What you need to know about ‘cross-collateralization’

It has an intimidating name. Indeed, it takes more letters to spell it than to put it into effect. But what is it and why is it bad for authors?

Most every book publishing contract will include a provision that obligates the publisher to periodically account to the author for the publisher’s sales of the author’s work. The language will probably look something like this:

Payments to the Authors will be made semiannually, on or before the last day of March and September of each year for royalties due for the preceding half-year ending the last day of December and June, respectively. If the balance due an Author for any royalty period is less than $50, no payment will be due until the next royalty period at the end of which the cumulative balance has reached $50. Any offsets (including but not limited to any advances or grant) against royalties or sums owed by an Author to the Publisher under this or any other agreement between the Author and the Publisher may be deducted from any payments due the Author under this or any other agreement between the Author and the Publisher.

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Authors’ suit against Cengage hits snags

In October 2019, six authors, intending to form a class action together with other Cengage authors, filed a lawsuit against Cengage alleging that Cengage’s royalty accounting for proceeds from distribution of their products through the MindTap and Cengage Unlimited business models breached the publisher’s royalty arrangements with authors. In addition to the breach of contract claim, the authors alleged that Cengage acted in bad faith towards authors regarding the two products. Before a trial could get underway, Cengage responded by asking for all counts to be dismissed, and that the attempt to form a class action be denied.

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Ask the Expert: What to look for in publisher-driven ‘new’ textbook contracts

Q: I’m a published author. I signed a textbook contract with a publisher 32 years ago and the first edition of my text was published 30 years ago. It’s since been revised 9 times, all under the original contract, and is due to be revised again soon. Recently, my publisher wrote and said they wanted to sign a new contract for the new edition because the industry had changed, their business model had changed, and the old contract was no longer in step with their current practices. Should I go along with this and sign the new contract?

A: Maybe. . . but not without doing a little homework first. Your original contract almost certainly contemplated that your text, if successful, would need periodically to be revised. What it probably said about this was that “if and when” the publisher thought a revision was warranted, the publisher would call upon you to prepare it. And if you were willing and able to do that, the revision would be prepared and published under the terms of your then existing agreement as if it were the work being published for the first time.

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Full results of TAA’s 2020 Textbook Contracts & Royalties Survey now available

In a recent survey conducted by the Textbook & Academic Authors Association (TAA), 27% of respondents reported that their 2019 royalties were 25% or more lower than in recent years. Only 8% reported that their royalties were 25% or more higher than in recent years.

One survey respondent, who writes in the Business discipline for Cengage and has been authoring textbooks since 1985, said: “Cengage Unlimited has had a significant impact on our royalties. We were told that CU would capture more sales (at a lower price point). It has not happened; we are selling (marginally) fewer units, but at a much lower price point.” The highest royalty rate this respondent had negotiated for both their print and digital textbooks was 20% and the lowest was 15%. They also reported their 2019 royalties were between 10% and 25% lower than recent years.

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Textbook rights reversion: How to get them back

Most publishing contracts are for the life of the copyright, so how could an author ever get their rights back? In her TAA webinar, “A Second Bite at the Apple: Getting Rights in Your Book Back”, Brenda Ulrich, a partner at Archstone Law Group, discussed the role of reversion clauses in a publishing contract, which allow rights in a book to revert to their authors under certain circumstances.

The issue of rights reversion can confound many authors, said Ulrich, especially as it relates to how broad the grant of rights is in any traditional publishing contract. “It’s a very broad, very wide, very long, license,” she said. “You are giving the publisher permission to publish the book, but you are not signing over the book to them forever.”

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