Assignment of Author’s Contracts in Publishing Sector Transactions
In the publishing industry, author contracts are frequently transferred when companies seek to acquire and sell specific titles, set lists, and complete editions.
However, legal limitations on such transfers are often ignored, which risks giving disgruntled perpetrators a powerful leverage. We look at the main issues that can arise and how best to overcome them.
Personal and non-personal contracts
Many publishers are unaware that author contracts are generally considered “personal contracts” and therefore the benefit of these contracts (i.e. the publisher’s right to publish the title of that author) 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 of “non-personal” contracts where the benefit of the contract can be freely assigned unless expressly prohibited or provided for in the contract itself.
We find that more often than not, author’s contracts are silent on assignment.
Thus, if the author does not accept the transfer of their title to a new publisher, they can block the transfer or, depending on the desire of the publishers to ensure the transfer, use it as leverage to renegotiate their contracts, including the payment of royalties.
Any publisher seeking to acquire titles from another publisher is strongly advised to evaluate the assignment provisions in the underlying authorship agreements before agreeing to such an acquisition.
If such a provision is lacking, this publisher will have to consider what protection/guarantee it needs in order for the contracts concerned to be effectively transferred upon completion. Different options are available:
- Rely on implied consent – after assignment to a third party, the author’s acceptance of royalties paid by an incoming publisher may be considered consent to assign the contract.
- Insist that the author expressly consents to the assignment being obtained from the author prior to its completion.
- Insist that the contract be amended to provide for the assignment.
- Make sure that the purchase contract itself includes relevant mechanisms to manage the interim period between the exchange and the conclusion of the contract.
- Structure the purchase price so that part of it is tied to obtaining agreement to assign the authors’ contracts.
These situations can be completely avoided if the author’s contract contains a well-drafted assignment clause. Although we advise publishers to ensure they have these provisions in place beforehand, navigation and mitigation are still possible.