In the mid 1990s, with the dawn of mainstream reliance on the internet and electronic communication, many of the large publishing companies revised their standard publishing contracts with authors to explicitly name rights in digital publication, along with the traditional printing rights. For many publishers, one of the constant areas for profit in a struggling industry remains its authors' backlists, the republication and sale of works long after their initial run. Now, with the swift rise in popularity of e-books in step with the growing use of digital book readers, many publishing companies find themselves scrambling for a way to claim digital rights for works in their backlists whose contracts did not explicitly include such rights, as some of these works had been published before the existence of the digital format.
The battle between authors and publishers over digital rights has now come to head in several inter-related events. On December 11 Random House sent a letter to many literary agents, announcing its position that all digital rights in its backlists vested with Random House. Many of the contracts that do not explicitly name the digital publishing rights still grant the rights to publish books "in book form" or "in any and all editions" according to the comments made in the letter. Shortly thereafter, the Authors Guild revealed its own response to Random House's action on December 15, refuting Random House's claim by pointing to a 2002 New York case also involving Random House and Rosetta Books LLC (Random House, Inc. v. Rosetta Books LLC, 283 F.3d 490, 62 U.S.P.Q.2d (BNA) 1063 (2d Cir. 2002)). In that case, Random House had pointed to the same clause in its contracts granting publishing rights "in book form", that it is currently using to justify its claim to e-book rights in backlist titles. The Southern District of New York refused to grant a preliminary injunction to stop Rosetta from publishing the digital books of a number of authors in Random House's own backlist, finding that Random House did not have the electronic rights to the works of William Styron, Kurt Vonnegut Jr. and Robert Parker. Despite having the rights for the earlier print editions of the books "in book form," the digital rights to works that had been created before the advent of digital publishing were not automatically encompassed within the contracts and therefore vested with the author. The court of appeals subsequently affirmed the refusal to grant the injunctions against Rosetta. However, in late 2002 Random House and Rosetta settled their litigation and avoided trial on the merits. The case was also decided under New York state law, and could conceivably lead to a different approach elsewhere where state courts take a less restrictive approach in interpreting contracts. Indeed the New York appeals court pointed out that Random House did have some appeal to its argument that an e-book is merely "a 'form' of a book, and therefore within the coverage of [those] licenses."
One could argue that Random House's own actions do contradict its claim that the digital rights are inherently included in prior grants, considering it has explicitly contacted authors requesting that the digital rights be released to Random House, and has also amended its standard contracts in 1994 to explicitly include such rights where necessary. While such actions may be seen as a way to just remove all doubt as to who controls the rights rather than as an admission that the digital rights are not included in prior grants, it certainly indicates that the issue and scope of prior contracts are not as clear cut as Random House is claiming.
Random House's announcement may also be a reaction to action by one of its authors, William Styron, author of "Sophie's Choice," and one of the authors involved in the earlier case with Rosetta. Styron recently entered an agreement with a different publishing company to release the e-book version of several of his novels that are in Random House's backlist. Around the same time, Steven Covey, the author of the popular "Seven Habits" series of books, announced that he had reached an independent and exclusive deal with Amazon to publish his books in digital format, presumably for use with the Kindle reading device. In reply, Simon & Schuster, the publisher of Covey's traditionally-published works, announced its intent to still publish its backlists in digital formats.
The issue seems to have not yet come to blows with publishers in Britain, where the e-book readers are less ubiquitous and a more common view is that publishers do not maintain the digital rights in their backlists unless they had been specifically granted. On the flip side, however, there also appears to be more reluctance in Britain for authors to turn to other e-publishing sourced beyond their print publisher. While such a gentlemen's agreement is working for the time being, it may only take one author on the scale of someone like Steven Covey to step towards seeking digital publishing deals elsewhere and challenge this arrangement.
Despite the New York case's prior finding, the fact that the parties did eventually reach a settlement and never went to trial leaves the issue somewhat open-ended, and Random House does maintain that since the matter eventually ended in a settlement, it is not a final ruling on the merits, only on the issue of the injunction. In refusing the injunction, the Rosetta court stated that the digital publishing rights for works created before the existence of digital publishing remained with authors, but this was under a fairly restrictive interpretation of the scope of the contracts. Would the same be true for works that were created after the existence of digital publishing, but before publishing contacts were amended to explicitly name such rights? If a contract granted the general publishing right using the catchall phrase of "in book form" or "in any and all editions," one could reasonably view this as encompassing digital publishing, provided the format was in existence at the time of the contract. While digital formats were certainly not contemplated for many books in a publishing company's backlist that were created before the dawn of digital publishing, there is a window between the start of digital publishing and the time when contracts were amended to specifically address digital rights.
With the stronghold by Amazon's Kindle in the e-publishing industry, followed closely by Barnes and Noble's new Nook and the Sony Reader, and the expected foray of Apple into the market in 2010, this issue is only beginning to develop. Furthermore, as digital versions are often far less costly for publishers to produce, authors are concerned that the royalty percentages provided by old contracts for the print editions may simply be inequitable and view the digital printing rights as a way to re-negotiate a more favorable percentage. Added on this, many large publishing companies intend to delay release of the digital format for many new titles, in an attempt to hold onto any potential profit from the hardback formats. In light of each party's at least partial motivation to increase its own profits, large publishing companies may have been better off approaching author's and agents to rework old agreements, rather than making unilateral announcements claiming all rights under former terms.
Random House's letter may be just one more attempt to revive a struggling industry, and the first shot in what will likely be a long war over the ownership of the increasingly lucrative digital rights.
Vol. 53, June 2010