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Negotiating Subsidiary Rights in Book Publishing Deals

The right to publish a book isn’t the only right that authors can grant to a publisher or retain for themselves. Authors may also grant or retain subsidiary rights in the book. A subsidiary right is the right to publish or produce the book in other formats, such as e-books, audiobooks, films or television shows, and more. This post details some of those rights and gives authors and literary agents insights on how and when to negotiate those clauses of a book publishing deal.

In reality, it is often very hard for an author to retain these rights for himself or herself entirely. As such, the author may be more successful negotiating for a larger split in the profits from these rights. 

Television and Film Rights

Any author in this day and age knows that there is just as much, if not more, money to be made in adaptations than there is in book sales alone. As such, authors generally want to retain as many adaptation rights as possible, and the publisher will generally propose broad language that grants them a broad right to sell all the adaptation rights.

In particular, movie and television adaptations have a strong potential to earn authors a lot of money on top of their book royalties. Because these adaptations have such high earning potential, most publishers will want this right. However, some authors are successful in arguing that they should retain this right, especially if the publisher has never licensed a book to a production company or network before or if the author is represented by a literary agency with connections to movie and television producers, studios, or networks.

An author with a skillful literary agent may be better poised to exploit these rights than a publisher with little experience in the film and television industry. Many reputable literary agencies have special agents specifically charged with exploiting the subsidiary rights of the authors represented by those agencies. That being said, reputable publishing houses often have similar employees who are specifically charged with exploiting the subsidiary rights of the books they publish. It is important for authors to discuss this topic with their literary agent and their publisher to determine what arrangement is best.

E-books, Audiobooks, and Other Formats

There is also a large market for e-books and audiobooks that can be easily exploited as a secondary source of income for authors. As such, book publishing contracts will also regulate whether the author grants or retains the right to exploit the book as an e-book, audiobook, or in some other format.

Audiobook services like Audible are eager to increase the size of their audiobook library and are generally willing to buy almost any published book they can. However, many large publishers are allocating resources to exploiting audiobook rights in-house. These publishers may demand that the derivative right in audiobooks be granted, so the publisher can produce the audiobook in-house and distribute it within existing channels. In such cases, it is likely in the author’s best interest to allow the publisher to do so. Alternatively, an author may be represented by a literary agency with expertise and experience in the area of licensing books to e-book and audiobook companies. In such instances, it may be in the author’s best interest to retain these rights, so his or her literary agent can exploit those rights on his or her behalf. It is important for authors to discuss this topic with their literary agent and their publisher to determine what arrangement is best.

Merchandising

T-shirts, bobbleheads, posters, trading cards, bookmarks, and stationary are all common items on the shelves of bookstores. Frequently, these items feature characters and trademarks licensed from popular books. The authors of these books receive royalties on the sale of those items.

Successful authors that have retained the right to license their characters and trademarks to third parties may seek representation by a licensing agency. Licensing agents have a role similar to literary agents in that they receive a portion of the profits earned on deals that the licensing agent locates and negotiates on the author’s behalf. Licensing agents have connections to retailers, designers, developers, and other merchandisers that are looking for the latest craze to put on their t-shirts, video games, board games, and other products. These relationships make the licensing process easier to execute.

Similarly, many literary agencies and publishers have in-house teams that are tasked with locating interested merchandisers and negotiating merchandise licensing deals on the author’s behalf. Others may rely on third-party licensing agencies. Authors should discuss this matter with their literary agent and publisher to determine who is best suited to exploit these rights in a way that maximizes the author’s potential profits.

Drafting Subsidiary Rights Clauses

From a copyright law standpoint, all these licensing opportunities are considered derivative works. The right to make an adaptation is known as a derivative right. Here is an example of a broad adaptation clause that most benefits the publisher:

Author grants Publisher the exclusive right to sell, license, and otherwise exploit the derivative rights in the Work throughout the world during the full term of copyright and any renewals and extensions thereof except as provided herein.

By using the broad term “derivative rights,” the publisher receives the right to exploit the book as a motion picture, radio play, television show, audiobook, theatrical play, and any other possible format. Thus, it would benefit the author to negotiate this broad “derivative rights” language down to more specific, narrower terms that exclude specific adaptations which the author hopes to exploit himself or herself. If the author seeks to retain certain derivative rights for himself or herself, it is best to explicitly state that in the contract. If the author and the publisher will split the profits obtained from exploiting certain derivative rights, it is best to also explicitly state that in the contract. For example:

Author shall retain the exclusive right to sell, license, or otherwise exploit the Work as an e-book and an audiobook throughout the world during the full term of the copyright and any renewals and extensions thereof except as provided here.

Author grants Publisher the exclusive right to sell, license, or otherwise exploit all other derivative rights in the Work in all other formats, excluding e-books and audiobooks, throughout the world during the full term of the copyright and any renewals and extensions thereof except as provided herein. All sums from the sale of these rights or materials produced under those rights shall be divided so that the Author receives fifty percent (50%) of the net amount received.

It is important for the author to negotiate who has control over these rights and what the author’s royalty will be. Typically, the publisher will seek the sole right to negotiate and sign contracts in regard to subsidiary rights. However, a skilled literary agent will negotiate terms more favorable to the author.


This series informs authors, literary agents, lawyers, publishers, and other interested readers about the basics of book deals. It provides tactics and tips to be used when negotiating a book deal. It consists of four parts that cover negotiating the following topics:

  1. Registering Trademarks and Copyrights
  2. Exclusivity and the Grant of Rights
  3. Subsidiary Rights
  4. Other Important Rights

Check back each week for the newest post or subscribe to the newsletter on bobbydesmond.com to get it sent directly to your email inbox.


About: DJ turned JD highlights the latest legal updates in the entertainment and media industries, intellectual property, the internet and social media. The blawg is compiled and curated by Bobby Desmond. After working as a radio personality, Bobby attended the University of Florida Levin College of Law in order to pursue an in-house legal career at an entertainment or media corporation. He has interned at PBS with America’s Public Television Stations in Arlington, VA and at AMC Networks in New York, NY. He graduated in May 2018 and passed the New York Bar Exam in July 2018.


 

Litigation and Policy Trends in Entertainment, Media, and IP Law

Litigation Trends in Social Media, Music, and Video Streaming:

  • The Most Litigious Firms in Copyright Law Are Boutiques. Small boutique firms (specializing in a certain area such as photojournalism, fashion, and the internet) filed the most copyright lawsuits during the second quarter of 2017. Between April 1 and June 30, Liebowitz Law Firm filed 113 new copyright cases, the most by a single firm. Doniger Burroughs came in second place with 83 new lawsuits this quarter. Doniger has filed at least 40 new copyright lawsuits each quarter for the last two and a half years. Lonstein Law Office came in sixth place with 14 new copyright lawsuits that all alleged bars had illegally shown UFC matches.
  • Paparazzi Plaintiffs Sue Celebrities for Instagram Posts. Celebrities and their social media accounts are being targeted by a string of paparazzi plaintiffs who are suing the celebs for posting photos of the themselves that were candidly taken by the paps. Diddy recently settled an infringement suit brought against him for posting a picture on his Instagram account. The paparazzi plaintiff took the photo of Diddy at the opening of a Harlem charter school. A paparazzi plaintiff also sued Khloe Kardashian after she posted a picture of herself on her Instagram account that the pap had captured of Khloe and Kourtney Kardashian eating out in Miami.
  • Artists Advised Not to Reveal Inspiration behind New Songs. After Pharrell Williams said he was “channeling … that late 70s feeling” of Marvin Gaye’s music which played a pivotal role in William’s younger years, Gaye’s estate was awarded $7.3 million for copyright infringement in Robin Thicke and Pharrell Williams’ “Blurred Lines.” Industry leaders and agents are cautioning artists not to publicly declare the inspirations behind their latest music, out of fear that “inspiration can [now be interpreted as] a catalyst for infringement.” Other artists are required to sign contracts that reveal their inspirations to the record labels, which use those lists to research potential infringement claims before they happen.
  • Beware of the Newest Way to Illegally Stream Content. Mobdro is the one of the latest streaming services that facilitates infringement by directing users to a trove of illegal live and on-demand television shows, movies, and sporting events. While the app isn’t available in the app store, in-the-know users are able to install the app for free online in order to play content directly on their TVs through Google’s Chromecast or Amazon’s Fire TV Stick. The new app has been frequently compared to Kodi, another streaming service that has been the subject of numerous lawsuits.

Policy Trends in Entertainment, Media, and Intellectual Property:

  • Google Influences Policy by Paying Professors for Research. Drawing on a list of IP academics, Google paid between $5,000 and $400,000 for hundreds of research papers that the tech giant then cited in its fight against regulations. Google made the payments either directly or through the think tanks it funds. Some professors gave Google a degree of editorial oversight, allowing the company to review the work and offer suggestions before publication. The professors argue that disclosing research to the company before publication ensures accuracy. Additionally, Google told professors that it appreciates attribution or acknowledgement of its financial support. However, many professors did not disclose their financial incentives. Google argues that it values the independence and integrity of universities, and simply supports IP and tech researchers in hopes of amplifying voices that argue for an open internet. Other tech giants have also paid professors for research. In fact, Microsoft, Qualcomm, Verizon, and AT&T have all paid for negative research on Google. Some have compared this new trend in the tech industry to Big Tobacco’s funding of questionable research into the dangers of smoking.
  • U.S. Tech Companies Unite in Support of Net Neutrality. On July 12, tens of thousands of tech companies and websites protested proposed changes to net neutrality rules in the United States during the Internet-Wide Day of Action to Save Net Neutrality. Sites including Facebook, Netflix, Twitter, Reddit, Amazon, and OkCupid participated by displaying banners or videos and by promoting hashtags or other media to incite their users to oppose the new administration’s attempts to overturn the Obama-era regulations on internet fast-lanes. Other companies including internet service providers like AT&T and Verizon voiced support for net neutrality while opposing the 2015 regulations.
  • “Right to Repair” Bills. Repair rights advocates argue that corporations are abusing copyright law to prevent third-party mechanics from fixing their products. Specifically, The Repair Association takes issue with companies that use the DMCA’s anti-circumvention provision to prevent mechanics from fixing smart machines, since doing so often constitutes a hack punishable by hefty fines and prison time. This leaves customers with only two options: return to the manufacturer for an expensive repair or buy a new device. The point of contention frequently comes down to whether users are owners or licensees of the products – usually, you own the hardware but license the smart software. Twelve states are currently considering “Right to Repair” bills which would require manufacturers to sell parts and manuals to be used by third-party mechanics. On the national stage, the You Own Devices Act, which was introduced to Congress in February, would extend the first sale doctrine to software, by restricting a company’s ability to prevent their customers from reselling or leasing their products. Customers would be able to transfer the licenses of any software on their devices to the new owner.
  • New Bills would have Major Impact on Music Industry if Passed. Congressional representatives have introduced or reintroduced multiple bills that seek to make copyright law apply more evenly and equally across the many different entities in the music industry. Here is a brief look at some of the most important aspects of these pending bills:
    • Fair Play Fair Pay Act of 2017. In an attempt to make copyright law apply to traditional broadcast radio stations as it does to digital streaming services, this bill would require terrestrial stations to pay royalties to copyright owners by giving copyright owners a new exclusive right to perform or authorize the performance of a sound recording by means of any audio transmission. The bill was previously introduced in 2015, but failed to pass after extensive lobbying by the radio industry.
    • Performance Royalty Owners Music Opportunity to Earn Act of 2017. In a different approach to a similar issue, this bill would require terrestrial radio stations to secure permission to use an Artist’s song. While the bill does not change the royalty landscape, Congressman Issa explained that the bill “calls the bluff of both sides in a debate over performance rights” by allowing artists to pull their songs from radio and miss out on the “exposure and promotional value” of radio air time.
    • Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act. Terrestrial radio isn’t the only free-riding target that Congress has its sights set on. This bill would require streaming services to pay a royalty for pre-1972 songs, by applying existing law to songs created before February 15, 1972 in the same way that it is applied to songs created after that date.
    • Allocation for Music Producers Act. This bill would amend Section 114 of the Copyright Act to grant music producers a new right to be compensated for their recordings through the letter of direction process.
    • Register of Copyrights Selection and Accountability Act of 2017. Under current law, the Librarian of Congress has the authority to appoint a Register of Copyrights. The bill seeks to make the position a presidential appointment subject to Senatorial confirmation and limited to a renewable ten-year term. While the position has no power to make law, anyone appointed plays a signification role in shaping copyright policy – a role that expands under this bill.
    • Copyright Office for the Digital Economy Act. Similarly, this bill would make the position of Register a presidential appointment, however the position would not be renewable. This bill also seeks to move the Copyright Office away from the Library of Congress to a more independent position.

About: DJ turned JD highlights the latest legal updates in the entertainment and media industries, intellectual property, the internet and social media. The blawg is compiled and curated by Bobby Desmond. After working as a radio personality, Bobby attended the University of Florida Levin College of Law in order to pursue an in-house legal career at an entertainment or media corporation. He has interned at PBS with America’s Public Television Stations in Arlington, VA and at AMC Networks in New York, NY. He graduated in May 2018 and passed the New York Bar Exam in July 2018.