deserves the success it has earned. I loved it so much that I wrote an essay about why I felt it was an important addition to the pantheon (you can read it here – Myke Cole on Warhammer 40K and Apocalypse Literature).

We were talking about giving me my own Space Marine chapter, with a supporting Imperial Guard unit, that hadn’t been written about before. I could develop them as my own, crafting their stories and heroes, fixing them firmly in the universe I loved so much. This is why I was willing to put my nose to the grindstone, working through idea after idea and draft after draft to get to something, anything, that would be acceptable to the editors.

And, after roughly a year, I finally got one across the plate. The editor I was working with made an offer on a short piece of fiction for their inventory, something to maybe be put in as supporting text for a forthcoming manual. It was just a finger in the crack of the closet door, but it was a start. I eagerly awaited the contract.

And then it came.

It was . . . well, it was a lot like the Space Marine thing. The demands were . . . not what my agent and I considered reasonable.

I wrote my editor with a long list of requested changes, begging him to budge on this. I loved the Warhammer 40,000 universe, was desperate to work in it, had already put in many, many hours toward that end.

The answer came back as expected. The contract was the contract. Sign it or walk.

So, I walked.

I spent a lot a downtime after that, bummed to have come so close to achieving a dream, only to miss it on a technicality. That feeling was quickly replaced by frustration over all the time I’d wasted. I had pages and pages of notes of what I thought were really good story ideas, all written to the Warhammer 40,000 standard. All useless now.

I bitched and moaned to my friend and fellow author Peter V. Brett about it and he shrugged. “They’re good stories, aren’t they? And they’re yours. Strip out the IP and look at the bones. Might be something you can use.”

Seems simple, eh? Intuitive? I was in such a bad spot over the experience that I hadn’t thought of it.

So, I sat down and took a hard look at my work. I took the story carcasses and boiled them until anything remotely resembling the Warhammer 40,000 universe came off the bones, until I was left with only the shining white armature of plot and character.

And I was right. Good stories.

Stories I am even now reshaping into work I can sell.

So, gaming influence my writing? Damn straight it does. Thematically, indirectly, and even specifically. There may be disappointments in my life, but the discipline has never let me down, so long as I kept faith with it.

Excited to see where it takes me next.

Guest Writer Bio: As a secu­rity con­tractor, gov­ern­ment civilian and mil­i­tary officer, Myke Cole’s career has run the gamut from Coun­tert­er­rorism to Cyber War­fare to Fed­eral Law Enforce­ment. He’s done three tours in Iraq and was recalled to serve during the Deep­water Horizon oil spill. All that con­flict can wear a guy out. Thank good­ness for fan­tasy novels, comic books, late night games of Dun­geons and Dragons and lots of angst fueled writing. Myke is the author of the Shadow Ops Series: Shadow Ops #1: Control Point, Shadow Ops #2: Fortress Fron­tier, and Shadow Ops #3: Breach Zone. (Author gets credit for all referral links.)

You can find Myke online at www.mykecole.com, or on Facebook, or Twitter.