Principles of Contracts: Everybody Knows Peggy Lee (or should)

Preface: I mentioned this in the first post in this series, but because I’m going to be talking about some specific points of law in this post, I need to reiterate: I am not a lawyer, am not qualified to dispense legal advice, and none of what follows should be considered as legal advice. All of what follows is opinion based on experience and on layperson’s research, and you should always consult a lawyer of an appropriate specialty when negotiating an IP-related contract (especially when dealing with a company that can afford bigger lawyers than you can).

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Previous chapter: Market Awareness
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If God had a lounge singer in the 40s, 50s, or 60s, I’d lay you even odds that it would have been Peggy Lee. Along with Etta James, Billie Holiday, and Rosemary Clooney, she had a glorious, smoky, rich alto that wrapped naturally around horns and clarinets to make sounds that were the aural equivalent of chocolate.

Peggy Lee had a good friend named Walter, and Walter need a singer/songwriter for his new project. Walter did good work, and he was a good friend, so Peggy gave him a good rate, and in 1955 the result of that project hit the country like Christmas. It was a little movie called Lady and the Tramp.

It was a great collaboration, and they had a good contract for the time (Peggy and her cowriter retained rights to “transcriptions” such as record albums and sheet music–a smart move). Everything might have been peachy for life, if Sony hadn’t screwed up the world with home video.

Videotapes have been around pretty much since the Big Bang (or at least since 1951) in broadcast, but nobody really expected that it would wind up being something people used at home any more than the early computer manufacturers thought that your phone would contain twice the computing power that sent men to the moon (which some of them now do). Even if it were technically possible, why would anyone want home video when they had, you know, lives? And television? A professional toy like video tape wouldn’t appeal to a mass market–or such was the thinking. Sony, by the 1970s the world leader in miniaturization, disagreed. In 1975 they introduced Betamax, the first home video format.

It took a few years for it to catch on, but (thanks largely to the porn industry) by the 1980s home video was THE thing (and in the years since, this trend has only deepened with more formats being released). Studios started making their bread-and-butter money from video rentals and sales, rather than from theatrical exhibition. The only people who had a problem with this were the artists who weren’t getting paid for the work they’d done for theatrical exhibition–but most of them just grumbled. Not Peggy Lee. Peggy Lee pulled out her lawyers and said “Sic ‘em.”

Disney argued that the original license left them with an implicit right to sell the movie in any format, and that “transcriptions” didn’t cover home video because it was just another video format, like film and television. Peggy Lee argued that it was a transcription, and that she couldn’t have sold home video rights, because home video didn’t exist at the time that Lady and the Tramp was produced.

It took a long time for the lawsuits, contrafilings, and court case to run its course. At the end of it, in 1992, Peggy Lee won two important victories. First, she got a few million dollars for her troubles, which helped with her retirement even after her lawyers got their cut. Second, she got a precedent, known in entertainment circles as “The Peggy Lee Decision.” According to this decision, rendered in the California Supreme Court, an artist can’t sign over rights that do not yet exist.

Let me say that again. An artist can NOT license rights that do not yet exist. All those old movie contracts suddenly got complicated, as studio lawyers had to scramble to make sure their creatives (such as composers, songwriters, etc.) signed addendum allowing the use of their work in home video. At the time, Internet streaming didn’t exist except in experimental theory, so very few studios listed that in their addendum–that came later (this is, btw, one of the reasons that certain episodes of TV shows, and certain films, are not available on DVD and/or for streaming–studios would not meet artist’s asking prices for their music and other creative contributions in the new formats).

To get around this, studios started introducing bullying language, where artist signed over rights to “any other formats which may come to exist in the future.” It’s a bluff–at least on contracts adjudicated in California, this clause is probably unenforceable, but how many artists are likely to sue on grounds that nebulous? And in Hollywood, where there are guilds for talent, there are often other compensatory provisions entitling the artists to residuals for those future formats, to be negotiated through the guilds at that time, which further reduces the incentive to go through the expensive rigmarole of a court case.

To people outside of Hollywood, this used to be fairly academic. As of this last year, that’s no longer true. If you’re a writer (or a musician) and don’t know about Peggy Lee, you’re asking for trouble. Here’s why:

Kristine Kathryn Rusch has been doing an excellent series of posts on the transition currently underway in publishing. Some of the stuff she talks about, such as terms that have recently come into vogue in publishing contracts, is relevant to all entertainment fields, and I highly recommend reading the miniseries. You can find it here, here, and here.

In the most recent post, she touches briefly on a a rights grant clause that showed up in a contract she saw recently, and it’s a textbook Peggy Lee dodge, but worse.

The clause in question (pilfered from this post) reads:

“The Author hereby grants to the Publisher…the exclusive license to produce, publish, sell, distribute and further license any Electronic Version of the Work…. ‘Electronic Version’ means versions that include the Work…in a complete, condensed, adapted, or abridged version and in compilations for performance and display in any manner whether sequentially or non-sequentially and together with accompanying sounds and images, if any, transmissible by any electronic means, method or device (including but not limited to electronic and machine-readable media and online or satellite-based transmission or any other device or medium for electronic reproduction or transmission whether now or hereafter known or developed…)”

Kristine Rusch isn’t the only person I’ve heard about this from–she’s just the most well-established author who’s run into it. Read that clause carefully, because you might see it, or something like it, if you’re in the business of making a living off your creative work.

To my amateur eye, this isn’t just future-proof insurance for publishers. This is a wholesale rights grab. That pesky word “adapt” is one to watch for, because in context with the rest of the clause, it means that if you sign this contract you’re signing away:

Movies
television
web series
radio drama
audiobooks
games (video/RPG/board/card/all other kinds)
foreign language (maybe, if the lawyer is very clever and the author is a pushover)
“enhanced” ebooks
computer reference works/supporting material
versions of the story for other audiences (i.e. a bowdlerized version for church libraries, or a juvenile version for children)
ghostwritten sequels (for which you don’t get paid)
turning your book into a shared world a’la Dragonlance (with no further compensation to you, but with your name on it)
spinoffs

And a lot more. The list goes on–literally–for several pages depending on the level of verbosity with which you list them.

And it does all those WITHOUT FURTHER COMPENSATION. Your advance check (and the royalties on your print/ebook/subsidiary rights the contract entitles you to) is all you will EVER get. No long tail. No ancillary income. No retirement money, nothing.

But it gets even worse than that. Because it’s an EXCLUSIVE rights grant, it can be interpreted to:
Prevent you from doing paid public readings (and maybe even unpaid public readings) of your own work.
Prevent you from writing sequels to your own work
Prevent you from using the characters/world/gimmicks/etc. in any other work you ever create. Depending on how nasty their lawyers are, and how easily intimidated you are, after a few contracts like this you could wind up constrained from ever writing anything fictional again, for any media or in any format, for the rest of your life.

Is this clause enforceable? I’m not a lawyer, and I don’t know for sure. I suspect that, if you got to the Supreme Court, a lot of it would get declared unconstitutional (based on the Work For Hire provisions in copyright law and the historic interpretation of the Constitutional nature of copyright law). But the trouble simply isn’t worth it. And there’s another problem.

It’s also worth remembering that the Peggy Lee decision was a California Court decision. Publishing contracts are normally adjudicated in New York, and their laws for this sort of thing are different. I don’t know New York law well enough to even speculate (even with all the disclaimers) on how such a case would turn out in New York.

Peggy Lee spent hundreds of thousands of dollars (or more), to enforce her rights and recover royalties due her, on a case that was much more clear-cut and less sweeping than this one. She lost nearly a decade of her life to that battle (5 years in court, plus all the preliminaries)–and it cost her her professional street cred (when she died, the Academy refused to run her obituary at the Oscars, as is customary. Her family rightly took this as a profound insult).

Clauses like this are sneaky, and they’re often distributed through contracts. I will never sign a contract like this, no matter how much money they wave at me. And with this kind of stuff going on, I will never sign a publishing deal without a qualified lawyer on my side–not an agent, no matter how good he or she is. Agents are not lawyers, and having dealt with a handful of very reputable, ethical agents, I’m very comfortable saying that publishing agents are, on the whole, not hip to this kind of legal sneak attack. If I deal through an agent, it will be IN ADDITION to a lawyer, not instead of one.

It’s situations like this that underline the unequal bargaining muscle that publishers (of all media) bring to the table. But there is something you can do to equalize that balance: When faced with a clause like this, say “no.” Period.

Next time, the long-promised post on dealing with power dynamics: Embracing Your Inner Two-year-old.

:::Addition:::
For those of you interested in further reading on the Peggy Lee case, a good starting point is the Variety article reporting the CA Supreme Court decision.

Please share your thoughts, criticisms, and reactions below. If you’re a lawyer and spot a problem with what I’ve said, or you just think I’m out to lunch, please say so. I’m happy to amend the article. And remember: I am not a lawyer, and this is neither legal advice, nor should you consider it adequate foundation to deal with this kind of contract without consulting a lawyer.

If you find this post useful, please consider donating to the tip jar at the top right of this site, or buying a copy of any of the books you’ll find listed in the right sidebar. Writing is how I make my living–I enjoy it and would like to keep it up!

13 Responses to “Principles of Contracts: Everybody Knows Peggy Lee (or should)”


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  2. Lexi Revellian

    Scary stuff. Is it happening yet over here in the UK, I wonder?

    I think you overrate lawyers, and it’s best to read any contract VERY carefully yourself, and not sign anything you don’t fully understand and accept. Make them explain obscure bits until you have grasped their meaning.

    Experience has taught me a lawyer will get paid and go on to his next job – if he gets it wrong, you will be the one to suffer, not him – unless US lawyers are very different from those I’ve encountered in London.

  3. jdsawyer

    Lexi —

    Lawyers (solicitors rather than barristers) do, of course, vary in their competence. However, they are specialists in the law, and there are times when specialists are called for. Finding one who is a specialist in the area of law you’re looking for (ex: publishing contracts), is important. And, varying in their competence as they do, it is quite possible to find a good one.

    You are correct, of course, that it’s bloody foolish to sign anything you don’t fully understand–educating yourself to be able to understand as much as possible is something I heartily advocate. The fact remains, though, that lawyers (at least in the U.S.) have Doctorates in the law, and years of direct experience day-in-day-out that no other class of specialists has. When dealing with a document drawn up by a lawyer, it’s wise to bringing your own lawyer to explain to you what it means–he’s likely to find implications or subtle points in the contract that you or I with our experience and penchant for self-education might nevertheless miss.

    As far as malpractice (i.e. the lawyer gets it wrong, particularly when he should have known better), lawyers in the US are required to carry malpractice insurance, and there are a number of legal remedies available against lawyers who misbehave.

    To sum up, my policy on lawyers is this:
    They are your personal shark-on-a-leash. Use them when you need them–put them in their cage when you don’t. They are a tool–one of many–to use in doing business. If you have some idea what you’re doing (i.e. you’ve educated yourself), you’ll get a LOT more value for your money when you employ one than if you just stumble in and say “take care of me, please!” ;-)

    Thanks much for the comment and for stopping by!
    -Dan

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  6. Brandon Wood

    This scares me and I’m just a little ole indie author! Haha. What I don’t understand is why the publishing industry is doing this. Well, why some people in the traditional publishing industry are doing this. It’s just not smart business sense at all to screw the provider of your product.

  7. jdsawyer

    Brandon

    I think it’s a “wounded animal is not safe to approach” kind of situation. The bigger publishing companies have been hit hard this last year by the Borders bankruptcy and a few other things. The growth of ebooks is happening faster than they anticipated, but by itself wouldn’t have been enough to really screw them over. However, on top of everything else, it’s made life very difficult in New York at the moment.

    In the 90s, a lot of consolidation went on in the industry, with many of the “big” publishers being bought up by media conglomerates who demanded larger profit margins than the book business can historically sustain. In some cases, too, the legal departments of the pub companies merged with the legal departments of the parent corporations, so there’s been cross fertilization with lawyers who are used to Hollywood (movies) and LA (music) style contracts.

    At the same time, the book retail industry was consolidating under a few very high volume retailers, away from the traditional setup of thousands of small volume retailers, which led directly to a shrinking of variety in the kinds of lists publishers could economically carry (there’s a saying I’ve heard from many pro authors “My customers aren’t the readers, my customers are the chain store buyers”).

    My (probably underinformed) opinion is that the consolidations set a number of publishers on a path that has put them in very bad positions financially and that, being in a bad position, they’re attempting to do whatever they can to get through this rough patch.

    The Passive Guy has a more detailed (and, I think, more informed) take no what’s going on, and it’s really worth a read. You can find it here: http://www.thepassivevoice.com/05/2011/strip-mining-the-authors/

    I honestly don’t expect the madness to last forever, but the kind of vigilance that one should be practicing anyway serves a person very well in situation like this. Here’s hoping that, when the big storms caused by bankruptcies settle out, cooler heads prevail in the contract departments and the publishers remember one of the golden rules of business:
    “If you want to stay in business, don’t screw your partners.”

    Dan

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