Business Musings: Long-Term Thinking: The Non-Compete Clause (Contracts/Dealbreakers)

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As many of you know, I’m revising the book Dealbreakers, which I published in 2013. This piece is the second revision of this topic that I’ve done. Please remember as you read this that I am not an attorney, and nothing in this post should be considered legal advice.

I probably should have called this post Short- and Long-term Thinking, or maybe just Thinking. Because no one should ever sign a non-compete clause.

Ever.

And yet, for the past several years, traditional publishers are trying to control everything about a writer, from the rights she sells to the amount of money she makes. They also want what they’re calling “a non-compete” clause.

In reality, it’s a “do-not-do-business-without-our-permission” clause.

I first wrote about this in 2011. Then I revised the piece for 2013. And now, well, things are much worse than they were five years ago for any writer who wants to become traditionally published.

I’m going to be as blunt as I can here.

If you sign any version of a non-compete clause, you will never be a full-time professional writer. Writing will not be your career. Something else will, and you will write on the side for the rest of your life.

Got that?

Can I be any clearer?

In the past five years, publishers have gotten draconian about the non-compete clause—and they’ve also gotten sneaky about it. Many writers have gotten wise to the non-compete clause, and refuse to sign it.

But most writers don’t realize that contracts are one long document that works as a whole, not a series of linked paragraphs. Just because you whacked one mole doesn’t mean you’ve gotten rid of the moles altogether.

These days, deleting the non-compete clause is not enough. You must also get rid of all the language about competition in the warranty section of the contract. That’s the part your agent (if you have one [and if you have one, why do you have one?]) tells you is boilerplate so you don’t have to read it.

Yes, you have to read your warranty clause. Yes, you have to read your entire damn contract, not just the parts that someone warned you about.

Around 2012, publishers started requiring non-compete clauses in almost all of their contracts, and are making those clauses a deal breaker from the publisher’s side. In other words, the publisher will cancel the deal if you do not sign a non-compete. The choice you are given is this: either you let the publisher control your entire career just because you sold that publisher one book for $5000 or you walk.

If that’s the choice you’re given, walk. Hell, run.

You have other options now. You can go to a different traditional publisher if you want. You can publish that work yourself.

You’re even better off putting that book in a drawer and not mailing to anyone than you are signing that clause.

Got it?

Because the moment you sign that clause, you give over your entire career to a corporation that cares nothing for you. Even if the clause does not hold up in court (and quite honestly, I don’t think the clause can hold up but I am not an attorney), you’d have to spend years not writing and litigating to prove me right.

What is the clause? Well, it’s not an option clause. We dealt with the option clause last week. But you’ll often find the non-compete clause in the same section of your contract as the option clause. The non-compete clause will look something like this:

The Author agrees that during the terms of this Agreement he will not, without the written permission of the Publisher, publish or authorize to be published any work under this name or any other, including blog posts, short stories, nonfiction articles, novels, or the like.

In other words, the contract will prevent the writer from making a living at his craft. I saw that clause in my first contract with Bantam Books twenty years ago and hit the ceiling. (The word blog was not in it, of course.) I thought I was going to lose this rather large contract because no way in hell would I sign a document with that clause in it.

I demanded the clause’s removal and got it with no fuss at all. Recently, however, writers have signed contracts with that clause because they were told the clause was a deal breaker. I know of at least two mystery writers who need their publisher’s permission to put up a blog post. I know of several more who have had to get a document granting them blanket permission from their fiction publisher to write nonfiction.

Do you really want that to happen to you? Because it could if you sign this clause. Consider that the contract, like your mortgage, might get sold to another company you’re entirely unfamiliar with at the moment. This happened to Avalon authors who had no idea when they signed their contracts that eventually Amazon would have the rights to publish those works. (I will deal with that in “Contract Termination” in a few weeks.)

Your current publisher might not enforce that clause; the publisher/business your current publisher sells out to might enforce the clause, and make you pay damages for anything you’ve previously published after you signed the contract (and ignored the clause).

Worst case, right? Yes, it is. But before you sign a contract—any contract—, you must imagine the worst-case scenario. The contract you negotiate should protect you from bad things, but you have to realize how bad those things can actually be.

Let’s go back to the clause: It is ridiculous. It’s there to prevent you from controlling your craft. According to that clause, your publisher is in charge of everything you write, whether the publisher pays you for it or not. Got that?

I have seen other versions of this clause, negotiated by (idiot) agents for their established clients. Those versions usually read something like this:

The Author agrees that, during the term of this Agreement, he will not, without the written permission of the Publisher, publish or authorize to be published any work substantially similar to the Work or which is likely to injure its sale or the merchandising of other rights herein.

This is only marginally better. Seriously. You’re still asking your publisher’s permission to write something. Granted, it’s only under one name, and if your publisher withholds permission, you can start up a new pen name, but honestly…who signs this stuff? And what advisor thinks something like this is okay for a writer to sign?

Because the problem isn’t with the publisher’s permission. The problem here is two phrases: “substantially similar” and “likely to injure.” Who decides if my funny fantasy novel about fairy-tale characters is substantially similar to my science fiction novels about the Moon? They are supposedly in the same genre—sf/f. Or what about my mystery series set in Chicago in the late 1960s? Is that substantially similar to the mysteries set on the Moon? They are both mysteries after all.

And who determines if those Moon mysteries “injure” the sales of the 1968 mysteries? Does the fact that I’m also publishing romance, a genre that many sf editors don’t respect, “injure” the sales of my sf books?

See the problem?

It gets worse when you think about who gets to decide. Most writers will let their publishers decide. Those writers who challenge the publisher’s decision will find their books, their careers, their livelihoods tied up in civil court, waiting for a judge to decide.

I have seen several versions of these clauses negotiated to death, with all kinds of phrases added in, but none of them are toothless, and all of them tie the writer’s output to his publisher’s permission.

For me, this clause is a deal breaker. No one controls my career but me. No one tells me what to write but me.

The best way to handle a non-compete clause is to refuse to sign one.

So…you take the non-compete clause out and you’re in the clear, right?

Hell, no. Lately these publishers have been adding something in the boilerplate section of the contract. A boilerplate section is the stuff that should remain the same from contract to contract—you negotiate it once, and it doesn’t change. It’s stock or formulaic language that covers expected things like insurance coverage and Acts of God. Some boilerplate can be changed and some can’t.

In the boilerplate section is something called a warranty, and in it, you’ll find language like:

The Author Warrants that the Work is original, and uses no material from any other source

Things like that.

Only cagey publishers have started to add this:

The Author Warrants that she will not publish any other work until this contract is fully executed.

In other words, the Author can’t publish anything until all the terms of the contract are met. Meaning that she cannot publish anything until the second or fifth or tenth book of the contract is published, and maybe, depending on the wording, not even then. She might not be able to publish until the book goes out of print.

If the book goes out of print.

Because, people, books generally aren’t going out of print any more. Contracts with traditional publishers are becoming contracts for the life of the copyright.

Think, think, think about what you sign. Think about the worst-case scenario. You people are supposedly good at imagining things.

Imagine this one.

Seriously, folks, watch out for this stuff. Take clauses like this out of the contract. If your publisher refuses to remove language like this from your contract and you still sign it, you will have no one to blame but yourself for your tanking writing career. Because you put your signature on a legal document giving someone else control of your output.

Let’s look at the non-compete clause from yet another perspective—one of balance.

Technically, contracts should at least pretend to have balance between the parties. Theoretically, you and your publisher are equal partners in the venture of publishing a book, and your contract should reflect that.

Contract law, from dozens of countries including ours, assumes that both parties are able to enter into the contract equally, with the same kind of knowledge and judgment.

If you can show, in court, that you’ve been swindled, bamboozled, or forced to sign a contract whose terms actively harm you, then the contract might—and I use the word “might” here on purpose—be canceled.

One of the things a judge will look at to see if one party is unfairly taken advantage of in the contract negotiation phase is balance. If the entire contract benefits only one party, then the contract is unbalanced, and argues—by its very existence—that the other party was taken advantage of.

The judge is not required to act here, and often will not. This is one of the many reasons I tell you to avoid court.

But let’s explore balance for a moment:

If you are a professional writer who makes her living on her writing, and you have signed a contract that does not allow you to practice your trade, then there must be some similar consideration for the other party to make the contract balance.

In other words, if your publisher wants you to sign a non-compete clause, then your publisher should sign one as well.

If you ask for a non-compete as ridiculous as the one the publisher is asking of you, then it would read like this:

The Publisher agrees that during the terms of this Agreement he will not, without the written permission of the Author, publish or authorize to be published any work that might compete with the Work, including blog posts, short stories, nonfiction articles, novels, or the like.

Imagine a publisher signing that. Oh, you can’t? Neither can I.

But let’s dial it down a notch. Let’s say you sell a vampire romance to Publisher A. If the contract has balance, then you can’t publish a romance or a vampire book that might compete with yours—and neither can your publisher. Even if you limit the non-compete to two years, imagine telling your traditional publisher that they can’t publish vampire books or romance books for two years after the publication of your novel.

Now do you see how wrong this clause is? You should not sign it because it’s bad for you. If that argument doesn’t sway you, then ask yourself if any reasonable business would sign a contract with a clause like that. Or if any business would sign a clause like that for any reason.

Your writing career is a business. Act like it.

Do not sign something that will stop you from practicing your trade.

Ever.

I am now in the nitty-gritty parts of the dealbreakers series. This is the place where I need the most support, partly because I get frustrated here, and I have to dive into terrible (truly terrible) contracts that writers have signed.

I want to prevent the rest of you from making the same mistakes. So, please, forward this, email it, share it–do what you can so other writers can see it. And please do support the blog financially.

Thanks!

Click paypal.me/kristinekathrynrusch to go to PayPal.

“Business Musings: Long-term Thinking: The Non-Compete Clause,” copyright © 2016 by Kristine Kathryn Rusch. Image at the top of the blog copyright © 2016 by Canstock Photo/PhotoEuphoria.




15 responses to “Business Musings: Long-Term Thinking: The Non-Compete Clause (Contracts/Dealbreakers)”

  1. Non-competes are a topic I’ve spoken and written about time and time again. And, like Kristen, the first time I saw one, I thought “You’ve got to be kidding me. No one would sign such a thing.”

    I thought it would be an easy thing to get removed. It wasn’t. Six months of hard-fought negotiation left me with my agent saying “Everyone signs them you’ll have to sign this or self-publish.” I then brought in an IP lawyer who pulled up contract after contract all with similar non-competes and he said, “They are industry standard, and the publisher won’t remove them.”

    To be clear, this was with an imprint of a big-five publisher and I was told the wording was controlled at the Hachette level and couldn’t be changed by Orbit.

    To make a long story short – I did finally get it defanged to the point of being able to sign it. What changes made it possible. First off I got “competing” book defined – which turned out to be a book with exactly the same words as the book under contract – which seemed pretty odd as they already had that in the fact I signed the contract at all, but hey if that’s how they wanted to define “complete” it was good with me. The second thing was providing a small window of exclusivity (a few months before and after the release of their titles. Outside those windows I was able to publish anything I wanted period.

    I’ve yet to meet any author published through the big-five that doesn’t have a non-compete. And believe me I’ve tried to find one. Many have said they don’t, but then they read the contract and go, “Hey, what do you know. Didn’t think that was there.” I’d LOVE to find someone who doesn’t. It would allow me to make a stronger case when arguing this with my contracts. So the statement of “If you have this in your contract don’t sign” means you can’t be published with the big-five.”

    So, yes, you do have to have them defanged – and yes if you fight long and hard enough you can get them so (unless someone else has come along prior to you and defanged them in a way that you can piggyback on). So it’s not a matter of “not signing” it’s a matter of getting them to (a) clearly define what compete is (and sequels, prequels, and spin offs should be specifically allowed), and (b) have them limited in some matter. For two contracts that was the window of exclusivity. For a third contract that was no book in a certain universe could be published without permission until after there last book of the contract was released. Definitely not what I would have preferred but it is something I COULD live with because the advance was so substantial and the time period was short in the grand scheme of things.

    But I do agree with Kristin that the non-competes she presented in this article (which were similar to the ones I was first presented with) are unsignable – period. So, rather than say if there is a non-compete don’t sign. I think in today’s publishing environment they are GOING to exist and unless you ONLY want to self-publish the rule should be if you can’t get it defanged to terms you can live with then walk.

  2. I would look at it this way: If you signed this non-compete clause, you’re giving something to the publisher. What do you get in exchange for it? Not: the contract as such, but something specific in return for this specific thing you would be giving them.
    Please note: I am not a lawyer and this is not legal advice.
    It reminds of clauses in employment contracts where the employee after leaving the company is not allowed to work for a competitor (however broad or narrow this is defined) for e.g. 12 months after termination of the contract, depending on his function / level in the company. BUT in exchange the employee gets a compensation for being blocked from the job market i.e. money. In Germany, this is legal up to max. 2 years after end of the employment, the compensation must be min. half of the last salary (full salary if contract is terminated by the employer), and the employer must have a legitimate business interest in demanding the non-compete (e.g. protection of business secrets). If the terms are disproportionate, this is not binding.

    I agree with you, Kris, an author should not sign this clause – unless she gets an acceptable monthly salary in exchange. Which publisher would be willing to pay this?

    Thanks for all the great articles you’re posting!

  3. And that’s why you HAVE an agent, to make sure you don’t sign dumb contracts, to advise and help your career path, to get you foreign and audio contracts. And yes, I also self-publish. So you can do both, and I recommend it.

    • Most contracts I’ve seen with a non=compete were “negotiated” by an agent.

      If an agent is advising you on contracts, they’re practicing law without a license. Hire an IP attorney. Agents are a remnant of an old system that no longer functions. Most people get better contracts and more subsidiary rights sales without an agent. I’ll have a post on this in the future. (I had one post on agents a few weeks ago as well.)

      If you want to understand your contracts and get good advice, hire an IP attorney for a few hundred bucks rather than an agent who has an English degree (usually) and will take 15% or more for the life of the contract. Thousands for a non-expert or a few hundred for an expert. I’ll chose the expert each and every time. (And in case I’m not clear, that’s the attorney.)

  4. Fantastic information. I’ve shared it with several groups and on Twitter.

  5. antarespress says:

    (Spitballing here.)
    There is a concept in law called economic breach. A non-compete clause looks like a perfect candidate for economic breach. A publisher could sue and get nothing but a shredded contract. I seriously doubt the publisher could prove damages. Sales of the book fell? In discovery, demand the sales records of the publisher’s other authors to demonstrate that sales fell for them, too; that is, adduce evidence that falling sales is a function of time, not competition. Did the publisher publish other works by other authors in the same genre? Then the publisher caused the loss by competition; that is, he has unclean hands and his complaint will not be heard. I would also argue that the publisher is in a fiduciary position vis-a-vis the author and has breached his fiduciary obligations by publishing and promoting competing works. Speaking as a lawyer, I think it would be fun to litigate a publisher’s non-compete clause. Might induce me to get a NY law license. As a writer, it would be a seriously hard ride through Hell even if you reached Heaven on the other side. ‘You can beat the rap, but can you stand the ride.’

    I truly believe the publisher cannot afford to enforce this clause. But even if I am 100% right out here, in court I’m only 80% right. If you don’t know what that means, you are not a lawyer.

  6. Leszek says:

    I’ve been following your blog for a long time and damn, this is the most unequivocal, slap-in-the-face-don’t-do-this-you-idiots post so far 🙂 That’s how deal breakers should be dealt with.

  7. acflory says:

    Terrifying. Even as an Indie this article scared me, at least in part because I’m one of those people who never reads a ToS. Not the same as a contract, I know, but in the same family. 🙁

  8. I’m pretty sure non-compete clauses are void and unenforceable in California (where I live) and possibly elsewhere. Gives some sense of how bad they are.

    • antarespress says:

      davidwisehart,

      A cursory search says you are correct. In California, non-compete agreements are void. But with publishing houses, it is likely that New York law applies. If I still had WestLaw, I would search for cases in New York on this topic. A New York judge might strike the clause as overbroad. The New York publishing houses cannot afford that precedent. I saw Microsoft go to extraordinary lengths to unpublish a decision against them.

      On the subject of publishing case law, all federal court decisions get reported unless the judges quashes publication; for example, the Microsoft case in New Mexico. For state courts, only appellate level cases get published. Courts of original jurisdiction keep records but do not publish them. A publishing house could lose a case, take its lumps (no appeal), negotiate a post-judgment settlement that included a non-disclosure agreement and agreement to seal the record, and no one would be the wiser.

  9. Gordon Horne says:

    I am not a lawyer either, but I have been an independent contractor and hired independent contractors. As such I’ve had to be aware of tax and other regulatory differences between contractors and employees. There are a lot of details, but at heart an employee is dependent on the employer to work. Non-compete clauses have always looked to me like a relationship that at least in Canada would make the writer an employee not a contractor. The legal standards for the care and feeding of employees are very different than for contractors and more onerous. Publishers do not want their writer stable to be classed as employees.

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