Sunday, April 20, 2014

Toward a Fair Non-Compete Clause

@jamesscottbell

Recently, a friend sent me the text of a non-compete clause to have a look at. It was from the contract of a New York publishing company. My gob, as they say, was smacked. If there was a contest for the most one-sided non-compete clause ever, this would take the crown.

I say this in love. Truly. I love traditional publishing and want it to survive. But contracts that contain clauses like this one are not going to aid the old cause.

Due to confidentiality I am not at liberty to reproduce the text verbatim, but I can give you the gist:

The clause prohibits the author from publishing "material" that is "similar" to the Work. So what if your crime novel is coming out from Publisher, and you want to self-publish a mystery short story? Or sell it to Alfred Hitchcock's Mystery Magazine?

Too bad. Because a short story is "material." And a mystery usually has a crime in it, so it's "similar."

Or suppose you've had the foresight to reserve audio rights. You have a mellifluous voice, and spend twenty hours recording the audio version of your book for ACX, Amazon's platform for indie audio works.

No go, because the clause in question prohibits the author from "exploiting" any reserved rights that may "conflict" with sale of the book. And who gets to decide if there is such a conflict? Not you.

And there isn't even language in the clause suggesting the author might seek the "prior written consent" of Publisher! Message: Don't even ask, dude.

Further, how long do all these restrictions last? There is no time limit (though the overall agreement is for "life of copyright.") Which leads me to believe that the wet-behind-the-ears law grad who drafted this needs to be flogged with a hardcover copy of Calamari and Perillo on Contracts. This clause is clearly unenforceable without a time limit. Courts will not allow a company to tie up someone's economic future ad infinitum.

But the burden of challenging the clause is, of course, on the author. Or, should the author go ahead and publish a work the publisher deems to be "competing," the publisher may task some associate at their retained law firm to put down his coffee and make life difficult for the author.

Who is going to be the big dog in that fight? Let's compare the status of our respective parties:

Publisher = deep pockets.

Author = pockets with holes.

Now, before I move on, let me emphasize that the traditional publisher absolutely deserves to have a fair non-compete clause in the contract. Here's why.

The publisher takes a risk with an author, puts up capital (in the form of advance and production costs) with the hope of return. A significant part of the return is from bookstores (remember those?) Bookstores do not want to stock competing titles from the same author during the same season.

Thus, the standard non-compete was to keep John Grisham from publishing The Firm with one publisher and The Pelican Brief with another, and having them both come out at the same time. The books would "cannibalize" each other, so the saying goes. One, or more likely both, publishers would be harmed by this.

Here's another reason publishers need the clause. Suppose Publisher is coming out with your debut thriller, and pricing it as a $14.99 trade paperback, and a $9.99 ebook. But, at the same time, you bring out a self-published thriller and price it at $3.99 in digital and the same $14.99 in POD. And then you unleash your social media marketing efforts to emphasize the book that's brining you more money per unit (i.e., your self-pubbed effort).

That's not cricket. You are hurting Publisher's investment in you. That's why the non-compete clause exists.

But by now that clause should have morphed into something more equitable than the specimen I reviewed. Publishers have to realize that the times are not a-changin'––they're a-changed. Permanently. They should not play hardball with contracts as if it's still 1995.

Authors (and agents) should not accede to a "standard" non-compete clause. One like this should be a deal breaker. 

Here's an idea: negotiate! 

So what is a fair non-compete clause? Very simple: a time-limited clause that specifically defines the type of material covered. For example:

For one year from the date of publication of the Work, Author will not publish or authorize to be published, in either print or digital media, any work greater than thirty-thousand words in the thriller, mystery or crime genres.

This leaves open the publishing of short-form work which, I might add, the publisher should encourage. This is how the writer attracts more readers, many of whom will then seek out the author's trad-published books. It's a classic win-win.

In this era of suspicion, vituperation and even paranoia, here is a way for publishers and authors to actually do what is in their mutual interest.

Imagine that.
  

27 comments:

  1. This sort of thinking, in my mind, focuses on the short-term window of opportunity that publishers market a new release. Eg the three-month-or-so "sink or swim" mentality where a book needs to sell as much as possible straight after release.

    With authors able to put out multiple titles per year, surely this kind of restriction only hurts everyone? I would encourage contracts to look a little longer-term. The evidence points towards a larger and more prominent backlist actually helping the sales of a new release, not the other way round.

    Clauses that prohibit a writer from working surely can't be the way forward? I understand the use of "first refusal" clauses, but I'd be hesitant to sign anything that stopped me from putting new work out - unless the advance made up for the shortfall, of course :)

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  2. Thanks, Nick. The reality is that "windows" are an economic reality for the traditional industry (the changes and challenges the industry must face these days is beyond the scope of this post). In said window, publishers want an assurance that its investment in the author is not being undercut by.....the author. That's why the non-compete exists.

    If the author wants to be more prolific in the same genre, that should become part of the negotiations. This is going to be a partnership, after all, so a meeting of the minds on longterm strategy is in everyone's interest.

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  3. This makes me glad I am not with a big NY publisher. My contracts allow for one year from hardcover pub date before I can publish mass market editions, audio, and any other subrights that I retain. That's fair.

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    1. To be fair, I *am* with a big NY publisher and that's not part of my contract. Not sure whether it originally was and my agent got rid of it or it simply never was, but it's not as if all publishers ask for this sort of ridiculous thing.

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  4. Reciprocity should be common sense, but it rarely is. Your recommended language is fair. Too bad many publishers, big & small, offer first passes at language that are more one-sided to see what the author or agent will push back on. Well defined terms, time limits, and fairness to both parties should be the rule, but too often the contract terms are riddled with binding aspects.

    Thanks for your insight, Jim.

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    1. Indeed, Jordan, the context these days does indeed seem to include "suspicion...paranoia." So much uncertainty, and both parties want to protect themselves. But old, boilerplate contracts won't do the trick, nor will new terms that are too restrictive.

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  5. Yet another informative and entertaining post, Mr. Bell! And timely for me.

    I'm five months into a new job at a small start-up publishing company. Our initial offering is self-publishing services, but we're working with an attorney to craft a contract (at least a template version) for more traditional book projects. We want to be that company that offers a fair and equitable contract -- and we're hopeful Attorney #3 can make that happen. Your post here will be a handy reference when we get to the non-compete clause.

    I find myself in an interesting position these days, because suddenly I'm thinking like an author AND a publisher. That elusive concept of a "publishing partnership" really is the secret sauce, I believe. The recipe for that sauce -- at least for us -- is taking a good deal of thought and experimentation to perfect.

    I look forward to reading all the comments here today. I'm sure there's much more collective insight and wisdom for me to gain from this savvy TKZ crowd.

    Happy Easter!

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    1. Diane, you and the company are in the perfect spot for the kind of "experimentation" that's going to be necessary for the industry to move forward. It's an exciting time to be a startup, and an author, too. Keep us posted on your progress.

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    2. I hope you'll keep us informed on what your company comes up with for that "fair and equitable contract."

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    3. I will be happy to post progress -- and truthfully, some input from folks who have "been there, done that" would be invaluable.

      Maybe this is a good Reader Friday topic: "What would your ideal publishing partnership look like?"

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  6. Thanks for another informative post. As a newbie, just getting into this thing, I sit by with my mouth closed and my ears open.

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  7. This reminds me of another contract that is problematic: so-called "perpetual representation clause" in an author-agent contract, whereby the agent designates himself "the sole and exclusive agent with respect to the work for the life of the copyright." In other words, even if you end the relationship, your ex-agent has rights to income from your work in perpetuity. This is NOT uncommon and not considered "disreputable." But increasingly many agencies are now discarding it. Writer beware...

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    1. A good reminder, Kris, that ALL contracts must be thoroughly vetted before signing. The trend now should be toward simpler, not more complex.

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  8. This post along with articles in The Passive Voice and Writer Beware! are enough to scare the hell out of those of us who live and write in the hinterlands.

    For a lot of reasons, I decided to go indie. I'm glad I did. I want to write not go to war with the company who is supposed to help me reach readers.

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    1. In law, the nastiest fights are always in divorce court. Thus, the pre-nup! A fair non-compete should be part of the publishing pre-nup from now on, along with who gets custody of the overstock.

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  9. JSB--Have you read Martha Grimes' two witty novels on the world of authors/agents/editors-publishers, Foul Matter, and the sequel, The Way of all Fish? They don't concern themselves directly with what you discuss here, but they do shine a light on just how bizarre is the world of legacy publishing

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    1. Can't say I have, but certainly the current climate is ripe for some satirical treatment.

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  10. I....but....VIKINGS!!! .... I call in the VIKINGS!!!

    sorry...but I don't do legalese. Everytime I try I suddenly see red before my eyes, and whamo...dead lawyers.

    I hate myself ... my truly murderous.... VIKINGS!!!!


    SVALBARD!!!!

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    1. Only Minnesota Vikings know how to negotiate, I guess.

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  11. Jim, great info here. Now that I'm writing in 2 different genres with 2 series and with 2 different publishers, one work agented and one not, this is very useful to me. And I love the idea of producing short works related to the work the Publisher produces (prequels, short stories,etc) to drive readers to the traditionally pubbed work. I appreciate the heads up on this compete agreement.

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    1. Thanks for dropping by, Donna. The kind of career trajectory you are pursuing absolutely requires this new kind of thinking. The more informed authors are about the malleability of contract terms, the better. Good luck.

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  12. When I read this, I was both shaken and stirred. You're right. There should be a non-compete clause for good reasons. But what were they thinking in that first one? Yikes! (Can you tell us the end of this story? What happened?)

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    1. I do know some writers signed onto this, and some of those writers are not happy how things have turned out. Putting your name on the line is serious business, and it's not enough to simply acceded because "That's the way we've always done it."

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    2. How common is this all-inclusive clause? In other words, what is the likelihood that an author going with traditional publishing is likely to run into it?

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    3. A clause this egregious is not common, but non-competes with other verbiage are.

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  13. Thar's gold in them thar hills, and I intend to git me all of it. As writers we sit on a wealth of wonderful stories. We dig them up, sort them out and polish them into gems. And then we give away the heart and sole (soul?) of our efforts. Why do we do this? Or I should say: why do YOU do this? Because I sure don't. Not any more, do I flop for the "trust me."

    We all need help along the way, for sure. But turning ourselves into shark bait won't help. I still think a story about a writer gettin' even with his publisher and agent would be a winner. Self-pubbed, of course.

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