How the 'non-compete' clause can help publishers hold on to digital rights
The rise of ebook technology has brought about a good deal of uncertainty and debate over whether a publisher is entitled to exploit ebook rights in its back list or whether such rights are reserved to the author.
Publishing contracts for titles which predated the advent of ebooks commonly (but not always) granted the publisher ‘volume rights’. There have been no cases directly on point to determine the issue of whether a publisher with volume rights can exploit ebook rights. The US case of Random House v. Rosetta Books held that a licence to exploit a work in “book form” did not include ebook rights. Older US and UK cases concerning the application of developing technology to existing copyright licences in other media (such as film and tv) have sometimes gone in favour of the licensee and sometimes in favour of the rights-owner. The only two safe conclusions are that a) it will always be a matter of the wording of the particular contract and surrounding circumstances as to what the parties’ respective rights are; and b) it will always be an uphill struggle to extend a licence to technologies which were unknown (and therefore not in the contemplation of the parties) at the date of the agreement unless it was clear that the parties intended the publisher to have incredibly broad rights and reserve little or nothing to the author.
So if the grant of rights clause does not expressly (or sufficiently clearly) entitle a publisher to exploit ebook rights, thinking laterally, could any other clauses in the publishing agreement help the publisher acquire the rights?
One clause which could definitely come to a publisher’s aid (if they are lucky enough to have one in the contract) is an option to acquire any derivative work. Although it would obviously depend on the precise wording of the clause, it is easy to see how an ebook version of a literary work could potentially fall within such a clause.
Another potential candidate which commonly appears in publishing agreements is the non-compete clause and publishers may well be hoping that such clauses will come to their aid.
Non-compete clauses are designed to protect the rights granted to the publisher by prohibiting the author from exploiting potentially competing rights or granting potentially competing rights to another publisher. A typical non-compete clause may, for example, prohibit an author from publishing any work which may compete with or affect prejudicially the sales of the work or the exploitation of the rights that have been granted to the publisher. A non-compete clause drafted in this way could therefore arguably prohibit an author from publishing an ebook version of a work if it could be shown that sales of that ebook version would prejudicially affect the sales of the printed work. Although there is some expectation that ebook sales may well cannibalise print sales, at present statistical information to substantiate such a claim may be difficult to gather. However, as industry statistics on ebook sales versus print sales and market trends improve, substantiating such a claim could prove increasingly easy.
That said, whether a non-compete clause will be helpful in practice will depend on a number of factors. First, much will depend on the exact wording of the non-compete clause in question. The drafting of non-compete clauses varies enormously - not just between publishing houses but also even within a publishing house as standard contracts evolve over time - consequently some would be more effective than others. For example, it is not uncommon for non-compete clauses to prevent the author from preparing or publishing “any other work” which may compete. Such a clause could be difficult for a publisher to use because it covers “other” works and does not expressly cover the publication of the same work in ebook form. Where a clause is ambiguous, as is the case in the immediate example, it is well established that any such ambiguity will be construed more strongly against the party who drafted the contract, which, in the publishing context, will almost without exception be the publisher.
Second, when construing a contract, the English courts will try to determine objectively by reference to the relevant factual background what the common intention of the parties was at the time they entered into the contract. There is therefore a potential argument that if ebook technology was unknown at the time a publishing contract was entered into, the parties to that contract could not possibly have intended a non-compete clause in that contract to prohibit the exploitation of ebook rights.
Third, unless a non-compete clause can be shown to go no further than is necessary to protect the legitimate business interests of the publisher it could be vulnerable to argument that it is unenforceable on the grounds that it is unreasonable. The Catch 22 is that the broader (and therefore the more potentially useful) a clause is drafted, the more likely it is that it could be open to attack as an unreasonable (and consequently legally unenforceable) restraint of trade.
Fourthly, negotiated non-compete clauses can vary in duration from anywhere between a few months following publication to the entire term of the publishing agreement. Therefore, a publisher would need to check in the context of each literary work that the non-compete clause has not expired.
A well-drafted non-compete clause which survives the above hurdles could act as a powerful deterrent to authors deciding to exploit ebook rights independently rather than strike a deal with the publisher. Therefore, although a non-compete clause will not guarantee a publisher the rights to publish the ebook version of an author’s work, it may prove to be a useful weapon in the publisher’s arsenal when attempting to acquire those rights.
Caroline Turner & Nicolas Murfett
Caroline Turner is a partner and Nicolas Murfett is a solicitor at Harbottle & Lewis LLP
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