Tue, Jul 31, 2001 page24

• Book business becomes battleground over rights

  PRINTING PREDICAMENT A startup's attempts to publish popular 20th century books in digital form has led to debates, and court cases over the ground rules of media contracts and copyright law in the Internet age

  • NY TIMES NEWS SERVICE
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  Is this man a thief, and just what is he making off with?

  That is what publishers are wondering these days about Arthur Klebanoff, the founder of RosettaBooks, a startup with a business plan that some publishers say amounts to picking their pockets.

  Klebanoff, a 53-year-old lawyer turned literary agent whose peripatetic career has included a short stint in Richard Nixon's White House and an ill-fated attempt to syndicate a column by the pope, seeks to publish some of the most perennially popular books of the 20th century in digital editions to be read on a computer screen. The catch is that those books are also the most profitable part of any publisher's business, and several say their original book contracts give them the exclusive right to publish electronic editions themselves.

  Last week, however, a judge in federal district court in Manhattan declined to block Klebanoff from selling digital versions of eight novels published in print by Random House.

  "I knew the publishers wouldn't be happy," Klebanoff said in his cluttered office at his firm, the Scott Meredith Literary Agency.

  No one knows the extent of consumer demand for electronic books, but his victory is already encouraging imitators, including the well-financed Barnesandnoble.com.

  The ruling, which Random House plans to appeal, puts Klebanoff in the middle of the second stage in the legal fight over the ground rules of media contracts and copyright law in the Internet age.

  Courts have more or less settled the conflict between copyright holders and file-sharing services like Napster. Now artists, writers and performers are haggling with the traditional media companies over the application of their old-media concepts in the new media world. It is a debate that revolves around lofty questions about the meaning of the word "book" and the experience of reading pixels instead of print.

  Last month, for example, the Supreme Court ruled that newspapers and magazines do not automatically have the right to sell the work of freelance writers to electronic databases like Lexis-Nexis or to consumers via the Internet. National Geographic is currently appealing to the Supreme Court a lower court ruling that it does not have the right to resell the contents of its magazines in digital form on CD-ROMs.

  Next up is the music business, where several major record labels are racing to build digital music services but still have not settled the issue of how to compensate songwriters and performers. In another case filed in federal district court in Manhattan, groups representing the owners of the rights to record the songs of Irving Berlin, Elvis Presley and others are suing Vivendi-Universal for selling digital downloads of music over its Farmclub.com Web site without their permission.

  Groups representing songwriters argue that transmitting the songs over the Internet entails a new right and requires their permission. Vivendi-Universal argues that it acquired those rights along with the rights to sell compact discs of the songs.

  Both sides are watching Klebanoff's case closely. "The implications to the music world are very real, that digital rights, if you will, are separate and unique from other rights and our licenses," said Edward Murphy, president of the National Music Publishers Association, one of the groups suing Vivendi-Universal.

  Still, each case hinges on contractual details, which differ widely both across and within industries. In the music industry, contracts vary among record labels, agents and artists, said Cary Sherman, general counsel of the Recording Industry Association of America. "We will face the same kinds of contract interpretation questions in the record industry as the other industries have faced. But it is too quick to proclaim a trend."

  For his part, Klebanoff insisted he knew his case was solid. "We are going to be extremely aggressive in the rights marketplace, signing up classic books and releasing them as e-books," he said.

  Klebanoff's career as a literary agent has included some misadventures. In 1987, Klebanoff represented the Vatican in the sale of some of Pope John Paul II's previous writings as a newspaper column to a syndication firm controlled by Rupert Murdoch. But the deal ended in bitterness after the syndicate first billed the column as new writings by the pope and then, against the Vatican's wishes, sold the column to secular papers instead of Catholic ones in some markets.

  The impetus to found RosettaBooks, Klebanoff said, came from Stephen Riggio, younger brother of Barnes and Noble's founder Leonard Riggio and acting chief executive of Barnesandnoble.com, who shared his enthusiasm for electronic books and wanted additional titles to sell on the company's Web site.

  In an interview this week, Riggio said he not only encouraged Klebanoff but also planned to follow suit by publishing Barnesandnoble.com's own digital editions of older works published by other publishers. He declined to specify any titles, but said the list would appear in the fall.

  That move is likely to irk traditional publishers, but Riggio said he was not worried that they would file suit as Random House did against RosettaBooks. "How could they file suit if they don't have the rights?" he said, "The digital rights to most books reside with the author."

  Riggio said he hoped that RosettaBooks and companies like it would help jump-start demand for electronic books by increasing the selection available, noting that traditional publishers have been slow to release their older titles.

  "Traditional publishers are unnecessary in the digital world," Riggio said, because Web sites can provide distribution directly to readers.

  Asked about Barnesand-noble.com's plans to emulate RosettaBooks, Harriette Dorsen, general counsel for Random House, said, "We would not be happy to hear that." Bertelsmann also owns 40 percent of Barnesandnoble.com.

  Dorsen said Random House planned to argue in its appeal that the district court misconstrued the nature of electronic books.

  "We were given the rights to take the authors works, the contents of the books, and to deliver those works to the reader in a number of different forms -- hardcover, paperback, and today e-book," she said. "When someone has the right to make a motion picture, they also had the right to deliver those images to the viewer on film, through the airwaves, on a video cassette, or now, I assume, on a DVD. It is the same thing, just a different mechanism."

  Richard Sarnoff, president of new media at Random House, said the company had no plans to begin paying authors anew for digital rights to previously published books. "There is an advance that has already been paid to the authors," he said. Random House has explicitly specified digital rights in contracts for the last decade, so recent works are not at issue.

  Sarnoff also said Random House and not dragged its feet in publishing electronic books, but simply waited for the market to develop. The company has released over 500 digital books, he said, and this week announced plans to sell electronic versions of nine novels by Raymond Chandler and In Cold Blood by Truman Capote.

  Sarnoff questioned the marketing resources of digital upstarts like Klebanoff's concerns. He added that authors who sell their digital book rights elsewhere risk discordant marketing strategies and possibly price competition on the text of the same book.

  In response, Klebanoff said plenty of small traditional publishers held their own against the giants. He noted RosettaBooks offered authors a good deal: It not only pays authors new advances running into thousands of dollars, the company also acquires the digital rights for just seven years. Traditional publishers insist on acquiring rights for the duration of copyright, often over 100 years.

  "That is basically a 100 year deal without an obligation to perform," he said, "This opinion means we can go full speed ahead, and that is exactly what we plan to do."
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