By Tax Credit on Flickr

Producing a well-edited, professionally designed book takes money.  If you don’t have spare change lying around, how do you finance the upfront costs?

Many writers are using crowdfunding to raise money for editors and designers as well as production and marketing expenses.  In crowdfunding, the writer seeks contributions on-line.

A number of websites provide a platform for the writer to pitch the project and collect donations.  Kickstarter and Indiegogo are probably the most well known, but there are others which claim to specialize in helping authors.  Some offer services beyond crowdfunding, such a market testing, advertising and printing. (Watch out for the fees on the extra services.) Some charge a percentage of the amount raised, while others charge a flat monthly fee.  Some are “all-or-nothing” which means the author does not collect anything unless a certain dollar target is achieved.  Others do not have a minimum threshold, and the author keeps whatever is raised.

Here are a few examples.

http://unbound.co.uk/

http://www.pubslush.com/

http://authr.com/

I have never used any of these services, so do not consider my listing them to be any endorsement or guaranty of integrity or success.

As a writer, I find crowdfunding to be an exciting resource.  As a lawyer, I find it full of dangerous pitfalls.  Here are some thoughts on avoiding these pitfalls.

When you solicit money from other people DO NOT CALL IT AN INVESTMENT.  If you are selling an investment, then you are selling a security (like a stock or bond) which is subject to a complex array of federal and state laws.  Yes, even if you are raising $2,500, you are selling securities which require registration and the preparation of detailed disclosure statements.  There are exemptions from the registration requirements, particularly if you are taking investments from family and friends only and in small amounts. But if you will be soliciting funds from anyone and everyone on an online site, you should call the funds contributions, not investments or loans.

Do not say the donations are tax deductible.  Many people hear the word “donation” and assume it is tax deductible.  Not the case.  Unless you are a non-profit entity which has applied for and received tax-exempt status from the IRS, the donations are not deductible by the donor.

By Simon Cunningham on Flickr

The contributions you receive may be considered taxable income.  From what I have read, the IRS has not yet decided whether funds raised through crowdfunding are non-taxable gifts or taxable income.  The more cautious approach is to consider them taxable income because they are funds obtained in pursuit of a business venture.  If you have deductions for expenses at least equal to the donations received, you may offset this income.

Below are a few helpful articles about crowdfunding.

http://winningedits.com/crowdfunding-books/

https://www.thebookdesigner.com/2013/06/pubslush/

http://authoritypublishing.com/book-marketing/how-to-use-crowdfunding-to-get-your-book-published/

All photos used under Creative Commons Attribution License http://creativecommons.org/licenses/by/2.0/deed.en

1.   Who owns a copyright?

As soon as you put an idea into a fixed form, whether on a pad of paper, a hard drive, a smart phone or a recording device, you own the copyright in that creation. Your first draft, riddled with typos, inconsistencies and clichés, is protected by copyright law whether or not you polish it, publish it, register it or mark it with a ©.

The only exception is “works made for hire” when the employer, or in some cases the person commissioning the work, owns the copyright.  See my earlier post about Work-for-hire.

If you collaborate on a project, then all the creators jointly own the copyright.

2.  What does copyright ownership mean?

As the owner of a U.S. copyright, you have the exclusive right to do, or to authorize others to do, the following:

• Reproduce the work in books or other forms and devices;
• Sell, distribute, and commercially exploit the work;
• Create derivative works, such as translations, adaptations, sequels, and abridgements; and
• Display or perform the work publicly, either live or in recorded form.

If anyone violates those exclusive rights, you have a claim of infringement against the wrongdoer. Of course, there are exceptions. There are always exceptions, and exceptions to the exceptions. The most common is Fair Use, which I will describe in a later post.

The U.S. Copyright Office has a number of informative circulars on topics from registering poems to licensing.

3. What’s protected by copyright law?

Literary works, musical works including lyrics, dramatic works, pictorial, graphic and sculptural works, sound recordings, architectural works, and pantomimes and choreographic works if fixed in tangible form such as a video recording.

What about characters and settings? Maybe. If a character is as fully developed as Harry Potter or a setting as distinctive as Panem in The Hunger Games, the creator might be able to claim copyright protection. But consider this a caution against writing something too reminiscent of a well-known character or setting. You could find yourself on the receiving end of some nasty and unsettling lawyer letters.

4. What’s NOT protected by copyright law?

• Titles, names, short phrases, slogans, although you might be able to register these as trademarks. See my earlier post Can Book Titles Be Protected?
• Raw data and objective information such as test results and statistics, although the method of organization, commentary and analysis are copyrightable. A listing of information, such as phone numbers and addresses in a residential phone book, is not copyrightable.
• Works that have not been fixed into a tangible form of expression, such as improvisational performances and choreographic works which have not been written or recorded.
• Ideas, procedures, methods, concepts, principles, and discoveries. A description, explanation, treatment, summary or illustration of any of these is copyrightable, but not the underlying concept. I’ll elaborate on protecting ideas in a later post.

5.  Is a copyright notice required?

Not technically, but use it anyway. Put it near the front of your book. If your work is property marked, then an unauthorized used may not claim that he or she was “innocent” and you may be able to recover a larger award.

The copyright notice has three parts.

1. © or Copyright .
2. Year of first publication, which generally means the year the work was first distributed to the public. On unpublished material, the notice should read: “Unpublished Work © year author.
3. Name of copyright owner, which may be a pen name or the name of an entity such as a corporation. If there are more than one copyright owner, name all of them.

You should add “All Rights Reserved” because the phrase is required in some foreign countries.

6. Are copyrights transferable?

Oh yes. And they are sliced and diced into various pieces.

You may transfer the entire interest in the copyright, but that is very rarely done. Instead, most writers grant licenses. A license is a right to use only; you, the creator, retain actual ownership of the copyrighted work. Licenses may be exclusive or non-exclusive, world-wide or geographically restricted, short-term or perpetual, royalty-free or royalty-paying, limited to particular media such as audio books, print, ebooks or a particular language; the permutations are extensive.  If you grant licenses, be as specific as possible. Put everything in writing. Vague descriptions and fuzzy details are not your friends. Details are. Examples are. Be redundant, precise and lawyerly. There is no way to overdo it.

7.  Will I ever get back my copyright?

A license agreement is an on-going agreement. If the licensee fails to perform as promised, then you may be able to terminate the license. For instance, if your publisher fails to release your book within the time stated in your contract or fails to pay royalties, you may be able to terminate. But team up with an experienced attorney before you start sending termination threats.

Under current law, any grant of rights, whether an assignment or license, is terminable after thirty-five years. This provision was intended to benefit artists who, for a few dollars, sold creations that went on to be worth millions. The classic example is the case of Jerry Siegel and Joe Shuster, who sold the rights to Superman for $130 in 1940. These artists and their families have fought for decades to regain their rights or a share of the profits.

8. Is publication required?

Not anymore. However, publication (i. e.; distribution to the public) is still important. The date of publication may determine the duration of the copyright. The year of publication should be included in the copyright notice in order to inform the public of the copyright claim and year of commencement.

9. How long will my copyright last?

A copyright lasts for the life of the author plus 70 years. If there are two or more authors, use the life of the last surviving author plus 70 years. If the author is a corporation or other entity, then the copyright lasts 95 years from first publication, but not longer than 120 years after creation of the copyrighted material.

10.  Should I register my work with the U.S. Copyright Office?

Absolutely. Registration establishes a public, searchable record of your claim and is required before an infringement suit may be filed. Prompt registration (within three months following publication) increases the damages you might recover in an infringement action. Register your work as soon as it is in reasonably finished form. On-line registration is currently $35, so there is no excuse for delay. You then mail in two copies of your work.

11. Is my copyright international?

Unfortunately, there is no such thing as an international copyright. However, many countries have adopted laws and signed treaties which provide reciprocal recognition of copyrights.

But no law is bulletproof protection against infringement. If your book is at all successful, then it’s likely to be pirated. If the infringers are overseas, there is little you can do without spending an inordinate amount of time and money. It’s best to accept a certain level of piracy as part of the business and move on.

Do you have questions? Please post them in comments. I would love to know.

EIN, POD, DBA, ISBN, DMCA, and ©?

For years, self-publishing writers have had to navigate the alphabet soup of legal issues on their own. Not anymore.

Soon to be released, Self-Publisher’s Legal Handbook is the first step-by-step guide to the legal issues of self-publishing. Attorney and self-published author Helen Sedwick uses 30 years of legal experience to show writers how to stay out of court and at their desks. She covers a wide range of topics, including:

Business set-up. From DBAs to sales taxes to crowd-funding, Self-Publisher’s Legal Handbook walks writers through the process of setting up their self-publishing ventures.

Moving from Manuscript to Book. Self-Publisher’s Legal Handbook compares the options of engaging a self-publishing service company to doing-it-yourself using a print-on-demand provider. It lists which contract provisions are acceptable and which are not. It explains the mechanics of hiring designers, editors, and other freelancers.

Intellectual Property Issues. Copyrights, trademark, fair use, and public domain are explained in practical, useful terms, including how to find copyright holders and ask permission. Self-Publisher’s Legal Handbook provide tips on licensing images and music for little or no money.

Internet Regulations. Any writer with a blog needs to know about privacy policies, SPAM, COPPA, and DMCA. Self-Publisher’s Legal Handbook explains these regulations in easy-to-understand language.

Spotting Scams. Writers are e-blasted by businesses promoting overpriced services, if not outright frauds. Self-Publisher’s Legal Handbook shows writers how to spot aggressive sales techniques and scams.

The Scary Stuff.  Self-Publisher’s Legal Handbook provides needed guidance on avoiding the dangers of defamation, invasion of privacy, and infringement.

Writing and publishing a book is a significant investment. Writers should not be losing money (and sleep) by hiring the wrong self-publishing company or getting sued for copyright infringement. Sedwick’s Self-Publisher’s Legal Handbook will help writers safely navigate the legal minefield.

University of Chicago Law School graduate and California attorney, Sedwick has represented small businesses and entrepreneurs for 30 years. Her historical novel Coyote Winds earned five-star reviews from ForeWord Reviews and Compulsion Reads and is an IndieBRAG Medallion Honoree.

Review copies of Self-Publisher’s Legal Handbook are available upon request from orders@tengallonpress.com or by calling 415-713-8386.

How exciting! You are about to receive your first royalty check from your local bookstore, CreateSpace, Amazon, Smashwords, IBookstore, anyone. And they ask you for your Social Security Number or SSN.

Do you really want to give your SSN away so casually?  No way.  And there is a very easy way to avoid it.

Here’s a secret most people don’t know.  You can and should get a separate Federal Employer Identification Number (EIN) for your self-publishing business. Yes, you should get an EIN even if you are a sole proprietorship, even if you never have any employees, even if you do not choose an imprint name.

Why a separate EIN? So you don’t have to give Amazon or any other seller your Social Security Number. They will accept your EIN instead.

Cost – nothing. Time — 10 minutes.

You will need your Social Security Number when you fill out the IRS forms online, but that is not a big deal since they already have it. Here’s the IRS link:  Employer Identification Numbers for Self-employed and Small Businesses 

Be sure you go directly to the IRS site. Sham sites that look like the IRS site are popping up every day. They ask for your Social Security Number, mother’s maiden name, birthday—all the tools for stealing your identity. Scary stuff.

Another benefit of having an EIN — your self-publishing venture will have more characteristics of a business, which will pay off at tax time. More on that in a later post.

File a Fictitious Business Name Statement. Once you have decided on your imprint name, file a Fictitious Business Name Statement (FBN Statement) with the county where your business will be located. Some people will call this a DBA (doing business as) filing. It is a simple and inexpensive task.

An Internet search of Fictitious Business Name and the name of your county will pull up services that handle the recording and publication for a small fee. The cost is typically less than $100. Doing it yourself won’t save much money, so I recommend you hire a company to handle your FBN filing.

Why file an FBN Statement? If you get a check made out to your imprint name, you will have trouble cashing it unless you show your bank a recorded FBN Statement. With an FBN Statement, you may also set up bank accounts and obtain credit cards in the imprint name, which simplifies keeping track of your self-publishing expenses and income.

Consider Trademark Protection. If you are selling your books under an imprint name, that name is your trademark. It identifies the source of the book, the same way the Penguin name and logo would indicate a book was published by Penguin. Your trademark could include an illustration.

If your trademark is not registered with the U.S. Trademark office, then you may mark it with a TM. Only registered marks may use the ® symbol.

Should you register your imprint name as a trademark with the USPTO? It is not required. You will own a common-law trademark as soon as you offer your books for sale under your imprint name.

Federal registration has several advantages. It puts the world on notice of your claim of ownership of the mark. It creates a legal presumption of ownership nationwide, and it gives you the exclusive right to use the mark on or in connection with the goods or services set forth in the registration. The USPTO has various publications to help you.

Trademark protection comes at a cost. Currently, the application fees for U.S. registration are $325 and up. And the USPTO may decide your imprint name does not qualify for trademark registration, and they do not return your fee. You may need a trademark lawyer to assist you, another expense.

Registering your imprint name as a trademark could be overkill.

Let’s pause for a moment and discuss proportionality. Are you paying for a ten-foot cement wall when a picket fence will do?

Think of using the law in two ways. One is defensively. You conduct a trademark search as a defensive measure to avoid infringing on the trademark rights of others. The law is also used offensively (and here I’m using the term to mean to advance strategically, as in football).

If you register your trademark, you will have more options for stopping infringement and collecting damages, in other words, going on the offensive. But consider how much time and money you are willing to spend to stop someone from using a name that infringes on your imprint name. How much are you likely to lose as a result of the infringement compared to the cost of trying to stop it, not only in terms of money, but in time, irritation, and distraction? This question arises with respect to your copyrighted works as well. Most people underestimate the frustrating and consuming nature of litigation.

In other words, you could put off registering your imprint name as a trademark and rely instead on your common law trademark until you see how well your book or books sell.

Some bloggers are up-in-arms about self-publishing writers using imprint names. They claim an imprint name misleads readers into assuming the book has been vetted by the traditional publishing process. (An imprint is a trade name you create for your self-publishing business and is listed online and at the front of your book as the “publisher.”)

Hogwash!

Think of all the small businesses you know: the local flower shop, the wedding photographer, the physical therapist, the fruit seller at the farmers’ market. How many of them use a trade name even if they are a mom-and-pop, or just a mom, or just a pop, company? Why not you? Your self-publishing venture is no less legitimate a business.

I recommend you adopt an imprint name, even if your self-publishing business is a sole proprietorship. An imprint name is commonly known as a DBA, short for “doing business as.” Publishing under an imprint name makes it less obvious that your book is self-published. (Many bookstores, reviewers, bloggers, contests, and readers refuse to consider self-published work.) Using an DBA also encourages you and others to see the venture as a business, a real benefit at tax time.

Choosing an imprint name is a creative process. You could use your personal name, such as “Helen Sedwick Publications,” which doesn’t say much. Your imprint name should imply some promise about your books, such as romance (Passion Press), adventure (Kick-Ass Books), travel (Rickshaw Riders), or life-changing insights (Next Chapter Publications).

My novel, Coyote Winds, is set in the American West, so I chose Ten Gallon Press as the name of my imprint. I tried dozens of other names, such as Prairie Winds Press and Coyote Publications, but they were already in use.

Your imprint name may include the word “company,” but should not include corp., corporation, or inc., unless you have set up your business as a corporation.

How to Determine if a Name is Available

Start with a internet search of possible names using Google, Bling, and other search engines. As you settle in on a name, be sure to check several search engines since one may show results that the others missed.

Check the Fictitious Business Name (FBN) filings of your local county. Many, if not most, counties have on-line databases. I’ll explain the purpose of an FBN filing in my next post. Here is the link for searching in San Francisco.

Search domain names. There are many sites where you can search and purchase domain names. I use GoDaddy, but there are many others. Try various spellings and misspellings. See where people will land if they type your domain wrong.

Search the U.S. Trademark Office database. Federal trademark law is tricky. If you see a registered trademark which is the same or similar to your dream name, don’t despair. Generally, you may use the same or a similar name as long as you do not “create a likelihood of confusion in the mind of the consumer as to the source of the product.”  What does that mean? Here’s an example.

I searched the trademark “Goody Two Shoes.”  The database lists one “live” registration by MaxWax Inc. for a “hair removal service using wax or sugar that removes hair from women or men up to two inches inside the bikini line with the bikini line defined as the break between the top of the leg and the beginning of the bikini area.”  If you were to adopt the imprint name “Goody Two Shoes,” you are highly unlikely to be infringing on the MaxWax’s trademark.

However, don’t try to use a well-known or strong trademark such as Exxon or Apple.  Owners of strong marks have the right to claim that permitting others to use their trademarks “dilutes” the value of the mark. Avoid this fight. Those companies have lawyers who will make your life miserable. You are better off using your time and energy for writing your next book.

Once you decide on a name, buy the domain name ASAP.  Considering buying .com, .net, .info, and other tags. They are a small and worthwhile investment.

What are your thoughts about imprint names? Has this issue been overblown?

Starting Out on the Right Foot

If you are publishing your own book, then you are starting a small business. Your brother-in-law may be urging you to incorporate, while your neighbor coaches you on avoiding taxes. You are puzzled by EINs, ISBNs, and DBAs.

Let’s take this one step at a time.

Do you need to incorporate?

Highly unlikely. Incorporation provides little benefit to an author. In publishing, your greatest risks are infringement, defamation, and invasion of privacy. These claims are based on your conduct as an individual, so forming a corporation or LLC will not help.

Your business will be a sole proprietorship. Despite its name, a sole proprietorship may be owned by you alone or by you and your spouse. You do not have to file any documents with governmental entities to create a sole proprietorship. You do not need to give your sole proprietorship a business name, although I recommend that you do so. You create a sole proprietorship simply by going into business.

If you are combining efforts with one or more other people (other than your spouse), then you are forming a “general partnership.” Like a sole proprietorship, forming a general partnership requires no governmental filing. The partnership is created as soon as the partners agree to combine efforts to earn a profit. Your agreement may be verbal or in writing, but I recommend you capture it in writing. Writing down your partnership or collaboration agreement forces you and your partners to discuss issues you may be avoiding. In Self-Publisher’s Legal Handbook, I list issues to discuss among your partners.

Not everyone agrees with me. Some lawyers recommend you set up an LLC or corporation. But forming and maintaining an entity is expensive. That money is better spent buying business liability insurance.

What do you think?

Photo used under Creative Commons license: Money Jar by Tax Credit on Flickr.

Congratulations. You have written a book. You have tackled the challenges of voice, pacing, and structure. More kudos to you if you are self-publishing. You are ready to grapple with copyediting, layout, cover art, and ePub.

As a self-publisher, you now face new challenges—legal issues as wide ranging as copyright, defamation, and taxes.

Perhaps you are surprised to find out that you are starting a business. You have questions about incorporation and crowdfunding, not to mention hiring freelancers and deducting expenses.

What about author platforms? How do you write blog posts that are provocative, but not defamatory? How do you find eye-catching images without spending a fortune? Does your website need a privacy policy, and what do DMCA, COPPA, and DRM mean anyway?

Dozens of books and blogs offer advice on designing covers, editing content, and tweeting effectively, but few will tell you how to protect your Social Security Number or spot a scam.

I am a business lawyer with 30 years of experience assisting clients in setting up and running their businesses, legally and successfully.  I do not go to court, and no one is ever going to produce a movie about the exciting life of a business attorney. But I get a great deal of satisfaction by keeping my clients out of trouble, so they can focus on their businesses, their creative projects, and their lives.

Writing and publishing a book is a significant investment in both time and money. Don’t lose money (or sleep) by hiring the wrong self-publishing service company or getting sued for copyright infringement.

Many posts will help a traditionally published writer who is blogging, tweeting, and creating content for internet distribution.

But I need your help. What questions do you have about the various legal issues of self-publishing? Is it important to register your copyright? How do you get permission to use song lyrics? Can you deduct the cost of grammar books? I welcome questions and suggestions in my COMMENTS section below.