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CAUGHT IN THE RIGHTS MAZE LACK OF RULES LEAVES PUBLISHERS WONDERING WHO OWNS THE CONTENT

By Published on .

Walter Isaacson recently got a close look at how the other side lives.

As editor of new media for Time Inc., Mr. Isaacson spends a good part of his time grabbing up the electronic rights to everything published in his company's magazines. As an author, he recently found himself clinging tightly to those same rights during negotiations with his publisher for a book on Benjamin Franklin.

"The solution took more than two pages to codify," said Mr. Isaacson, who retained some electronic rights, ceded others and left still more to be negotiated at a later date. "It was an education."

An education it is, and publishers, editors, authors, artists, agents and photographers are all crowding into the classroom to work through the sticky question of who owns what in the age of digital media.

Is the information in a magazine article that's repackaged for an online service owned by the person who wrote it, the magazine that published it or the online network where it appeared? Is the reader who downloads the information violating a copyright, and if so, whose?

The issue is significant because it will help determine whether, and how soon, it will make economic sense for publishers to move toward new-media platforms. If they can't control their products or share in new profit streams, businesses will have little incentive to participate.

"It's a nightmare," said Mr. Isaacson. "You have to create new contracts that account for those digital rights, but since no one knows what they're worth, it's hard to put a price on them."

With publishers of magazines, books and newspapers increasingly being viewed as key sources of content for new-media pipelines, electronic rights are looming as one of the most significant roadblocks.

"We've got more focus on that particular issue right now than any other," said James Guthrie, exec VP-marketing development at the Magazine Publishers of America. "All of our members are talking about the sensitivity of rights and contracts."

Some are getting a close-up look. Writer Lee Lockwood accused Playboy of "electronic piracy" earlier this year after the magazine included his 1967 interview with Fidel Castro on a CD-ROM featuring 30 years of Playboy interviews. Mr. Lockwood filed a grievance with the National Writers Union saying the magazine never asked for electronic rights and that the $100 payment they sent him was "inadequate."

Playboy was able to settle the grievance privately by agreeing to pay Mr. Lockwood an additional $1,000. Left unsettled was the issue of who held the copyright.

"Some of these things will be determined in court," acknowledged Eileen Kent, director of new media for Playboy Enterprises. "There is contention over language. Our [contract] language is being discussed right now extensively with all parties concerned."

The National Writers Union-which represents some 4,000 writers, including book authors, free-lance magazine and newspaper journalists, technical writers and poets-is smack in the middle of the debate.

The union is also involved in a pending lawsuit in which 10 free-lance writers are suing The New York Times Co., Newsday and Time Inc. for selling their work to Mead Data Central Corp. and University Microfilms International without seeking their permission and without paying royalties.

Mead operates the Nexis computer news retrieval service. University Microfilms distributes stories from The New York Times to subscribers on discs.

The writers union insists writers should control electronic rights and recently proposed that if publishers control those rights, they should be entitled only to a 15% agent's commission, leaving the lion's share to the writers.

"Publishers are fighting us tooth and nail," admitted Philip Mattera, a national grievance officer for the union. Random House, for example, recently approved a new boilerplate contract "giving the publisher much more control over the exploitation of electronic rights," he said.

Most book publishers do want control of electronic rights but in return are willing to split revenues 50-50 with writers.

Mr. Mattera believes the rights issue will be particularly sticky where it involves the repackaging of older material, as it did in Mr. Lockwood's case.

"Ten years ago, nobody thought twice about electronic rights," he said. "If they were in a contract, they were throwaway rights, lumped in with microfiche and braille editions."

The writers union is taking the position that if a new technology comes along, such as CD-ROM, and the rights to that medium are not explicitly granted, they revert to the writer.

Publishers obviously disagree. Playboy's Ms. Kent said that if the magazine obtains rights to re-use work in an anthology compilation, for example, the medium it's published in doesn't matter.

Shari Steele, director of legal services for the non-profit civil liberties group Electronic Frontier Foundation, noted that while from a legal standpoint "there is some confusion, right now it's looking like the publishers get the rights unless the writer has specifically retained them."

While she said electronic rights are not yet a deal-breaker in negotiations with publishers, they are becoming more important: "At this point, electronic rights aren't huge moneymakers for anybody, but there might be a time when publishing electronically is lucrative."

Even if the profit potential isn't easy to see today, publishers want to avoid long-term mistakes like The New York Times' 1983 decision to sell the rights to its news archives to Mead Data Central Corp. for use on the Nexis database. As a result, the Times' recently opened @Times service on America Online is only allowed to display news stories for 24 hours after publication.

Tribune Co.'s Tribune Media Services syndicate has been writing electronic rights into its contracts for five years, said Michael A. Silver, VP-editorial and development.

He predicts new contract terms will evolve as market demand materializes but said there's no sense in demanding high prices for data people may not use.

Tribune is providing material to Access Atlanta-an online service developed by Prodigy and the Atlanta Journal-Constitution-at virtually no charge during its launch phase.

"Truthfully, we're at the very beginning of the interactive age, and right now there is more confusion and opportunity than there are squabbles," Mr. Silver said. "Every one of our contracts is different and each one is negotiated out."

The battle over rights isn't contained to publishers vs. contributors. Consumers are also getting tangled up in the mess.

The digitization and electronic distribution of books, magazine articles, music and other forms of information and entertainment open up a whole new area of copyright questions: Does a consumer have the right to make thousands of copies of a software program and distribute them online at little or no cost? Can they access a newspaper's database electronically and re-use the material without paying a fee to the publisher?

Again, the courts will have a say. In one pending lawsuit, Frank Music Corp. is fighting CompuServe for making songs such as Frank's "Unchained Melody" available to subscribers without paying a royalty to music publishers.

The Clinton administration added its two cents when Secretary of Commerce Ron Brown released a preliminary proposal on how to deal with intellectual property issues earlier this month. Under existing law, it's unclear whether electronic transmission of information counts as distributing that work.

The report calls for copyright laws to be rewritten to include digital information transmissions, confirming that electronic distribution rights are held by the copyright owner.

"The potential of the National Information Infrastructure will not be realized if the content is not protected effectively," the report said.

John Goldschmidt Jr., an intellectual property lawyer with Reed Smith Shaw & McClay, Philadelphia, said it's important that copyright law cover different forms of digital media rather than group them under the same umbrella.

While computer discs can easily be duplicated and shared on an online network, CD-ROMs cannot be copied and are limited to one user at a time. But that doesn't mean there are no copyright issues.

Said Mr. Goldschmidt, "In order for a CD-ROM to work, it has to be called up on the screen-that's reproduction on your computer screen. Then, will users be able to download it and print it out or copy it into a database? You want to project yourself into the seat of the end user."

As a follow-up to Ron Brown's report, public hearings on the issue of intellectual property law will be held this fall. And most publishers are working hard to develop new contracts and guidelines that will benefit all sides.

"In the end, there's a big upside to solving this issue," said Mr. Isaacson of Time Inc. "There's a lot of money to be made in solving this issue."

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