Just one example: those provisions in an agreement allowing for the right of assignment on the part of the other party. These provisions can appear in a licensing agreement where the publisher assigns some set of rights to another party, such as serialization rights, merchandising rights, book club rights or the like. It can also appear in a foreign publishing deal in which the United States publisher assigns the right to either reprint or translate their English language version to a publisher in another country. It can also find its way into a web design agreement whereby the designer grants the site owner the right to assign the rights granted by the designer to others.
The seemingly innocuous words often appear as merely a phrase in the agreement to the effect that "Publisher [Designer] grants to Licensee and Licensee's successors and assigns, ...." The right of assignment on the part of the Licensee in this instance is expressly granted even if the consequences are unintended. There may also be an express provision granting either or both of the parties the right to assign their rights and duties under this agreement. While having the ability to assign may be of advantage to the publisher or designer, it can turn out to be very costly if that right is granted to the licensee.
The right of assignment can also be implied and the failure to expressly prohibit the right of assignment may imply that such right exists. In the United States, the right of assignment is generally allowed unless the agreement is what is referred to as a "personal service contract" on the part of the licensee in which the personal services of the licensee are called for. In the examples about which I am writing in this article, these agreements almost assuredly are not considered personal service agreements on the part of the licensee and therefore, unless prohibited, the right of assignment may be implied by a court.
And of course it is the purpose of effective contract drafting to eliminate the possibilities of uncertainty wherever possible. Contracts are, after all, an attempt to create a "private law" and except in certain circumstances, courts will give great weight to what the parties have created in that contract. Therefore, it is in both parties best interest to make the agreement as clear as possible. In this instance, the failure to address this "assignment" provision may create significant uncertainty that may impact upon the ability of both parties to exploit the work that is the subject of the agreement.
The Effect of the Assignment
The perhaps unintended effect of granting a licensee the right to assign its rights under the agreement is to deprive the publisher or designer of the right to make the very deals that the licensee is now making. For example, if the publisher grants to a licensee the right to serialize a portion of a book and the licensee has, either expressly or by implication, the right to assign its rights, then the publisher may be deprived of the right to make another serialization deal. Additionally, the designer may have granted the right to the site owner to assign the rights the designer granted to the site owner to others and, as a result, the designer may find his or her designs being licensed to third parties thereby losing money.
And while it may be true that the publisher or designer may participate in the income received by the licensee from this further subassignment (not necessarily a given since the publisher or designer would have to have negotiated for that right), the net result is that the publisher or designer now has a partner in that income when it could have had no one else to share that income with, excerpt perhaps the author in the case of the publisher. Therefore, it is almost never in the best interests of the publisher-designer-licensor to allow the licensee the right to assign the licensee's rights.
Another potentially disastrous consequence can arise if a publisher makes a foreign publishing deal and does not restrict the right of the foreign licensee to assign its rights. What this may mean is that if the foreign deal is say for an English language reprint or a Spanish language translation for say one country, the licensee may make a deal in that country but for rights to sell the English language reprint or Spanish language translation rights in another country or countries. This may deprive the publisher of the ability to make those deals directly and that publisher then loses substantial sums as a result. Keep in mind that merely limiting the above licensee to selling books in one country may not solve the problem if that licensee as the right to assign its rights to another. And under the best of circumstances, a contract that does not expressly deal with this issue has the potential of creating a cloud over the rights and that in turn can cost everyone money. It may also lead to liability for the publisher since the publisher owes a duty to the author to maximize the income and the failure to have an appropriate contract may lead the author to sue the publisher for loss of income.
Consider as well the Internet and electronic rights. If the licensee is not restricted in its ability to further license the rights the publisher or designer has granted, the publisher or designer may find that the work is being distributed not only all over the Internet instead of merely on one site but in CD-ROM, DVD and other forms of electronic rights as well by virtue of the original licensee assigning those rights to third parties and now that licensee,, and not the publisher or designer, is receiving the money so derived.
Finally, by restricting the right of assignment, the publisher or designer has an opportunity to control the exploitation of rights and as a result, be in a position to make better deals themselves.
When the publisher or designer are negotiating their deals, the publisher or designer are well advised not to try and figure the deal out themselves but to seek out professional legal services to tell the publisher or designer what it is they are signing. In this instance, as in many other instances, trying to save a few bucks on attorneys fees may turn out to be quite expensive. It is the wise publisher and designer that understand the difference between value and cost.
What may seem like innocent language can turn out to be a very costly mistake.
The devil, it is said, is in the details.
© 1998 Ivan Hoffman
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.
No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.