"Is this the worst paragraph in your publishing agreement?"

The Passive Voice, a blog I follow that has tons of information for authors, has a really important post today entitled "Is this the worst paragraph in your publishing agreement?"

The advice in here is good for not just authors. App developers and film/TV producers should know about it too.

Why is it so hard to stop patent trolls?

In the right hands, patents are good for inventors and for society. The monopoly they give allows for companies to do R&D work and commercialize that work, creating things that are a net gain for all of us.

The problem is, there are also companies out there that never make anything. They just see an issue, think about what kinds of things might somehow be related that issue, and then file patents based just on the description of how something should work rather than on something they've actually done. They never manufacture anything using that patent. They never even have any intention of doing it. Their definition of "doing business" with their patent is to find people who they think are doing something similar to the things described in their patent, contact them, and offer to license or even sell the patent. Meanwhile the companies that license or buy the patent just keep doing what they were doing, making things to try to help the world.

I have, of course, just described startup pharmaceutical companies.

A 3-step guide to basing fictional characters on real people

In a previous post, I've given a high-level overview of the issues involved in using real people as the basis for your characters. But this raises a very technical issue called libel in fiction. And that can be just as bad as libel in fact.

Here's three steps to consider if you want to take a real person and use them as the basis for a character in your fictional universe:

A checklist of 5 things creators could do at the beginning of each month

I like to set various habits at the beginning of the month to get myself in the practice of checking things that bear checking on a fairly frequent basis. If you're a creator, especially an author, here's 5 things that might help you in your work as well as in protecting your work.

Look and feel of your apps and games: two important cases on copycat apps

What's so special about Angry Birds or Tetris that makes them so lucrative? Why can't someone just create their own versions of these games? Or can they? Two recent judgments on copycat games shed some light on a fast-breaking area of the law that's important for developers to understand.

Video games are almost unique among copyrightable materials because they can be simultaneously protected under copyright law in multiple ways: the source code in which they are written is protected by literary copyright, and the look and feel are a protected audiovisual work. But there's another interesting issue about video games, which is that they simultaneously have creative and functional content: the art and music vs. the rules that make the game work. This matters: creative content can be copyrighted, but functional content can't.

At least that used to be the case.

Three basic questions about using real people as inspirations for your characters

Authors, filmmakers, and other creatives have always built their stories from their own experiences. Being inspired by real events and real people is almost impossible to avoid. But sometimes people go a step further and build their creations directly from reality, including real people or real events that can be traced back to real people. And, when done right, this can lead to increased interest translating into increased sales. As a wise gnome once said, Step 3 is Profit!

But doing it wrong can lead to real problems.

Although there's more than just four things to consider when using real people in your creations, the questions I've gotten have revolved around three big issues.

Two easy ways to succeed on Kickstarter (and two reasons you should look for these kinds of projects)

Over the weekend, Ars Technica put up a quick post on old games getting rebooted through Kickstarter. They talk about how it's fertile ground for rebooting old games. Unfortunately, at least for creative endeavors, revisiting well-trodden ground may be one of the only profitable uses for it. But surprisingly this might be a really good thing for people looking to back Kickstarter projects.

As someone who is mentioned twice (obliquely) in the promotional video for one of the most successful Kickstarter reboots (when at Microsoft I worked on Shadowrun), I have a bit of a sentimental interest in this topic. It would seem that if you want to succeed on Kickstarter, try for one of two things:

Avoiding option clauses and cross-collateralization by using LLCs

A short post today, but hopefully a helpful one.

I've recently seen people complaining of two standard problems with traditional publishing contracts:

• Option clauses: where publishers require you to give them an option on your next book.
• Cross-collateralization: where publishers won't pay you royalties on your first book until you've paid back the advance on your second.

It seems to me that there's a very easy way around each of these problems.

It's not okay just because it's free: three myths (and two truths) about fair use

[Note: this is part 4 of a 4-part series on fair use.]

The last portion of the fair use test, the effect on the original market for the work, is one of the most commonly-misunderstood elements of copyright law.

The test itself seems like it should be fairly straightforward but in fact it's not. The relevant text, "the effect of the use upon the potential market for or value of the copyrighted work", looks like it only addresses the specific use made in the specific context. But that's not what courts will actually look for: they will ask both whether the specific use that you're making of someone else's work is going to affect the potential market for or value of the work, but also what would happen if everyone started doing it.

That's right, judges are just like your mom.

Why optioning your characters may be a horrible idea

If anyone asks to take an option on your characters as opposed to on your next project of whatever type, you might be tempted to say yes. Think hard before you do.

The general rule of entertainment contracts is that buyers want to buy as much as possible and sellers want to sell as little as possible. So a character license may seem like the best of both worlds: if you work with the same characters then the publisher/studio/whatever gets a first pass (I'll use publisher to keep things simple), but if you don't work with those characters then the publisher has no claim on whatever you do and you can take it wherever you'd like.

Or so you may think.

How big companies make big mistakes

"How can such a big company be so stupid?"

Maybe it's because I was just at Romance Writers of America 2012, but a lot of the conversations I had around the Harlequin litigation turned on that question. And every time I gave my answer, the amazed looks I got spoke volumes about what my next post should be about.

My answer: "What they did isn't stupid. It's just stupid to you and me."

I'll use the Harlequin facts to explain, but the principles apply far beyond. If you're creating content for distribution by a large company, I'm afraid you'll have to deal with these kinds of situations pretty often in your career.

If you review content on the Internet, don't forget one thing

Do you take review comments from blogs or from Amazon and use them to promote your work? If so, do you feel you have a good sense for when people are trying to be sarcastic or ironic? And if you think reviews are sarcastic or ironic, do you avoid using them in your promotional materials?

Unless you've answered all of these with yes, you need to know about one aspect of the FTC Endorsement Guides that might come as a surprise.

Below, I've embedded and linked to the trailer for a film called Birdemic. Watch the whole thing if you like (and if you can) but in any event fast forward to 2:08 where you start to see review comments like:

When agents are better than lawyers, and vice versa

Agents and lawyers both negotiate contracts. They both seem to fill very similar roles. And they both want your money.

So how are you supposed to know whether you need one, the other, or both?

Oversimplifying the role of each of an agent and a lawyer:

Four last things to remember for now about net profits clauses

1. If your publisher is doing deals with related parties, they have to charge what are called "arm's length" rates. A good way to show this is with an example. If your publisher is charging you a marketing fee  is using a marketing firm in the same corporate family, there's a really strong incentive for them to make the fee as high as possible. The "arm's length" rule says that they can only charge you the same fee that a company not in their corporate family would charge. If your publisher is charging fees against your book that you think are totally crazy, look for some industry data to see if you can use this to change their position.

Three common deductions that publishers and studios take, and tips on what to do in response

Here's three of the most popular or egregious deductions from book and film deals:

1. Distribution fees. Although there are always costs involved in shipping product, many times the distribution fee in a contract is determined as a fixed fee or percentage, such as "20% of gross profits". I'll let you decide whether this kind of calculation is based on actual costs of distribution. If it helps to figure this out: often the distribution company is a related party to the publisher. By the way, the same thing often happens with marketing fees: they are calculated as a percentage of profits and aren't usually tied to actual spending.
2. Overhead. Basically this represents salaries and other internal costs to your publisher. Publishers often try to pass through the cost of editors, accounting staff, lawyers, and other employees. Some even want to charge a fee for things like photocopies, long distance phone calls, and office rent. You'll see this as a percentage of your profits, which is a clear signal that it's nothing to do with the work they've actually done on your project.
3. Interest. If your publisher is paying you an advance, then that's money out of their pockets. If you read the advances and royalties post then you may recall that you don't get paid any royalties until your publisher recoups the advances. Some publishers also charge you interest on the advance; most film and TV studios will do this. So if you get a $15,000 advance and 10% royalties with a book whose wholesale price is $10 but 10% interest, then you don't get paid on copy 15,001. It takes another 1,500 units: you get paid at unit 16,501. Same thing for the marketing and distribution charges: some publishers allocate money to a project and then charge a interest against it even though the money isn't spent yet.

If you see these things, try these responses:

Why net profits can mean no profits: learn how to protect your money

Net profits clauses are almost a dirty word these days, but they didn't start that way and they don't have to be. It really comes down to the way they're written.

Taking net profits used to be something only big names got. One of the first people to take a net profits clause in a contract, if not the first one, was Jimmy Stewart in 1950. His version of the net profits clause would have worked similarly to the way these work today: talent and creators agree to take less money in advance but they get additional funds if the project makes money. The thinking is: if the project is a success then everybody wins, and if not then everyone loses less.


But as time went on that last statement became less and less true. Today there are often clear winners and losers in a net profits situation. And the publishers and studios do their best to make sure they're not the losers.

Understanding advances and royalties clauses, and two things to think about when deciding to take them

Getting paid is great, but getting paid over and over is even better. Or is it? Payments over time are a bit more complex, sometimes a lot more, than a flat fee. But at the end of the day they break down into two buckets:

• Royalties
• Advances on the royalties

You might see a contract say that you'll get $1,500 advance on signing against 10% net royalties. Let's use that as an example. Here's what that means:

1. On the day you sign the contract, your publisher/studio/whatever will give you a check for $1,500. You can cash that, it's yours. But...
2. Effectively, you've borrowed money from yourself. That $1,500 will be paid back from your royalties. If your book (for example) wholesales for $10, let's assume there are no deductions (which is a HUGE assumption and I'll come back to that), then you're making $1.50 per unit sold. So you don't get paid until you've sold at least 1,000 units ($1.50 x 1,000 units = $1,500).
3. At unit 1,001, you start getting $1.50 per unit sold.

Four steps in determining whether a flat fee is right, and three things to consider

In a previous post (http://bit.ly/P4CUUb if you missed it) I discussed the issues that might lead people to take flat fee deals. Now it's time to talk about how to calculate flat fees and whether a flat fee structure is right for you. I'm sorry, but there will be math today...

In the book world it's actually pretty easy to figure out whether a flat fee is a good deal:

Show me the money: what you need to know about getting paid

If you're creating valuable content, you may someday want to get paid. And that means you'll need to know something about how payments are structured in entertainment contracts. I know, this could be tedious. But when we get to talking about money, and especially in future posts when I go into net profits clauses, knowing the basics will be really important.

Oversimplifying drastically, there are two basic types of payments:

• Flat fees
• Payments over time (royalties and advances)

First I'll talk about flat fees. Then I'll cover royalties and advances.

App developers: if you sell into the EU and don't think about these four things, you'll hate yourself in the morning

For European app purchasers, July 4, 2012 may be their software independence day. (Okay, I admit that was horrible. I couldn't resist.)

Long story short: in the USA, if you download software, the developer has the right to restrict you from passing your download to someone else. Your app can be tied to your phone or your tablet and it's a violation of the license to sell the app to someone else. Until today, that was the case in Europe too. But after a lawsuit brought by Oracle against a company called UsedSoft, a sort of marketplace for buying and selling licenses for downloaded software, things are different in the EU. And for everyone from app developers to authors to musicians, this is a big change.