WHAT CAN HAPPEN TO YOUR PROJECT
IF YOU DON’T PLAN AHEAD?
Ivan Hoffman, B.A., J.D.
The short answer to the question posed by the title of this article (to be elaborated upon below) is that your project likely falls apart! Whatever your project…book, television show, movie, web site etc., goes absolutely no where. It is generally over before it starts, although the “owner” rarely knows that at the time and so goes about spending time, money, dedication etc. trying to get it off the ground. And all the time, money, dedication etc. that the party has put into it is eventually completely lost if not on day 1 but thereafter.
And the main reason (also to be elaborated upon below) that it falls apart and goes nowhere is because without laying a proper legal basis, one that is designed to withstand legal challenges, you cannot count the number of claims that are likely to arise should the project show even the smallest chance of being successful and even if it is a colossal failure. And while no one can prevent claims from being made, if the legal basis, especially the intellectual property and the written and signed agreements, are properly put together, the chances that such claims could be raised can be substantially diminished. If a potential claimant examines the situation and realizes that he, she or it is likely to lose in any legal contest, it makes the chances of any claims being raised possibly less likely.
And the most significant building blocks for that that proper legal base (also to be elaborated upon below) are clear intellectual property rights and thorough, clear and legally valid agreements signed by all parties. In the intellectual property business, the key elements, without which you have nothing, are clear and thorough ownership of rights in the form of copyrights, trademarks and other forms of intellectual property as well as rights that arise from written agreements. (I do not handle patent legal matters and so this article will not deal with patent issues.)
But my experience is that many parties simply either do not know about how to protect their rights to their projects or if they do know that they need to do so, do so in a “self-help” manner that is legally and woefully inadequate if indeed not totally useless. How this makes any sense at all is completely beyond my comprehension. But then again, I think like an entrepreneur as well as an attorney.
And then they come to an attorney to “fix” them. My further experience has shown me that “help me” is almost always infinitely cheaper than “fix me.” (Read “Hoffman-isms: 35 Words That Can Help You Make Money” and “Ten Words That Can Help You Make Money” and “Set To Fail” and many other articles on my site.) Doing things right in the first place is far, far less expensive and likely to be far, far more effective than trying to win one or more lawsuits or trying to retrofit an already completed deal.
So let me explain some of the points above in more detail. I will refer to many articles I have already written because I have expressed these ideas in those articles in more detail and you should read these and the other articles on my site.
These issues arise in regard to many “works,” whether they be movies, television shows, books or other works. In my experience, movies and television, because they require much more money to get into and are more often populated with experienced producers, tend to produce creators who understand some of these issues and frequently, although not universally, address these matters better and usually through experienced legal counsel. Additionally, these type works almost always involve dealing with and entering into agreements with third parties (distributors, networks etc. ) and that causes the producers to have to address these issues as a result of the requirements of those third parties.
However, when it comes to books, the barriers to entry into that market are very low and thus these works tend to produce creators without any knowledge or very little knowledge of these issues who tend to find out about the same only when things go wrong. So although the focus of this article is primarily books because they seem to produce the most issues, the substance of the article applies to all these works.
And what do I mean by “vision?” In my vernacular and for purposes of this article, the word refers to seeing the end goal on day one. After all, a good entrepreneur works backward. That means that a good entrepreneur sees the end of the project or at least where he or she wants the project to be in 10 or so years and knows what he or she has to do in 8 years, in 5 years…what he or she has to do today to be there in 10 years. And today almost always involves laying a solid legal basis. Read “The Need For Vision” on my site.
The Fundamental Premise
Unless you are the actual creator of a copyrightable work of any kind, you cannot acquire exclusive rights (and you must have exclusive rights if you are to effectively be able to use and allow others to use your work…see more below) unless you have a valid writing signed by the actual creator. I am leaving aside situations in which the actual creator is a bona fide employee of the engaging party doing work in the course and scope of their employment as that is a rare situation except perhaps when it comes to motion pictures and perhaps television shows. Read “The Fundamental Principle Under United States Copyright Law” on my site. It is so important it is at the top of every article table of contents page.
That means that if you are a publisher, you are not the actual creator of the work.
That means if you are an author and you engage an illustrator, cover artist or editor or other parties, you are not the actual creator of the work of those parties.
And these are just a few examples.
And by far, by a vastly overwhelming majority, the single biggest mistake made by publishers and authors alike is the failure to get any written agreement with the illustrator and cover artist that provides to the publisher or author exclusive rights to the entirety of the work of the illustrator and cover artist. Without question, cover art and illustrations are in nearly every instance infinitely more valuable than the text since it is from cover art and illustrations that merchandising rights arise. Think of your favorite characters from children’s literature, just as but one example. I doubt more than a handful of persons on this planet can relate the details of any story line from those books and yet I imagine that nearly everyone on the planet can tell you what the characters in those stories look like. The visuals are key. If you want to have even a small chance to make money, whether or not you are writing children’s books, own the rights to the cover art and merchandising! Read “The Cover Artist/Illustrator Agreement” and “The Book Editor Contract” on my site.
Now of course the illustrator (and editor etc.) may object to the transference of all his/her rights exclusively to the publisher/author and thus a negotiation must take place. It is not simply this or that. There are a wide variety of areas for discussion but without knowing what those areas are and how they can be used to reach a compromise, the parties may simply end up in a stalemate and the project goes nowhere. The mantra is “own everything.” Read “Hoffman-isms: 35 Words That Can Help You Make Money” on my site.
And one of the other points I have learned is that it is nearly impossible, but certainly far more difficult, to make a deal once the work has been done or the project completed. Parties’ positions change and they become less negotiable. So if you do not accomplish laying your legal basis properly before the project starts, you may find that you will not able to do so thereafter.
The Need for Exclusive Rights
As I have said, in order to acquire exclusive rights to the work of another party (absent the employer-employee situation), you must have a valid and signed writing. That writing should be a thorough agreement since there are many issues that need to be covered in addition to the actual transfer of rights set of issues.
What is the value of exclusive rights? One primary reason is that without exclusive rights you are not even the copyright proprietor of the work of that other party and are not in a position to make money from that work since the likelihood that you will be able to use such rights or allow others to use such rights is slim to none. Your rights, without a thorough agreement, are likely to be clouded in legal uncertainty. This means you will probably not be able to make foreign deals since that involves transferring exclusive rights to the foreign licensee (at least for certain territories), rights you do not have (or if you do not have a written agreement, you probably do not even have non-exclusive rights to these rights). It means you will not be able to make merchandising deals (see above) since you will not be able to transfer exclusive rights (or if you do not have a written agreement, you probably do not even have non-exclusive rights to these rights). It means that if you will not be able to make deals for other media such as television, motion picture, digital books etc. etc. since these involve needing to license exclusive rights as well which you do not have (or if you do not have a written agreement, you probably do not even have non-exclusive rights to these rights). Read the numerous articles on my site under the link “Articles for Writers and Publishers” under the main title “A Legal Nightmare: The Unwritten License” and “Precise Contract Drafting.”
Furthermore, in nearly every agreement you might wish to make with another party to exploit the work, that agreement will likely require you to represent and warrant that you actually own all rights to the work that you are seeking to license. That includes not only rights to other territories and languages but rights to other media and all other rights. And without having the proper legal basis and without having the proper legal agreements, you cannot make those representations and warranties because you do not own such rights and certainly not exclusive rights. And if, despite such legal gaps, you do make these representations and warranties and a claim is made, you will also have agreed in those other party agreements to indemnify the other party from any such claims. So here is but one scenario: a claim is made (and frankly given even the most unsuccessful project, claims are nearly always made…we live in litigious times), and all of sudden the fees and costs start…not only your attorneys fees and costs but the other party’s attorneys fees and costs for which you are responsible. And then if you lose, you may also have to pay the winning party’s attorneys fees and costs! And on top of all that, damages!
And during the pendency of all these formal legal proceedings, the project is likely going nowhere since no one knows what the outcome will be. And irrespective of the outcome, the market for the project may have long since passed once it is determined.
And it is not just any agreement that will suffice. I’ve seen woefully inadequate agreements that are either vague and uncertain or which do not cover all the issues or both or have other “lackings.” So in a real sense, this false sense of security is actually equally as bad or in some instances worse than no agreement at all since the author/publisher will likely spend many dollars marketing and promoting the book in the belief that he/she or it has rights that it does not have only to find out, too late, of that sad fact, usually when a claim is made.
And all this because you did not spend a relatively few dollars laying a proper legal basis including entering into properly drafted agreements. So let me again write the rhetorical comment: How this makes any sense at all is completely beyond my comprehension.
Although I have written above about copyrights and contract rights, a solid legal basis is also necessary as to trademark rights. As authors and publishers, you may have trademark rights in characters, in book series titles, in images used as trademarks and other elements. All these should be the subject of United States federal registrations and, if you do business outside of the United States, foreign registrations as well. Remember that there are distinct and valuable rights and remedies that attend having United States registrations (read “Should I Register My Trademarks” on my site.
And remember as well that having domain names that cover your work or works is extraordinarily valuable as well. Here again, written agreements with web designers and developers is very important. Often parties will engage the services of these parties including online services without any written agreement or only “terms and conditions” established by the designer/developer/service to which the party merely agrees to by clicking on “I Accept.” Read “Jargon” and “Web Designers, Clients and Domain Names” on my site.
And note the connection here to the prior discussion. To the extent you engage an artist to create your logo, to the extent to engage a web developer and designer or service to create your site, you must have valid, thorough, written and signed agreements transferring exclusive rights to the work of those parties to you.
Selling Your Company
By extension, if you have not established a solid legal basis on day 1, you may be building in the reason that you may never be able to sell your company or at least not for the price you may otherwise deserve. Whenever a sale is contemplated, the buyer is likely to do an intellectual property audit to establish what it is you own. At that time, it may become clear that you have not connected all the legal dots and thus you cannot establish clear title to the works that form the majority of the assets of your company. Read “Selling Your Publishing (Or Other Intellectual Property) Company.”
Other than “I didn’t know,” my experience has shown that there are 2 general categories of excuses.
Excuse No. 1: “I can’t afford an attorney.” Read “The Do It Yourself Publishing Lawyer” on my site.
The logic of this statement defies understanding. The party making the statement fails to realize that he, she or it is saying that he, she or it can afford to spend thousands on the project and then perhaps many thousands more on an attorney to “fix” your project when it goes wrong. Remember: Help me is almost always cheaper than fix me. You never, ever want to put your project into the hands of a judge or jury to determine whether you are right or wrong. You want to say it so thoroughly in the agreement that there is no room for debate.
Keep in mind that in the business of intellectual property rights, which is the business you are in, legally appropriate agreements and a proper legal basis are not add-ons to your business, not something you do if you have any money left over; legally appropriate agreements and a proper legal basis are your business. Without a thorough and valid agreement and proper legal basis, what you have is nothing but an illusion and a house of straw. It only appears you are in business but in reality, you are not since given a controversy between you and the other party, the house of straw can collapse and you risk losing your rights and the money that goes along with those rights. If you are going to run a dress company, for example, an essential expenditure might be machines to manufacture those dresses. However, in the intellectual property business, an essential expenditure is a high quality intellectual property attorney. Thus unless you budget for attorneys fees in a realistic amount, the amounts you spend on the other areas of your business are potentially put at substantial risk. Further, you may put yourself in a lose-lose situation: if your project is a failure, you lose. But if your project is a success (or even if it is not), you may find that the other party, not you, ends up making all the money or you may open yourself up for more claims than you can even imagine and in which event, you lose because you pay all your profits to lawyers and/or damages to the offended parties. So when you do your budgeting for the project, you must include legal costs. So let me yet again write the rhetorical comment: How this makes any sense at all is completely beyond my comprehension.
Excuse No. 2: “We don’t need an agreement. We’re [brothers, sisters, mother and child, best friends etc. etc.]”
All the reasons given above for having written and signed agreements, thoroughly drafted, apply equally here.
But more directly to the “excuse.” My many decades of experience have taught me that it is not agreements that break up relationships. Agreements are just easy targets. What breaks up relationships (at least business relationships…there is not enough space in this or in a million articles to discuss what breaks up personal relationships) is the “I thought you said….” that comes from no agreements or poorly drafted agreements. It is the vagaries and uncertainties that lead to disagreements and thus break ups. If an agreement is thoroughly prepared, all sides can know where they stand and this can eliminate those vagaries and uncertainties.
Here is a phrase that few may understand and even fewer may agree with: a good attorney can actually preserve the relationship!
The above are just a few of the legal and financial consequences that may arise if you fail to act with vision in regard to the intellectual property rights that are the basis for your rights. This article is certainly not a summation of all of the mistakes but should, I would hope, create an awareness of some of the issues and their legal results. And if by becoming aware you are able to see with vision to seek to avoid those mistakes or others, then this article has done its job.
Copyright © 2017 Ivan Hoffman. All Rights Reserved.
This article is not legal advice and is not intended as legal advice. This article is intended to provide only general, non-specific legal information. This article is not intended to cover all the issues related to the topic discussed. You should not rely on this article in any manner whatsoever and you should not draw any conclusions of any sort from this article. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. This article is based on United States laws but the laws of other countries may be different. You should consult with an attorney familiar with the issues and the laws of your country. This article does not create any attorney client relationship and is not a solicitation.
No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.