The reform of the publishing contracts in the digital area: the search for balanced contractual relations between authors and publishers, within a secure legal framework

After several years of negotiations between the authors’ and the publishers’ professional unions on the necessary development of the publishing contract rules at a time when digital broadcasting is becoming the main source of author’s rights exploitation, an inter-professional framework agreement dated 21 March, 2013 has been taken forward. The government regulation n° 2014-1348 dated 12 November, 2014 has amended the French Intellectual Property Code in order to insert various rules consistent with this agreement (hereafter the “Regulation”).

This reform which concerns only literary publishing and not musical publishing, does not only affect digital contracts but also traditional contracts.

When will the reform apply?

The Regulation came into effect on 1st December, 2014. However, most of the rules provided by this Regulation have a retroactive effect and shall be integrated within fixed time limits into all on-going publishing contracts entered into force before this date.

What are the main changes?

Though the request from the authors’ union to have a separated contract with a limited duration for the digital exploitation has been disregarded, the Regulation has restored the balance for the authors with the following provisions, some of which make notably easier the automatic termination of a publishing contract:

• A distinction between two specific obligations of the publisher has been implemented: the publisher is required to ensure a permanent and continuous exploitation of the work published in a printed form or in a digital form.

• In order to respect the specificity of these two types of exploitation, the terms of the assignment of digital exploitation rights must be specified in a part separated from the rest of the contract. The sanction for the failure to comply with this rule is the nullity of the assignment of rights.

Moreover, author’s rights are reinforced since:

• The assignment of the exploitation rights under a printed form will automatically terminate if the publisher does not meet its obligations in this respect within 6 months of the date of receipt of a formal notice from the author.

• The assignment of the exploitation rights under a digital form will terminate automatically if the publisher does not meet its obligations in this respect within 6 months of the date of receipt of a formal notice from the author.
  Such terminations will only affect the part of the contract relating to the relevant exploitation rights.

• As for traditional publishing, digital exploitation must give rise to remuneration proportional to the revenues for the authors and must be subject to a review clause with regards to its financial conditions.

• Regarding the reporting obligation of the publisher, on one hand, its scope has been clearly reinforced for the printed publishing and, on the other hand, it has been adapted to the digital publishing specificities. Henceforth, the publisher shall report to the author once a year at least. Moreover, a part of this reporting must be dedicated to the digital exploitation. In this respect, the publisher must provide the author with specific information in relation with the exploitation of the dematerialized copies of the work, by distinguishing between the incomes from the unit sale and those from other types of exploitation (i.e. advertising-based economic model). The sanction for failure to comply with these obligations is the automatic termination of the entire contract at the discretion of the author.
• The publishing contract may be terminated by the author or the publisher if, during 2 consecutive years beyond 4 years after the publishing of the work, the statement of accounts does not show any benefits for any of the following operations: (i) unit sales of the work in a printed form, (ii) unit sales of the work in a digital form, (iii) digital for fee consultations of the work (iv) translations of the work in a printed or in a digital form.

Though this reform substantially clarifies the regime and the content of publishing contracts, it does not reduce the parties’ freedom but provides the author with an effective protection as he is not required, in specific cases of non-use of his rights by the publisher, to bring an action before the Courts to obtain the termination of his publishing contract, which is now automatic.

Moreover, the Regulation grants quite a large regulatory power to the professional unions representing both the publishers and the authors as they are tasked with specifying certain rules of implementation for these new provisions by signing a further agreement (i.e. “code of practice”). Thus, we are waiting for this agreement to know the meaning of the publisher’s obligation to exploit permanently and continuously a work in both digital and printed form, the terms of the digital right assignment, the form of the publisher’s reporting, the deadline for the publisher to pay the author’s fees or the terms of review of the financial conditions of the digital rights assignment (periodicity, dispute settlement procedure, etc.). This agreement should be mandatory by order of the Minister of the Culture. Should the unions fail to reach such an agreement, the government shall adopt a decree.