MERCHANDISING RIGHTS IN BOOK CONTRACTS

IVAN HOFFMAN, B.A., J.D. 


Who owns the rights to market and sell underwear, lunch pails, t-shirts, toys and the like in an agreement between authors and publishers? Given the explosion of the licensing market in the past decade or so and factoring in the new media such as the Internet and CD-ROM, this is a very significant question and one that should be addressed in the agreement. The market could amount to large dollars that may flow from even a moderately best selling book. And that merchandising success can in turn spawn further success of the book and so on. It is often the hit record that carries the feature motion picture which in turn creates a market not only for the original book but spin-offs as well. The party that controls these rights may be in a position to determine much of that success. Or hinder it.

By "merchandising rights" I mean those rights that attend the ownership of the underlying copyright in the book but which involve the sale or license of rights to do marketing and promotional material in media other than the printed medium of the book. And while soft cover or book club licensing or the like may fall loosely within this term, for the purposes of this article I intend to speak to non-book exploitation of the material. These are part of what are considered "ancillary rights" and are, in copyright terms, the right to create a derivative work based upon the original copyright in the book. The United States Copyright law states:

Subject to sections 107 through 120, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(2) to prepare derivative works based upon the copyrighted work;
And a "derivative work" is defined as follows:
A ''derivative work'' is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a ''derivative work''.

THE CONTRACT AND COPYRIGHT QUESTIONS

The initial premise is that the author of a creative work is the owner of the copyright in that work, whether the work is fiction or non-fiction, prose or poetry. This is so, absent a valid agreement to the contrary. It is through the mechanism of the agreement between author and publisher that some if not all rights are transferred from one to the other. If not specifically addressed in the agreement under the language of merchandising rights, a transfer of "all rights" may create confusion and ambiguity in this area that can even lead to loss of potential marketing opportunities if neither party clearly owns the rights to license. Boilerplate language such as where the Publisher agrees to pay x% of any "license with regard to the Work" may not be sufficient. Thus there should be a specific reference and definition to these rights. A review by an attorney of the publishing agreement that you are using may be in order with regard to this issue.

Additionally, these rights must address the entire scope of what may be considered copyrightable material in the underlying work including rights to characters, titles, art, and such. The specific areas in which these rights may be exploited should also be covered, areas such as films, television, multimedia such as CD or via the Internet and all other potential marketing platforms and media.

COVER ART

One area of sizable concern and one filled with some of the most difficulties is that of merchandising rights to the cover art of the book. Cover art can be a major source of licensing since the logo, the style, the colors and such may be what becomes identified in the mind of the public. And what is identified in the mind of the public is what screams from the shelves and stops them in the stores. Cover art is the stuff of all sorts of other marketing paraphernalia.

The issue that arises here is the appropriate acquisition by the publisher of the rights to the art from the artist. Whether acquired via a work made for hire agreement or an assignment of all rights, this is key. If the artist is a bona fide employee of the publisher and does the work in the course and scope of the artist's employment for that publisher, the publisher will likely own the artwork under the work made for hire rules. But independent contractor graphic artists often want to retain rights to their art, licensing to the publisher only those rights necessary for use as a book cover. Thus, the issue is squarely faced and the party retaining merchandising rights is in a significantly better position.

If these rights cannot be obtained from the artist, then the negotiation must include issues such as holdbacks, approval rights, participation interests in order that the exploitation of these rights does not interfere with and indeed enhances the book.

INCOME SPLITS AND OTHER ISSUES

Another area that must be covered in the agreement is how any revenue related to these rights is to be handled. If as between author and publisher one party retains those rights, what shall be the compensation to the other party from any income so derived? What is the split to be, if indeed there is any split at all? And if there is a split, upon what basis are the calculations to be made? Shall the split be based upon gross income, gross revenue, net income and if the latter, how shall the difference between gross and net be calculated?

Yet another concern may be the allocation of the right of approval of the particular merchandising item. Neither side is likely to want to license anything that might be considered as lessening the value of the book but such a standard is at best subjective. Someone has to be given the right of final approval.

CONCLUSION

These are only a sampling of the issues that may arise in this area and this article is not intended to be exhaustive of those issues. But given the potential licensing income that may be involved, it is certainly worth a careful look during the deal-making process. No one knows which book can create the market.

© 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.


FOR MORE INFORMATION: 

FOR RELATED ISSUES TO THOSE RAISED IN THIS ARTICLE, SEE:



"Who Owns the Copyright In Your Website?"

"Work Made For Hire Agreements"

"Protection of Book Titles"

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