WORKING WITHOUT A SIGNED AGREEMENT

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


        In the business of intellectual property rights, which is the business you are likely in if you are reading this article even though you may be a writer, publisher, web site designer or developer, software creator or other such business, legally appropriate contracts are not add-ons to your business, not something you do if you have any money left over; legally appropriate contracts are your business.  Without a thorough and valid contract, what you have is nothing but an illusion and a house of cards.  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 cards can collapse and you risk losing your rights and the money that goes along with those rights.   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, 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.

        In Flynn vs. AK Peters Ltd., these were the facts as summarized by the Court:

Plaintiff-appellant Anita M. Flynn is an electrical engineer and robotics scientist who wrote a book with a colleague, Joseph Jones, entitled Mobile Robots: From Inspiration to Implementation. The book was published in 1993 by Jones & Bartlett Publishers, Inc. Shortly after publication, Jones & Bartlett assigned its publication rights to AK Peters, a publishing house named after its principals, Alice and Klaus Peters. The book was a great success, and Klaus Peters asked Flynn and Jones to write a second edition of the book in 1997. Hoping to have the revised edition published by the next spring, Peters suggested that they invite another contributor to help them with the research and writing. Jones and Peters later agreed that Bruce Seiger, a high school teacher, would be added as a co-author and would write a chapter addressing educational applications and curriculum proposals.

To confirm this agreement, Peters wrote to Flynn on August 23, 1997, asking if she was amenable to the proposed revision with Seiger's assistance. Flynn responded in a letter dated November 16, 1997:

I received your letter as to the second edition of our book and would be happy to agree to your suggested arrangement--on one condition. That is, you send me my money for my portion of the royalties on sales from January '97 through June '97 in the next month.
Alice Peters responded via letter on December 4, 1997:
Thank you very much for your letter of November 16. I am enclosing an accounting of the sales of your book, Mobile Robots, for the period January-June 1997 along with a check for settlement of the royalty for those sales. We are pleased that you have agreed to our suggestion regarding the 2d edition of Mobile Robots. We will be forwarding a contract to you soon for the signature.
The publisher did not directly send Flynn a revised contract. However, it had previously sent Jones four copies of the author contract (one each for Jones, Flynn, Seiger, and AK Peters) and two copies of a contract for the curriculum guide (one each for Jones and Seiger) on October 3, 1997. Jones and Seiger began revising the text even though neither of the two original authors had signed the contract. [emphasis added]
        To make a long story somewhat shorter, the revisions of Seiger were not to Flynn’s liking and when the book was published, Seiger’s name was included as a writer.  Flynn objected to the contributions of Seiger and to the inclusion of Seiger’s name as a co-author along with Flynn’s name and told Peters that she [Flynn] had not signed the revised edition agreement and would not do so.  Peters countered by claiming that it had the rights to revise the book and publish the revised book under the provisions of the original agreement author agreement (which was apparently signed).  That provision read:
The Author/Editor agrees to revise the Work when the Publisher shall decide that a revision is desirable, and to deliver same within a reasonable time after such request. Should the Author/Editor be unable or unwilling to undertake such revision, or be deceased, the Publisher may arrange in agreement with the Author/Editor not to be unreasonably withheld, for the preparation of a revised manuscript, the cost of which (including such royalties or fees as the Publisher may elect to pay) shall be paid by the Publisher and charged against any first royalties that may accrue to the Author/Editor from the sale of the revised edition. All terms of this Agreement shall apply to each revision as though it were the work being published for the first time.
        Flynn notified Peters that Flynn interpreted the said provisions differently and that the said provisions did not allow Peters to have Seiger do the said revisions and that she had not agreed to the provisions of the revised agreement (unsigned).

        Further, Flynn did not accept the publisher’s attempt to resolve the matter:  In the words of the Court:

AK Peters responded to that letter by noting the contributions that Seiger made to the book and by informing Flynn that it had already sent the book to the printer by the time that she notified them of her objections. It offered to address the errors that she identified by printing an errata sheet and to address the authorship issue by listing her before Seiger.
        In the end, Flynn filed a litigation containing several causes of action including violation of the Lanham Act, violation of California Business and Professions Code section 17200, violation of California Civil Code section 3344 and breach of contract.  Flynn lost on all aspects of her causes of action in the trial court (the precise procedural aspects of such determinations are beyond the scope of this article) and in addition, the trial court awarded $55,000.00 in attorneys fees to Peters and against Flynn.   Flynn appealed and the appellate court affirmed the entirety of the judgment against Flynn.

        In the article “Revised Edition Clauses in Book Contracts,” I discuss the substance of the Lanham Act claims of the plaintiff and thus will not discuss that claim or the other substantive claims of the plaintiff since the purpose of this article is to discuss issues related to proceeding without a written and signed agreement.

The Legal and Financial Consequences of Proceeding Without a Signed Agreement

        In general and not with reference to the specific case discussed in this article, I’m sure that many readers will say words to the effect: “Well, its just a small project and I cannot afford an attorney.”  The short answer is that no one can say where the next successful project is coming from and you have to plan as though this project is going to be successful.  If you do not believe that a project has the possibility of being successful, it is just not clear at all the reason anyone would undertake the arduous task of writing, publishing etc. Planning means getting your legal house in order so that if the project is successful, you can win and not have to spend all the money on legal fees in the hope of winning.  By not having that legal house in order, you create a situation in which litigation seems like the only choice.  Read “Set To Fail.”

        I have written about these issues frequently (read “What Business Are You In?,” “A Legal Nightmare: The Unwritten License,”“A Legal Nightmare: The Unwritten License-Further Issues,” “The Need For A Written Web Design Agreement” and “The Fundamental Principle Under the United States Copyright Law”, among many other articles.)

        Some lessons in general and not in relation to the specific case discussed in this article:

            1. Any decision to “roll the dice” in terms of what a court might or might not do in a given set of circumstances is a gamble.  It is one thing to get into a litigation that might have been unavoidable.   It is another thing entirely to decide to allow a court to decide a matter in which the parties have negotiating choices.  What courts and juries will do can almost never be predicted with any degree of certainty and to live with uncertainty for so many years in the hope that you end up with a judgment in your favor is a very high risk approach.   The purpose of having thorough agreements in writing, signed before any work is done, is so that the parties take every step, as much as possible, to try to make sure that:

a. there is no dispute or potential for dispute; and

b. in the event there is a dispute, that the agreement is interpreted in only the manner intended by the party drafting the agreement and that there is no discretion on the part of any trier of fact to interpret the agreement in any different manner.

        2. As I have said countless times—“Help me is almost always cheaper than fix me.”  The purpose of preventative law—in this instance, thorough, written and signed agreements—is to avoid, wherever possible, litigation or similar formal court proceedings.

        3. It is either impossible or extremely difficult to make a deal once the work has started.

        4. Never, ever, ever do any work or have any other party do any work until a thorough, formal, written agreement is signed by all parties.

Copyright © 2004 Ivan Hoffman.  All Rights Reserved.

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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.  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 law.  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.

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