Negotiating the foreign sales clause in textbook contracts

If authors are not careful when negotiating language related to foreign sales in their book contracts, they can end up earning next to nothing on international sales of their books.

Stephen Gillen, an attorney with Wood Herron & Evans, said that although he cannot provide exact language authors can use to negotiate the foreign sales clause in their contracts without knowledge of the unique facts and circumstances of each case, he suggests authors use the following to start the discussion with their publisher:

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How to protect yourself from lower textbook royalties from foreign sales

Textbook authors need to be alert for the possible impact on them of the practice among some U.S. textbook publishers of selling books in foreign countries using an “inter-company” transfer price.

U.S.-based publishers generally sell into overseas markets through relationships with foreign publishers based in the destination country. Books sold in this way are sold to the foreign publisher at a discounted price to compensate the foreign publisher for its role in the distribution process. In such a case, the author’s royalty is calculated on the lesser amount received by the U.S. publisher from that sale.

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Create a collaboration agreement with your co-author

Collaborating with a co-author on producing a textbook can have many benefits, said Steve Gillen, an attorney with Wood Herron & Evans. “It can diffuse the burden of a large project; allow you to draw on each other’s strengths; create a broader appeal for the work; and give you access to a sounding board for ideas,” he said. “On the other hand, the most bitter troubles and disputes occur between co-authors. Of all disputes, those between collaborators are the worst–they almost never have a happy ending.”

One source of trouble is in the way the Copyright Act deals with co-authorship, said Gillen. “The default positions stated in the Copyright Act with regard to co-authorship are often not those that you would provide yourself,” he said. They include:

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Q&A: What happens to textbooks when a publisher sells lists to other publishers?

Q: “What happens to textbooks in inventory or those under contract when publishers sell lists to other publishers? How can we find out whether books have been stolen or put into the hands of resellers?”

A: Stephen E. Gillen, Attorney, Wood Herron & Evans:

“It depends upon the deal between the two publishers. Typically, the acquiring publisher buys the inventory along with the contracts. Then they sell it out or destroy it so they can produce a new printing under their imprint. It’s also possible that the acquiring publisher would have no interest in the existing inventory under the old imprint and would require, as a condition of sale, that the selling publisher destroy the inventory. Regardless of who sells the books, the author should get a royalty in accord with the terms of the publishing contract (of course, if the books are remaindered that royalty may be small or nonexistent depending upon the terms in the publishing contract). In any event, any sales should be reflected in the next royalty statement. If there is a question, ask the new and old publishers to provide an inventory reconciliation.”

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Q&A: How to determine a good royalty rate offer when negotiating a textbook contract

Q: “I’m in discussions with six publishers right now for my first book. One of them has just made a preliminary offer, including a 12 percent royalty on the first 2,000 sold and 15 percent thereafter. They also offered me a $3,000 advance against royalties to prepare a camera-ready copy over the summer. The editor has informally projected something like 2,000 books/year sold at about $90-100 per, saying it costs them $60-70 per. Here are some of my questions: 1) How common is it to have a lower percentage on the first chunk of books?; 2) Even if it sold only 1,000 at $80, 12 percent of that equals $9,600. Shouldn’t they be willing to part with more than $3,000 of it up front?; 3) How much am I saving them with a camera-ready copy? Doesn’t that cut out a lot of work for them and shouldn’t that translate into a much better deal than this? Sounds like a cookie-cutter offer.”

A: Don Collins, former managing editor at a publishing company:

“First, it is very common to offer a lower rate on the first textbooks published. The publisher is in business for profit and at every point the publisher wants an advantage although in your case it seems slight. Second, up front money is an expense. If the book does not sell then the publisher is out this money. But you get to keep the advance. And lastly, you may think of giving camera ready copy as saving the publisher money. It probably is. But the way publishers play the game is to take only authors who are willing to do this.

Only after your work has proven successful and you have established a reputation will you have much of a chance of negotiating better terms.”

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