Tuesday, 2 July 2013

Royalties in publishing agreements: when expectation leads to litigation

In Morse v Eaglemoss Publications Ltd [2013] EWHC 1507 (Ch), a Chancery Division (England and Wales) decision of Mrs Justice Proudman last month, the judge who kickstarted the whole Meltwater controversy in the UK over internet browsing and copyright infringement (see various blog posts here and here) found herself once again dealing with a copyright-flavoured issue, this time involving royalties.

In short, Morse was claiming royalties from Eaglemoss, basing his claim on publishing agreements which concerned a series of illustrated wildlife publications for the Reader's Digest magazine. In effect, the agreements let Eaglemoss make use of Morse's published work, Wildlife in Britain, by packaging a series for licensed publication and mail order sale by Reader's Digest.

Morse's first contention was that there had been a binding contract even before the agreements had been entered into; this was rejected, even though the parties had been co-operating on the basis of trust and informality. Morse however had better luck with the publishing agreements themselves: on their correct construction there was a licence between the parties which entitled Morse to a proportion of the royalties in the strict sense -- but not to any elements of the fixed payments from the Reader's Digest to Eaglemoss. According to Proudman J, Eaglemoss was, on the true construction of the licence, entitled to deduct the  cost of paying third party owners of copyright in the pictures from these royalty payments, even though Morse was entitled to an account of the sums expended on them. Finally, the pleas of Morse that the agreements should be rectified for unilateral mistake or that Eaglemoss owed him fiduciary duties and should have disclosed that it would be receiving the fixed payments from Reader's Digest were also dismissed.

This is one of those curiously old-fashioned cases in which the judge actually had to decide the case on the facts before her, rather than engaging in detailed analyses of the legal principles involved.  If any moral can be extracted from this action, it is contained in the fact that, wherever money is expected by one party from another, it is best to concretise that expectation in clear and unassailable terms from the outset -- however embarrassing it may seem at the time.  Understandings and expectations based on trust and mutual respect are all very well, but in the long run they so often lead to tears.

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