In the publishing industry author contracts are frequently transferred as businesses seek to acquire and dispose of specific titles, defined lists and whole imprints.
However, often the legal limitations on such transfers are overlooked, running the risk of giving disgruntled authors some powerful leverage. We look at the key problems that can arise and how best to overcome them.
Personal and non-personal contracts
Many publishers are not aware that author contracts are generally considered to be “personal contracts” and therefore, the benefit of such contracts (i.e. the publisher’s right to publish that author’s title) cannot be transferred to a third party (i.e. another publisher) unless the contract expressly provides for such a transfer, often contained in an assignment clause.
This is the opposite position from “non-personal” contracts where the benefit of the contract can be freely assigned unless expressly prohibited or conditioned in the contract itself.
We find that more often than not, author contracts are silent on assignment.
As such, if the author does not agree to the assignment of their title to a new publisher, they can block the transfer or, depending on how keen the publishers are to ensure the transfer goes ahead, use it as leverage to renegotiate their contracts, including royalty payments.
Any publishers seeking to acquire titles from another publisher are strongly advised to assess the assignment provisions in the underlying author contracts, in advance of agreeing any such acquisition.
Remedies
If such provision is missing, that publisher will need to consider what protection/surety it needs that the relevant contracts will indeed be transferred at completion. There are various options available:
- Rely on implied consent – after the transfer to a third party, the acceptance by the author of royalties paid by an incoming publisher may be deemed as consent to the transfer of the contract.
- Insist on express consent to the assignment being obtained from the author prior to completion.
- Insist on the contract being amended to provide for assignment.
- Ensure the purchase agreement itself has relevant mechanisms to deal with the interim period between exchange and completion of the agreement.
- Structure the purchase price so that a proportion of it is linked to obtaining the consent to assign the contracts from the authors.
Comment
These situations can be avoided entirely if the author contract contains a well drafted assignment clause. While we would advise publishers to ensure they have these provisions in place beforehand, navigation and mitigation is always possible.
The Publishing & Digital Media team at Fox Williams has extensive in-depth experience of publishing mergers and acquisitions and can add significant value to a transaction in guiding the parties through the various options available when it comes to the thorny issue of author consents.
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