Filtering by Category: "contract review"

Why Comic Creators Need Lawyers

Added on October 22, 2013 by Gamal Hennessy.

Technology has given independent artists the tools and freedom to control more of their work. It is easier than ever to create, publish and distribute your stories without a deal from the big boys. This evolution in the industry gives you more chances to get your work in front of bigger players, and gives you the potential to make deals that were few and far between a few years ago.

But this DIY spirit can be dangerous if taken too far. There is a point where it is helpful, even preferable, to do things on your own. When it comes to legal agreements involving your intellectual property, you need the support of a professional.

Disclaimer
You’ve probably already came to the conclusion that I'm only writing this post to get more work. After all, I am an attorney who represents comic creators. (See An Introduction to Creative Contract Consulting). If I scare you into thinking that you'll be cast off into the Negative Zone if you don't get a lawyer, then there's a good chance you'll hire me. To a certain extent, that's true. But there are three points to keep in mind before you dismiss me out of hand:

The history of comics is filled with creators who lost all the rights to their characters and spent years in court trying to get those rights back. (See Newsarama: The Ten Major Creator Disputes in Comic Book History)
Based on the survey I did over the summer (See Results of the Great Independent Comic Survey) 25% of current comic creators do not own (or they don’t know who owns) substantial rights to their books.
Even if you decided to hire a lawyer, you may decide to not hire me

So as self-serving as this post might be, that doesn't mean it doesn't make a point that can help you.

Division of Labor
The reason you need a lawyer to help protect your rights is because legal contracts and legal principles are designed to be confusing. The language used in contracts is circular, opaque and dense. What the words mean and what you think they mean are often two different things. The implications of certain words are often unclear even to the person who wrote the contract. Without someone there to explain things to you, it is easy to sign something that will hurt you down the line.

This is not an attack on your intelligence. Many of my clients are a lot smarter than me. This is a question of training and experience. I’m a writer as well as an attorney (See Smooth Operator). I don't edit my novels and I don't design the covers. I hire professionals to do that. (See Judging a Book by its Cover) As an airline passenger, I don't fly my own plane. I pay the airline to supply professionals. I could learn editing, cover design and piloting, but it saves time and money to bring in a professional.

Hiring a lawyer is the same. We already wasted years of our lives and hundreds of thousands of dollars learning to decipher contracts. Why not take advantage of our poor decisions?

A Word about Costs
Lawyers are not cheap. We have to pay off exorbitant loans and many of us have expensive tastes. We normally charge by the hour, so the best way to use a lawyer is to hire one for as short a period of time as possible. If you hire them before a deal gets signed, it might cost you a few hundred bucks. If you hire one after something goes wrong and you need to go to court, that number can rise exponentially. Court cases can take years and those billable hours pile up fast. It's better to bring us in on the front end and nip the issue in the bud.

Somebody, but not just Anybody
I understand if you don't want to hire me. You might not like my style. I might not be attractive enough to be your lawyer. That's fine. I've been rejected before. All I ask is that if you're faced with a contract that involves you or your work, get a lawyer to review it before you sign it. And not just any lawyer. A criminal defense attorney might not understand the entertainment or comics market well enough to help you. Check the background of your prospective attorney, talk to your colleagues about who they use. Once you find the right one and you determine they have an acceptable level of attractiveness, retain them and put them to work. That will give you the time and the peace of mind to go back to making comics.

Have fun.
Gamal

Catastrophe and Contracts (Understanding the “Act of God” Clause)

Added on November 1, 2012 by Gamal Hennessy.

Imagine you’re sitting at home one day, making comics and minding your own business. You are working at a steady pace and you plan on finishing long before your publisher’s deadline. All of a sudden, the sky goes dark, the wind begins to howl and the lights go out. A couple days later you have no power, no water, no heat and there is a tree in your living room. On top of all that, you missed your deadline and your publisher is claiming you breached the contract. Now what?

The answer to that question depends on the force majure or “act of God” clause in your contract. If the language is written well, you shouldn’t have a problem. If the language is written poorly (or doesn’t appear at all) you might have to deal with a business dispute at the worst possible time.

What does it mean? Basically, a force majure clause extends the period of performance for the artist and the publisher if certain events occur. Most force majure clauses include events like fire, natural disaster, accidents, act of government, war, terrorism, industry wide shortages or any other event beyond your control and that directly impact you. For example, if you live on the East Coast, Hurricane Sandy probably qualifies as a force majure. If you live in Seattle, it probably doesn’t because you are not directly impacted. Keep in mind that a hangover is not a force majure, even if it does feel like an act of God when you are recovering. Getting the hangover wasn’t beyond your control, so force majure can’t save you here.

What do you have to do? When a force majure event occurs, you usually have to notify the publisher of the event’s impact on you and then follow whatever terms are specified in the force majure clause. Terms can range from an extension of time to cancellation of the agreement. While it is impossible to anticipate every potential force majure event and write a solution into the contract, it is better to have some guidelines in place that work for both sides, instead of waiting until your basement is full of water and the National Guard comes rolling in.

Often, a publisher or colleague will understand your situation during a crisis and won’t try to use it as a way to avoid paying you or to get out of your contract. However, it is always prudent to make sure there is a good force majure clause in your contract when you sign it. You never know when the lights could go out and you never know when your relationship with your publisher could fall apart.

Best

Gamal Hennessy, Esq.

PLEASE NOTE: THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. IF YOU HAVE A LICENSEING OR INTELLECTUAL PROPERTY ISSUE, DISCUSS IT WITH YOUR LEGAL ADVISOR OR CONTACT C3 AT gamalhennessy@gmail.comFOR A FREE CONSULTATION.

Meet with Creative Contract Consulting at New York Comic Con

Added on October 3, 2012 by Gamal Hennessy.

I will be attending the New York Comic Con this year. If any artist, writer or comic professional would like to set up a meeting for business consultations or the inevitable drinking to discuss future projects, please contact me at gamalhennessy@gmail.com to set up a meeting.

I’ll see you on the Exhibition Floor.

Have fun.

Gamal Hennessy

Related Articles

An Introduction to Creative Contract Consulting

Gamal Hennessy Biography

The Current C3 Client List

Addition by Division (Separation of Licensing Rights for Creator Owned Deals)

Added on September 14, 2012 by Gamal Hennessy.

by Gamal Hennessy

Most of the contracts that my clients send me from publishers are fairly broad blanket licenses. Although the language of each one is different, it boils down to the same concept; the publisher looks for the artist to license all of the rights to all of their property in exchange for one fee. While this simplifies the contract for both parties, it also limits the earning potential for the creator by reducing the number of licenses his comic can exploit. A more experienced and profitable approach is to divide the property into as many licenses as possible to maximize the revenue and minimize the dependence on one licensing partner.

Separation of Power

As I discussed in an earlier post, creators can use the trademarks created from their work to license to product manufacturers. Instead of granting blanket rights to the publisher of the print comic, a more granular division of rights gives the creator more options and potentially more revenue. Licenses can be divided in the following manner:

Property: or what title or characters you are actually licensing. A license could be for all the characters and settings in a particular book, but it could also be limited to just one character or a group of characters or in some cases just a particular image from a particular book (like a cover image)
Licensed Good: or what you are permitting the licensee to create. You can be as specific as you like with the type of license you are providing. For instance you could grant a broad license for “clothing” or make it narrower by limiting it to “T-shirts”, “men’s T-shirts” or “men’s short sleeve cotton T-shirts”
Term: The time limit on how long the license will last. This is usually measured by years, but it could also be as short as a few months.
Territory: The geographic area that the license is limited to. This could be something as broad as a worldwide license, or it could be limited by countries (i.e. USA), groups of countries (NAFTA or the English speaking world) or continents (Europe)
Outlet: This is the type of venue that the licensed can be sold in during the term in the territory. It could be a broad concept like “retail outlets” or “online sales” or it could be a specific type of store (high end, mid market or discount chains)

For every license granted, there is a separate fee and a separate royalty for every item sold. There is also a separate negotiation for rights.

Example

Let’s suppose you have a popular title and you start negotiations with a clothing company to produce T-shirts with your main character. There are several approaches you can take including:

You might have granted the merchandise rights to the publisher, which means you get a portion of what ever he reports to you for a deal you had little or no input on.
If you kept the rights for yourself, you could grant the T-shirt company a world wide perpetual T-shirt license for a $10,000 advance and an 8% royalty off the suggested retail price.
If you split the rights up, you could grant the T-shirt company a two year, US only, mass market T-shirt license for a $5,000 advance and an 8% royalty off the suggested retail price. You could then go to a Canadian company and do the same thing. And do it again with a European company, and an Asian company. Instead of one advance of $10,000 you could be looking at $20,000 in advances from four companies for the T-shirt rights alone. You could potentially have dozens of clothing, toy, game, poster and other licenses for your property with licensees all around the world that generate revenue that dwarfs what you make from the actual book, all because you separated the licenses to increase the revenue.

Enforcement

While it is a giddy thought to think that your character could be on licensed products from New York to Cairo to Hong Kong, keep in mind that there is significant work involved in keeping track of a vast licensing empire. You not only have to keep track of what license you granted to which company, you have to monitor each one to make sure they don’t violate the agreement. It is not easy to make sure your American licensee isn’t shipping goods to South America, selling them and then not reporting the sales to you or paying for them. It is even more difficult to monitor and keep track of counterfeit knock off goods in far flung countries that will reduce your revenue and dilute your license. The cost in time and money to manage a diversified licensing plan is huge, but think about it; if your book was that big wouldn’t it be worth it to manage and control the licensing program?

Negotiating Power

I have already pointed out that new artists are often not in a position to reject a blanket license and negotiate divided license rights. When you are trying to get enough money to pay your bills, you can’t worry about holding onto the bobble head doll rights for South East Asia. But if you want to make the most of your creator owned deals or you are in a position to choose between a partner who wants a blanket license versus one who is more flexible with the rights structure, you might be inclined towards addition by division.

Best

Gamal

Get What You Give (Rights and Revenue for Creators)

Added on August 21, 2012 by Gamal Hennessy.

By Gamal Hennessy

A contract is basically an agreement between one or more groups for the exchange of resources. The exchange could be time and skill for money, goods for services, property for future gains or any combination of those things. The best agreements exchange roughly equal resources. The worst ones have one side trading large amounts of resources for little or nothing in return.

This is the problem that artists run into with many of the contracts that I see. The most important service I provide is showing my clients what they are giving up in comparison to what they are getting. I’d like to provide an overview of the different types of rights and revenue streams as a general overview for creators looking to get their projects into the market.

Types of Rights

As discussed before, copyright law gives the creator of an original work the right to benefit from the distribution of that work. There are various types of ways currently available for creators to exploit their work, especially when we consider comics. Some of the major distribution methods include:

Publishing (Print, novelization and Digital)
Public Display (gallery displays and public performances of some of the methods listed here)
Theatrical (Movies whether live action or animated)
Television (including network, basic cable, premium cable, PPV whether live action or animated)
Home Video (including DVD, Blu-Ray, etc.)
Live Performance (including Broadway performances and theme park performances)
Interactive (including console computer or mobile video games)
Merchandise (as discussed in last week’s post)
Audio (soundtracks and audio novelizations)

As new forms of distribution are created, new rights are created for the artists. These rights are universal, but they can be divided or carved out by geographic area, time frame, distribution channel, language and other factors. (This division can be complicated, so I’m going to save that for another post)

Types of revenue

Just as there are different rights that creators can use to get their work into the market, there are various ways that they can be paid. Creators need to focus on three ideas:

A royalty is a percentage that the artist earns for every finished unit that is sold. For example, an artist might receive 30% of every one of their comics that is sold to the public.
An advance is paid before the work is finished. For example, a writer of a novel might receive money up for her novel based on the proposal not the finished product.
A minimum guarantee (MG) is money paid up before the work is finished, based on anticipated sales. For example, if a toy company plans to sell a new licensed toy for $10 and the creator gets 10% of that sale, then the creator gets $1 per unit sold. If the company expects to sell 100,000 units, then the MG that the artist gets for this deal is $100,000.

These are broad revenue concepts. They are often altered and refined by concepts like gross, net, recoupment, offsets and other variables. (This is another complicated subject that I can talk about later.)

Choices that Artists Must Make

In certain creative circles, the types and amounts of revenue are fairly straight forward. Writers for some mediums often get an advance. A work for hire artist for comics often gets a page rate. There is more confusion for creators pursuing creator owned deals. There is often no advance, no MG and a blanket royalty rate for all forms of distribution. This puts them creators in a dangerous position since the lack of up front money and the uncertainty of any profitable sales in the future means that the creators are really working on spec while at the same time giving up all their rights to their property.

From the publisher’s perspective, it is understandable why they would take this stance in their contracts. Publishers protect themselves from risk by limiting exposure to projects that might not be financially viable. At the same time, they maximize their potential gain by securing as many rights as possible for projects that are financially viable. Artists need learn the same lesson. They need to counter the publisher’s position by attempting to limit the rights that a publisher gets for projects that are financially viable and maximizing revenue for every project they do.

I know negotiating power is often limited for artists. But having a clear understanding of the relationship between revenue and rights and clear goal of where they want to go can help maximize their limited negotiating power and increase their chances of success.

Best

Gamal