Category Archives: The Fictorians

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.

I Swore I Would Never Go Into Business…

ebook cover 9…And then I became a writer.

When people talk about finances, business models, marketing, and spreadsheets, all I here is, “blah, blah, blah…” That’s how I’ve been most of my life. I can  discuss calculus with more energy than I can muster up for anything related to business.  I had to stop and recognize that becoming an author meant I was going into business. I had to make a shift in my way of thinking, especially regarding the works I would self-publish.

We’ve talked about the business side before, but I’m going to say it again, one of the best places to learn about that aspect of writing is Superstars Writing Seminars. Check it out. Beyond that, as I went through the process of putting together my short story anthology, The Black SideI realized forming my own publishing company was probably a good idea.  Jace Sanders addressed this in his post, “My friend said to get an LLC”, but I’m not going to talk about reasons to form publishing companies or types of companies. Instead, let’s talk about some of the business decisions that might need to be considered in conjunction with forming a company.

Money:  Where does it come from and where does it go? Trees, right? I’m still wishing for one of those, but in the meantime, I had to decide if I needed a separate bank account for my business. Depending on the type of business you organize, it may be a necessity, but what if it’s not? After spending time talking with a bank manager, I realized I had a few options. There were multiple types of accounts to choose from and I’m glad I didn’t jump on the first one they suggested to me. I took the time to talk with them, fully understand the pros and cons for each one and the possible tax implications, and then I made an informed decision based on my current needs. In a few years, those needs might change, and that’s something to keep in mind, too.

But it didn’t end with the bank. After getting my account, checks, etc. , I still needed to get everything in place  on Amazon, Paypal and any other service related to my business. I’m still in the process of deciding whether to get the Flint app for payment services or the traditional Square. Maybe that can be a future discussion.

Thanks to Heidi Berthiaume and her excellent advice on how to run a Kickstarter, at least I had money with which to publish my first novel and to make the whole process possible. I can’t wait to get her upcoming book on the subject. Money doesn’t bring happiness, but it helps make a business.

Privacy: You know the part of the copyright page where it says the publishing company and then the ADDRESS? That’s not the only place where you might want to have contact information, but you might not want it to be your home address. This is where a PO Box can come in handy. The postal service offers small boxes for very reasonable fees that won’t cost you more than a night out to dinner. Not everyone takes this option, but I think it’s worth it. When I send out the rewards for my Kickstarter, that’s the return address my supporters will see, further allowing me to separate my personal life, from my business life.

Perception: I don’t think forming a publishing company really changes anyone’s perception of the self-published writer. For those of us familiar with traditional versus self-publishing, it doesn’t take much investigation to recognize whether a writer went through an outside publishing company or formed their own. But registering my company name with the state, the bank account, PO Box, getting an EIN, and all of the other things involved, changed my self-perception, reminding me that I must treat this venture for what it is, a business. I must market, I must work, and I must be professional in order to make it profitable. I also developed a business logo that has personal meaning. Each time I put that on the cover of a book, I’m reminded again, that I’m not only an author, I’m a businesswoman.

So, as you contemplate whether or not to take self-publishing to the level of forming your own publishing company, I hope this gives you some information to consider in your pros and cons.

*As has been stated in previous posts, by other blog contributors, this is not legal advice.

Partnership Considerations

A guest post by Sandra Fitzpatrick.

Greetings!

Thanks to the Fictorians for letting me have some space on their blog. I hope this can help people understand partnerships. There are tax and legal implications that differ slightly between Canada and the US, but I hope to give everyone a starting point.

Partnerships are when two or more people get together for a purpose. For this blog, the basis of the partnership is that you want to share a writing project with other people. It can be the best thing that ever happened to all of you or the worst.

Partnerships need to be thought out carefully. It may seem to wreck the mood of creativity and joy to think about what might happen if things go wrong. Partnerships can range in size from two people to any number. They may grow. They don’t have to be registered with the government but everyone has to pay taxes on the profits and can deduct many expenses if there isn’t. If there is significant income, you should think about registering it or forming a corporation to hold the rights to the work. Either gives everyone involved protection and more structure that makes the bookkeeping and who’s responsible for what easier.

Think of this as a prenuptial agreement. The excitement of starting a new life with someone you love. You’ll never have any troubles. And then the lawyers get involved. Yuck. Bummer. But… The most import question a writer can ask: What if?

Some discussion topics are:

Who owns the project?

Who are the writers, editors, illustrators or publishers of the project? For writers, are you a plotter or a pantser? Can you work with someone who is the opposite?

What percentage of the work and what type will be done by each person? If you are doing a children’s picture book, pairing with an artist may be the obvious division of labor. But is the artist the writer’s partner or an employee? It makes a legal difference.

Communication is key to a partnership in the arts or any other endeavor. Living in different cities makes sitting down and brainstorming difficult. How will you arrange those meetings? Skype is cheaper than long distance phone calls. Emoticons only go so far in showing your passion on a topic in email. Recording your sessions eliminates the ‘Didn’t I write down that fantastic idea?’ blues. Or the ‘I said, you said’ memory lapses.

How will you fund the project to get the book to a publisher or self-publishing? Do a Kickstarter campaign or each contribute an equal amount? An arts grant to help cover printing costs of your new magazine? What happens if that isn’t enough to cover the expenses?

How are royalties split? Evenly? In the case of an anthology, the stories may be purchased and only the editors get royalties. How much can you afford to pay for the stories?

If one person drops out of a larger partnership, what compensation will they get in the future? How do new people join? Or can they?

Who is the final authority on what happens to the overall plot line of the series? Who decides on the little details of adding characters or major plot threads?

If one partner dies, who inherits their share? This supposes that you have a finished book. Or an unfinished one but lots of notes. (Everyone should have a will. Really.)

For an anthology or a magazine, who makes the final decision on what stories to include? Who gets to deal with the slush pile? Who is the faster reader? The better line editor?

How will you shut down the partnership if everyone gets tired of it and wants out? What if not everyone does?

The lawyers’ fees. Who pays them? Can you sit down and go ‘what if’ with each other? And still remain friends and complete the project? A lawyer is a neutral party. If you know a publisher, ask them for a referral to their lawyer. You can look up information on the net, but most articles have limited information for a writing partnership.

Examples:

Two people write a book together. They thrash out the general plot line and take turns writing chapters. Each edits the other’s chapters. What is the time limit on writing your chapter? Or they could alternate books, or have subplots within the novel, each following their own main character. Each has expertise that makes the book(s) better.

A big name and a newcomer collaborate on a book. This can boost sales because the big name will sell the book. The newcomer will be noticed. Be careful. Is the newcomer putting in 90% of the work and getting 10% of the profit? How much does the big name make just because his name was on a book someone else wrote?

Anthologies can be fun. Choose a theme, a publisher and send out word for submissions. Are the editors guaranteed a story spot? Is there a set fee for each story and/or a percentage of royalties? Who’s the better copy editor?

Shared universe series. The overall coordinator supervises the universe with veto power over plot lines. New authors can be invited in or just ask. These series can get very large and complex. More plot and character oversight is needed once you get past three or four partners.

Enjoy your writing partnership!

Guest Writer Bio:
Sandra head shotI’m a tax preparer and financial advisor in Canada with eight years experience in the trenches of business tax returns. I’ve done tax seminars for writers, artists and other creative folk over the years. I write sf and fantasy in my non-tax months. My husband Gary is working on a detective series when not confusing medical students.

Spreading your Intellectual Property without Infringing on Someone Else’s

Image in the Public Domain from the Library of Congress.
Image in the Public Domain from the Library of Congress.

Many people view the internet as a lawless scary place where virtual goods, the lifeblood of starving authors and artists worldwide, is freely traded and stolen. And worst, this is all done without the original creators knowledge or consent. This is the image often portrayed by lawyers and copyright holders around the world when working to protect their personal income. The sad thing is, to an extent, they’re completely right. It’s not difficult to find copyrighted works, especially popular and bestselling works, available for download the day they’re released. While there are many competing views, as content creators ourselves, we should make the best effort to stay on the straight and narrow as we promote ourselves and our works.

It’s not easy to provide good content and still ensure everything is legal. If you’re reading this blog, it’s likely that you’re an author working on your own works. Your words are interesting, your descriptions are captivating, and your audience is enthralled. However, if you’re like me, your drawing abilities leave much to be desired. But fear not, the internet is there for you. A simple google image search quickly gives you many great images that will give your prose that nudge to perfection. It happens all the time, and many times nothing bad comes from it. Perhaps even most of the time, nobody will even notice that the work didn’t belong to you. Some may even think you created it yourself. But, for the sake of argument, what if it was your work that someone “borrowed” and put on their page. No attribution or notice to you. It might make you feel guilty and quickly try to set matters right. Luckily, as technology advances, so does the ability to find content that is freely available to use on your site!

As always, if you’re concerned or have any questions, consulting a copyright lawyer can save you time and money in the long run. Information is freely given, but you ultimately own the responsibility for your own actions.

Images: As with all content, you want to ensure you have the rights and permissions to duplicate and host someone else’s work. While it’s perfectly acceptable to find an image you like on the web and ask the creator for permission, sometimes it’s difficult to know exactly who the creator is. If the owner of a piece of work is ambiguous, you probably just want to avoid the work altogether. When searching for work, look to buy from well known vendors or via trusted sources. A couple well known sites include: Shutterstock and iStockphoto.

If searching for free images, you probably want to look for images that are hosted under the Creative Commons license or listed as Free Use. These images are available by the content creator for your use following certain restrictions. Before using them, ensure you understand what is required and how far the rights extend. Many images, for example, are available to anyone as long as they contain proper attribution and are used for non-profit purposes. A few good sites to find Creative Commons images are to look at the Creative Commons section of flickr or look at wikimedia. You can also do a Google Images search and select “Labeled for reuse” under the usage rights of the search tools. Finally, you can just do a search on the Creative Commons website itself.

Writing: Like using images created by another, written content should be used carefully as well. Everything is given an initial copyright as soon as it is created, and that work should be respected. It is usually pretty easy to get access to bloggers and authors if you wish, so it’s never a bad idea to send a quick email asking for permission. This usually costs you a little time and can be very rewarding in the long run. The original author may even send traffic your way as a token of appreciation of your own work. You should always link back to the original work if possible as well. If not, make sure you give proper attribution and details on how the users can find the work referenced.

In the end, if you are using someone else’s work to help promote yourself. Someone, in the future, may consider doing something similar with your work. Play it forward and do what you can to help improve the current state of copyright on the internet. It may not get any better, but at least you’ll know that you’re one of the good guys. And, better yet, it might keep you free of all legal issues and ensure you can keep writing the good stuff!