THE GAP TRAP:

The Hidden Perils For The Author in Licensing

IVAN HOFFMAN, B.A., J.D.


Frequently an author uses protected materials owned by third parties and is in need of licensing the use of the same for the author's book. These uses can involve text, graphics, photographs, screen shots, software or other items. The license agreement that the author uses must be carefully constructed to avoid potentially disastrous and costly problems down the road.

An initial word of caution: the author is well advised to avoid the use of "standard" licensing forms for such situations. It has been my experience that the use of such a "standard" form is often woefully inadequate to protect the author's rights and the use, without customized tailoring to fit the circumstances, may present the author with substantial liability issues. Indeed, the use of the word "standard" when applied to legal contracts ought, in and of itself, to be a flashing red light. If such forms are drafted by the publisher, even if intended to be used by the author, the author may not be fully protected by its provisions.

And another word of caution: the author should avoid using forms provided by the licensor, the owner of the material. Those forms are designed, if well-crafted, to license as little as possible whereas the author needs to license as much as possible.

HOW THESE ISSUES ARISE

Here is the set up: the author's agreement with the publisher provides that the author assigns to the publisher many rights: the right to publish the book; the right to publish the book in all languages; the right to make a CD-ROM out of it; the right to turn it into other works (derivative works) such as through the exploitation of ancillary rights such as electronic versions, motion picture rights, television rights, merchandising rights and so on. Let us not forget that such exploitation is becoming more and more common and the Internet makes it all the likely that it will become even more common as we progress.

The assignment of rights most always grants the publisher the right to assign to third parties all the rights that the author has granted the publisher. These rights, often bundled in a paragraph called "Subsidiary Rights," cover the entirety of the scope of copyrights and other proprietary rights in and to the book and its contents.

But the issue for the purpose of this article is not what the author creates and the rights thereto. The issue rather deals with that material the author uses that belongs to others. I have written extensively about the need to license but this article deals with some of the contents of that license. In the book publishing contract, the definition of the deliverable "Work" almost always includes all the rights to the material owned and controlled by these third parties. The author is solely responsible for obtaining rights to this material as part of the author's obligations under the publishing contract. If any of the necessary permissions and licenses for this other material is not delivered in acceptable form to enable the publisher to fully exploit all the rights granted it by the author, the author is on the verge of trouble, as I explain below.

The issue is complicated because the rights that the author obtains from the third parties must match exactly the rights that the author is granting to the publisher and the publisher's assignees. In other words, if the publisher is granted all the rights in the Work, including the rights to be derived from third parties as to their material, then the author must obtain the same rights from these third parties that the author is granting to the publisher. If there are rights that the author has not obtained from third parties but which the author has granted to the publisher, then there is a gap in the scope of protection and it is the author that is caught in the snare so created-the gap trap.

THE LIABILITY ISSUES AS TO THE THIRD PARTY

In seeking permission and licenses, the author must be fully aware of the scope of the rights the author has granted away to the publisher in the author's contract. A careful reading will disclose the quantity of rights, the territorial scope of those rights, the assignability of those rights by the publisher, the term of that grant of rights, the exclusive/non-exclusive nature of the grant of rights and so on.

It is then the responsibility of the author to go to the licensing party that owns and/or controls the rights that the author needs and make certain that the author obtains the same scope of rights from that licensor. Depending upon the rights needed to match the rights granted to the publisher, there may be fees involved. There may also be different owners of different rights, necessitating dealing with several parties. There may be many stumbling blocks in that certain rights cannot be obtained, either because of the licensor's contractual issues or because the licensor is unwilling to make those grants. In such instances, it is often the best approach for the author not to use such material for to use it without adequate protection can create legal problems for the author.

The author must also be certain to obtain appropriate representations and warranties from the licensor that in fact the licensor owns and controls the rights granted and that if such turns out not to be so, the licensor will hold the author and the publisher harmless from all damages, costs including attorneys fees that may result from the use of the rights by the author and the publisher.

If there is a gap trap, if the author has not obtained the full compliment of rights needed to match the rights granted the publisher, and if the publisher then exploits the Work in markets and media that are not covered by the license from the owner of the third party material, the publisher may then be infringing upon the copyrights, trademark rights and perhaps other rights of that licensor. And if enough money is generated by such exploitation, you can be fairly certain that some rather nasty problems may emerge in the form of licensors claiming such infringement or other violations.

And if the publisher is found to be infringing, the publisher will turn to the author for remedies.

THE LIABILITY ISSUES AS TO THE PUBLISHER

If it turns out that the author has not obtained the appropriate licenses, if, in other words, the author gets caught in the gap trap, then both the publisher and the author may face legal consequences. The publisher may find itself on the end of the copyright or other rights infringement or violation claim. Perhaps even a lawsuit in the event the project is big enough.

And if the publisher receives a claim, the publisher immediately turns to the contractual provisions in its deal with the author whereby the author represented and warranted that it had all the rights to the Work, including such third party rights. And under such indemnity, the author then may find himself or herself at the peril of also being sued, if not by the third party then by the publisher, but more often by both. It is the author, not the publisher, that may end up having to pay damages and costs plus the author's attorneys fees, the publisher's attorneys fees and under certain circumstances, the third parties' attorneys fees. And if such does occur, you can bet that the publisher will be withholding all the monies coming due to the author at least under the contract involved and perhaps under other contracts between the author and the publisher.

CONCLUSION

These are but a few of the many issues involved in the appropriate licensing of materials. I suppose the lesson in all of this is to not rely on what seem to be "standard" or preprinted forms and be attentive to the specifics of the transaction. As always, the devil, as they say, is in the details.

For more on the need to license, read "Screen Shot Liability for Computer Book Authors" and "The Use of Protected Materials in Multimedia Projects" among other articles on my site. Click on "Internet and Electronic Rights Issues" below.

© 1996 Ivan Hoffman

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This article is not intended as a substitute for legal advice. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. You should consult with an attorney familiar with the issues and the laws.

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No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.


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