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Acceptable and Unacceptable Terms of Agency Agreements

Co-author Gerald M. Levine

Agency agreements are not forever which is the reason to be concerned about their terms. There are acceptable and unacceptable terms.  They are not like publishing agreements in which authors grant licenses “for the term of copyright.” Nevertheless, for the term of of agreement the agent has an exclusive right to place an author’s work and if the author retains another agent before termination of the first and is successfull the author is exposed to a double commission. It would therefore be prudent for the author to calendar the date for termination of the agency agreement and terminate according to the terms if she has lost confidence in the agent. There is no early termination without an agreement in writing.

Some provisions in agency agreements are unacceptable and should be questioned. There is a difference, for example, between a literary agent and an agent who manages an author’s career. A literary agent’s rights extend only to offering the work. More importantly, if the agent is successful in placing the work it is he who collects advances and royalties on the author’s behalf. Publishers and licensees pay agents who then distribute to their principals. This calls for a degree of trust in strangers. How those funds are accounted for (whether segrated in a subaccount and not comingled) and when distributed are important elements in the agreement. Breach of contract and fiduciary duty is not unknown. Payments due author are terms that have to be taken into account in reviewing and negotiating an agency agreement. In an unpublished decision from a New York trial court from 2006, Fay v. Yost co-authors charged their literary agent with failing to provide account statements in a timely manner and remit royalties earned from foreign sales. The court denied agent’s application to dismiss the complaint as against her on the theory that her agency was a corporation.

Authors should turn around the “know your customer” rule under securities laws to “know your agent” before signing an agreement. (Not all literary agents use written representation agreements; rather the author’s obligation to pay commission is drafted into the agency clause in the publishing or licensing agreement). Agency commissions are typically deducted upon the agent’s receipt of income before distribution to the author.

Aside from compensation and distribution of royalties — in Yost, the authors were unaware of foreign placements of their work — authors should also pay attention to the scope of agency. The larger the scope the more important to have a clearly spelled out early exit right. Literary, management, and licensing agreements are essentially performance based. Agents are only paid for success. However, as the market has tightened for print books some agents demand more than simply the right of placing an author’s work. The scope of services term should not be uncritically accepted. (Some non-traditional “publishers” have also expanded their services to include agency representation for subsidiary and ancillary rights. Watch out!).

Scope of services should be no greater than the agent is capable of performing. Question whether the agent should, for example, include in his provence any of the exclusive rights under the copyright law that the author would ordinarily retain in negotiating a publishing or licensing agreement. Dramatic, performance and movie rights should be granted to specialized agents (but not necessarily literary agents) who have the expertise to exploit them. Whatever terms are offered and ultimately accepted should be clear and precise. This applies not only to the handling of funds, but also to the scope of services and separation provisions.

Scope of services was the subject of one recent agency agreement.  The agent’s services included “development” of “your literary career.” This gives the agent the opportunity to throw in every right the author owns. This particular agreement read

Such representation shall include, without limitation, all rights to the Work, including, but not limited to, exploitation of the following: hardcover, paperback, serialization, condensation, translation, anthology, periodicals, electronic (including electronic books and electronic multimedia versions), motion picture, television, radio, dramatic, audio, video, commercial, and merchandising rights.

Even if it were appropriate to expand an agent’s role to television and movie rights they should never be given wholesale. Such a scope presupposes that the agent is qualified to negotiate and market to licensees the rights he is supposedly representing. If an author is tempted to do this, she should insist on a termination clause if no substantive negotiations commence within a stipulated time. The agent in the above grant of rights clause who would assist in the development of the author’s career wanted 2 years to exploit the work from receipt of an acceptable manuscript (rather than from execution of the agreement). Other agents ask for one year with notice. (Note: All agencies terminate automatically on the death of the principal, although accrued commissions continue to be earned under active contracts and survive an author’s death).

A typical termination provision reads: “This agreement shall remain in full force and effect until either of us gives the other written notice terminating the agency” following a stipulated period of time, which should not be unreasonably long. There are three possibilities at the time author exercises her right to terminate: the agent has performed and earned his commission for the life of the contract; agent is in negotiations; or, agent has exhausted all opportunities to sell or license the work. If the middle circumstance and the negotiations are unsuccessful, agreements typically provide that the author cannot (within a stipulated period) conclude an agreement with any contractor found by the agent without having to pay the commission set forth in the terminated agreement.

Some agency agreements, in fact the one mentioned above provide what could be considered a penalty, namely a provision that breathes the agency agreement back to life if the author subsequently succeeds where the agent could not in negotiating with a contractor originally identified by the agent. A back to life provision is less questionable if the author terminated the agent with the intention of avoiding paying the commission.  Otherwise, if a back to life clause cannot be resisted it should be limited to provide an appropriate exit within a further stipulated period of time. 

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