Publishers may not recognize that when they enter into an agreement with an author, cover artist or other person who has a continuing royalty interest in a book, that the publisher may have liabilities to that person that extend beyond the accounting and other express provisions contained in that contract.  In other words, often times a court creates liabilities that are found “in law,” as opposed to within the four corners of the document.   And those liabilities may exist even if the publisher has no written contract with the other party (which of course creates its own set of problems).

        For the purposes of this article, a “continuing royalty interest” refers to a party, whether with or without a written agreement, who has a right to receive income based upon the sales or other exploitation of the book by or under the authority of the publisher.  Most often this party is the author who participates not only in the sales of the book domestically, but in foreign deals as well as in other forms of exploitation that may be the subject of various licenses into which the publisher may enter.  This type of arrangement may also be made with a cover artist and even with an editor or others.

        Given the rather creative imagination of attorneys in coming up with legal theories upon which to base a civil litigation, this article is designed to deal with some of those potential issues.  Keep in mind that some of the ideas I express in this article may be in themselves creative, inventive, speculative or otherwise not currently accepted legal causes of action.  That a court may or may not have ruled on these issues does not mean they will not.  Your contract, your situation, should not be the test case.  It is the wise and visionary publisher that sees these potential issues and then attempts to cover itself either within the four corners of the appropriate agreement or through the publisher’s approach to the marketing and exploitation of the project.

Nature Of The Potential Liabilities

        The obligations that may be imposed on the publisher in these situations are generally what the law refers to as “implied in law” obligations.  This means that whether or not the agreement expressly states so, the law may impose a duty on the publisher to affirmatively protect or at least look out for the other party’s interest.

        These duties may often be imposed when the author or other party has granted the publisher exclusive and comprehensive rights in and to his or her work and is thus dependent upon the good faith and experience of the publisher to exploit that work.  As an example, if the author has granted away to the publisher all rights, exclusively, throughout the world, in all languages etc., some duty may arise on the part of the publisher to maximize the exploitation of the book because the author, in this instance, has no rights left to exploit on the author’s part.  The law may impose a duty upon the publisher because the author or other party has no choices except to rely upon the implied obligations of the publisher to maximize the income in the deal.  These are situations in which the courts impose on one party to an agreement a duty of good faith and fair dealing in respect of the other party.   In this instance, because the publisher controls the destiny of the work and in turn the royalty participant’s income with regard to the work, if that publisher does not exercise good faith or even its best efforts to exploit the work, the publisher may be exposing itself to a claim on the part of the participant.  In a certain sense, this duty is similar to a duty of trust imposed upon a trustee who controls the financial destiny of the beneficiary, although it certainly does not rise to quite that level in law.  On the other hand, if the author or other party has retained certain rights to the work whereby that author or other party can make money from and exploit these reserved rights, then the law may not be quite as strict with the publisher.

        Thus, it may become incumbent upon the publisher to maximize the income from the book or other work.  The publisher that is unfamiliar with what deals are available in certain areas of exploitation may find itself at the wrong end of such a claim by the royalty participant.  For the law may also impose upon even the most inexperienced publisher the same duties it demands of the most experienced ones.  Calling oneself a publisher may make the publisher liable to the standard of knowledge and experience of an experienced publisher even if that knowledge and experience are lacking in the given instance.

Some Potential Examples

Some areas that may become troublesome for the publisher may relate to the following issues, among others.

1.  Foreign publishing and other deals.  Clearly each book is unique and there are no true “rules of thumb” about what sort of deals any given book “should” bring in any particular territory or for any particular form of exploitation. (read “Foreign Publishing Deals” and related articles on my site.  Click on “Helpful Articles for Writers and Publishers.”)  However, a publisher that materially undervalues a book may be subject to such a claim.  If, for example, a publisher makes a world wide Spanish translation deal for a *very small* advance and a low end royalty, either out of ignorance or because the publisher did not seek out the advice of an attorney or other advisor more familiar with such deals, the royalty participant may raise such an issue as I am discussing in this article.  After all, other than English, a world wide Spanish language deal is perhaps the second most valuable foreign deal a publisher can make.  Similarly, if a publisher licenses a best selling book for a price that is substantially lower than might otherwise be expected for the nature of the book or the kind of deal made, an inventive royalty participant may be prompted to file such a claim.

2.  Owned and Controlled Deals.  These are deals in which the publisher makes a deal with a “nominally” independent company but which other company is actually owned and controlled by the publisher. (Read “Owned and Controlled Licenses” on the same link.)  For instance, if the publisher has a separate subsidiary that handles licensing and merchandising of the proprietary rights owned by the publisher under the agreement, the publisher may be charged with the responsibility to make a deal with that other company on an “arms length” basis.  This means that the deal so made has to be at least as good for both the publisher and the author as the publisher could have obtained had the publisher dealt with an unrelated and non-controlled company.  In such an instance, the publisher would likely have negotiated for an advance against a royalty and if the publisher, in dealing with its owned or controlled entity fails to obtain such an advance or accepts a lower than expected royalty (which would on the surface appear to benefit the publisher since the publisher is only obligated to share with the royalty participant whatever the publisher actually gets), the royalty participant may again be expected to be heard from.

3.  Obligations to Promote.  Given the speculative nature of book publishing and the realistically unreliability in determining the likelihood of success, claims by royalty participants that the publisher failed to promote the book and thus that royalty participant did not earn what he or she “should” have earned seem a diminished, if still potential risk in many instances.  But where an author can show his or her “track record” of sales for similar books, the failure of the publisher to effectively market and promote the book may give rise to such a claim. In this regard, if for example, the publisher has used the subject book as a way to promote other, less successful books of the publisher, or has given away more books as “free” than might be justified, the publisher may expect complaints from the participant.


        The purpose of this article is not to raise legal bogey men and thus keep publishers from sleeping at night.  But the reality is that we live in a litigious society and in the appropriate circumstances, claims may pop up whether meritorious or not.  Often times a publisher’s most disastrous situation is when a book is success.  If it is a “stiff,” no one is going to care.  But if the book becomes a hit, the unprepared publisher can expect an ungodly number of claimants to come out of the literary woodwork.

        Be prepared.  Have vision.

© 2000 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.



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