The Paladin Group has filed a complaint with the California Labor Commission against the RSWG Literary Agency and its agent Geoffrey Sanford. Paladin claims that neither RSWG nor Sanford are licensed agents or attorneys under California law, and thus illegally took 20 percent commissions for licensing the late John Steinbeck’s literary works.
Before getting into the complaint, let me first walk you through what literary agents do to get a better idea why Paladin is suing RSWG.
What is a Literary Agent?
Literary agents are an author’s first step toward publication, and they are essential to the publishing process unless an author decides to self-publish. It’s extremely difficult to land one since hundreds of thousands of books are published each year. If an author obtains a literary agent, that person helps with the manuscript and/or proposal before pitching the book to acquiring editors. Auctions, or bidding wars, can occur if multiple editors want the book and believe it can be a best seller; however, most books get acquired by one editor who expresses interest.
The author then signs an author agreement with the editor’s publishing company, which states the author’s advance (i.e., how much the publisher is paying the author for his book before royalties), grants (usually) the author the copyright to his or her literary work, and gives the literary agent a 10-15 percent commission. The literary agent’s commission can be peanuts if a book’s advance is say, $10,000, which is an average debut novelist’s advance. However, take Bill Clinton’s advance, which was reportedly more than $10 million. Who wouldn’t want 10-15 percent of that? Thus, it is easy to see why agents are extremely picky about who they represent because best-selling authors can generate the agent millions of dollars.
What is a Co-Agent?
However, that isn’t the end of the road for an agent’s and author’s potential revenue. When a book publisher grants an author the copyright to his literary work, the author receives a bundle of exclusive rights (e.g., motion picture, television, audio book, e-book, large print, Braille, book club, abridgements, first serial, second serial, etc.) to do with what she pleases. Usually, the author’s agent hires a co-agent or sub-agent to license these rights, which are known as subsidiary rights in the book publishing industry, to third parties.
Sub-agents may specialize in licensing certain rights. For example, a sub-agent may license rights of an author’s book, such as motion picture rights to help get a novel adapted as a feature film. More frequently, however, sub-agents try to sell an author’s book in countries around the world. You may have seen book covers with the words, “Published in 37 Countries.” You can thank sub-agents for that. Sub-agents generate commissions of 10 – 20 percent depending on the right that is licensed.
Enter Steinbeck
In Steinbeck’s case, Steinbeck’s literary agency is McIntosh and Otis, which is located in New York City. McIntosh and Otis hired RSWG as a sub-agent, and RSWG negotiated motion picture rights for remakes of Steinbeck’s “Grapes of Wrath” and “East of Eden” and received 20 percent commissions for its services.
According to the Hollywood Reporter, the Paladin Group, created by Thomas Steinbeck who is Steinbeck’s only living son, argues that RSWG had no right to negotiate the motion picture rights for “Grapes of Wrath” and “East of Eden” without the Paladin Group’s consent.
Attorney William Briggs who spoke on RSWG’s behalf, however, argued that the heirs of the Scott family are the rightful owners of Steinbeck’s literary works, so the Paladin Group could not object to RSWG’s negotiations. In 1968, Steinbeck left the majority of his estate to his third wife, Edith Scott, who died in 2003, and left all of Steinbeck’s rights to her heirs.
Briggs also alleges that the Paladin Group misunderstands California law because there is no rule that RSWG must be licensed to sell rights of Steinbeck’s literary works.
Although I do not have access to the Paladin Group’s complaint, the company is rightly concerned about RSWG’s actions. The Paladin Group receives a portion of revenue for every license that is negotiated for Steinbeck’s works, so it is invested in who licenses that work. If RSWG is not properly licensed, the license agreements are null and void and the Paladin Group receives no money. However, even if RSWG is licensed, the Paladin Group may have been able to receive more money than what RSWG negotiated. The 20 percent commissions that RSWG received are likely a huge number, but given that Steinbeck is a Nobel Prize-winning novelist, the price for remaking motion picture rights for any of his works, let alone “Grapes of Wrath” and “East of Eden” — two of his most popular books — can be potentially millions more.
Hence the value of choosing a literary agent and sub-agent.