Out of Print Clauses

September 24, 1999


Michael I. Rudell

Out of Print Clauses and the Authors Guild Reprint Agreement

(Originally published in the Entertainment Law column in the New York Law Journal, September 24, 1999.)

The “out-of-print” clause contained in most agreements between authors and publishers has not, until recently, been the subject of intense negotiation. The emergence of new technologies that enable books to be stored in computer databases and be reprinted on demand, together with the announcement of an agreement between The Authors Guild and an “on-demand” publisher has changed this. Already, publishers and authors are reviewing relevant provisions contained in existing agreements, including those which were executed decades ago.

A typical out-of print clause provides that if, after a certain period of time following the initial publication of a work it no longer remains in print, the author may give written notice to the publisher, and if within a specified time period thereafter (typically six months), the publisher has not put the work back in print, the agreement will terminate and all rights will revert to author.

The obvious question raised by such a provision is what constitutes remaining in print. Also, because the publisher often is granted the right to publish more than one edition of a work (e.g., hardcover, trade paperback, mass market, special edition), a second issue is whether the right to terminate applies to all editions or only to those that are not in print.

Publishers take varied approaches to this issue in their form contracts and negotiations. Their goal is to maintain as many rights as possible for the longest possible time period. Towards this end, they frequently propose that the work is considered in print as long as it is listed in its catalogue and orders placed by bookstores can be filled. This is particularly appealing to a publisher in an era when orders placed can be filled on demand; for there would be little reason for a publisher to refrain from listing all of its books as available if it need not maintain an inventory of them.

The common thread among authors and their representatives, especially recently, is to attempt to impose requirements that represent a more meaningful obligation which the publisher must fulfill in order to maintain rights in the work. For example, an author may request that if at any given time there are not in existence a specific number of printed copies of the English language version of the work which are available for purchase through normal retail channels in the United States, the work will be deemed out-of- print and unless it is placed back in print within a reasonably short time period, the rights will revert.

Even if a publisher were to agree to such a provision, it might seek to retain rights to all editions other than the one which no longer is in print, and it certainly would insist that the reversion not affect any licenses which it had granted to third parties in accordance with the terms of the publishing agreement.

Another approach is to require that in order for a book to be considered in print, there must have been a minimum number of royalty-bearing sales during the prior accounting period. If the parties agree to this concept, a related issue is whether the publisher can continue to maintain rights to the book in a period when the minimum level has not been met by paying to the author the differential between the amount due based on actual sales and the amount that would have been due had the minimum sales figures been met.

Until recently the primary reason an author would wish to recapture rights to a book that is out-of-print would be to try to place it with another publisher. With the announcement of the agreement between The Authors Guild (the “AG”) and to ExCel.com (“TX”), a unit of Kaleidoscope Software, Inc., (the “AG Agreement”) the alternatives available to authors have expanded.

The AG Agreement provides that the Guild will make the services of TX available to its members through a “Participating Authors Reprint Agreement” to be entered into between TX and the participating authors. The services of TX will be made available for all out-of-print works by Guild members that previously have been published by an established U.S. publisher for which the author has regained all necessary rights. TX has the right to decide whether it will publish more than two titles by any particular author.

The participating author will grant to TX the exclusive license in specified territories to publish and sell books in print-on-paper book form in the English language or, where appropriate, in other languages.

If the right to use the text format of a previous edition of the work is granted to TX, it will bear all costs of creating browseable, downloadable and printed versions of the titles. Otherwise, the author of the work will pay TX $200 to input, design and reformat the text.

TX will determine the price, production, appearance, format, advertising and promotion of a work. If the author is able to obtain rights to do so, TX will attempt to recreate the cover design in any previously published version of the work. If the cover is different from the previously published cover, the author will have the right to review an online version of the proposed cover and to approve of the proposed cover if it differs from the previously published cover.

The exclusive license granted to TX for each work will extend for three years from the date of first publication thereof, with automatic renewals for additional three-year periods unless the author or TX gives timely notice to the other of its intention not to renew. Each author also has the right to terminate the Participating Author Reprint Agreement on 60 days written notice. TX will have the non-exclusive right to continue to produce and sell the work for a period of one year following the termination notification.

TX will pay the author a royalty of 25% of net receipts for sales of each of the first 100 copies sold in print book form and a royalty of 30% of net receipts for sales in excess thereof. Net receipts is defined as the list price of printed copies (other than those sold or given to the author or given away free for promotional purposes) less all sales, distribution, retailer, marketing and promotional discounts, including discounts given to internet marketing affiliates (internet destinations, other than those of TX or any website run by an entity in which TX has an ownership interest, the Guild and participating authors, that have links to TX and that receive a discount for sales made through those links). No discount is to be taken for sales made through the website of TX. It is anticipated that discounts will range between 10% and 40%.

The list price will not include shipping and handling, charges that will be approximately $4 for the first copy and a lesser amount for additional copies.

The Guild and the participating authors will have the right to purchase books at 30% off the list price for single order quantities of 20 to 50 books and 35% off list price for single order quantities of 50 or more books. No royalties are to be paid on such sales.

If TX executes an agreement with any other organization in which published book authors receive a higher royalty rate or other financial benefit that is greater than those set forth in the AG Agreement, those more favorable royalties or financial benefits will be deemed automatically to be incorporated in the AG Agreement to replace the less favorable terms. Further, if in the reasonable judgment of the Guild, any other entity offers authors higher print-on-demand royalties then those made available to participating authors under the AG Agreement, the parties will negotiate in good faith new royalty rates applicable to all participating authors that meet or exceed such higher rates.

All rights that an author does not specifically grant to TX are reserved to the author for use at any time. Without limitation, such rights include translation rights, multimedia and electronic rights, film, dramatic, television, radio and theatrical rights, serial rights, photocopy rights and the rights to use up to 7,500 words of the text for promoting a film based upon the work and to permit the use of the work in a textbook or anthology.

By signing a copy of the Participating Authors Reprint Agreement, each participating author agrees to be bound to the terms of the AG Agreement with respect to each work for which said author submits a signed Grant of Reprint Rights form.

At present, online printing constitutes a small percentage of total book production. Inevitably, this percentage will increase as authors whose works are out-of-print, first-time authors and university presses avail themselves of its benefits.