by Steve Gillen

When Apple announced its iBook2 platform and the equally powerful and absolutely free iBook Author early this year at a media event, the combination was hyped as providing the next-generation capability to publish, deploy, and access digital books with interactive multimedia support.

Although Apple introduced these tools as the reinvention of the textbook and touted its partnership with three major educational publishers—Houghton Mifflin Harcourt, McGraw-Hill, and Pearson—make no mistake: this is not just about textbooks.

By adding interactive multimedia support that the Kindle, Nook, and other popular devices can’t match and by making it easy to develop, publish, and sell via iBook Author, Apple has mounted a formidable campaign to become the preferred platform for self-publishers and digital books of all sorts—cookbooks, self-help and instructional works, art and photography books, computer books, craft and hobby books, do-it-yourself books—any book, really, that benefits from being more than just unadorned text on a page.

But before you encourage your authors to pull this Trojan Horse inside your castle walls, let’s open it up and peek inside.

The Only-Through-Apple Issue

Though free, the software comes subject to a click-through license agreement. Once you click through, download, and install the software, you are bound to the terms of that license. And, it’s a license agreement that almost immediately drew widespread criticism from publishers and others, largely as a result of one key term.

That term is not hidden. It appears as a warning in bold type right at the top of the document:

IMPORTANT NOTE:

If you want to charge a fee for a work that includes files in the .ibooks format generated using iBooks Author, you may only sell or distribute such work through Apple, and such distribution will be subject to a separate agreement with Apple. This restriction does not apply to the content of such works when distributed in a form that does not include files in the .ibooks format.

The operative language appears a little further down in the document:

2. Permitted License Uses and Restrictions.

. . . .

B. Distribution of your Work. As a condition of this License and provided you are in compliance with its terms, your Work may be distributed as follows:

(i) if your Work is provided for free (at no charge), you may distribute the Work by any available means;

(ii) if the work is provided for a fee (including as part of any subscription-based product or service) and includes files in the .ibooks format generated using iBooks Author, the work may only be distributed through Apple, and such distribution will be subject to a separate written agreement with Apple (or an Apple affiliate or subsidiary); provided, however, that this restriction will not apply to the content of the work when distributed in a form that does not include files in the .ibooks format generated using iBooks Author. You retain all your rights in the content of your works, and you may distribute such content by any means when it does not include files in the .ibooks format generated by iBooks Author.

Apple will not be responsible for any costs, expenses, damages, losses (including without limitation lost business opportunities or lost profits) or other liabilities you may incur as a result of your use of this Apple Software, including without limitation the fact that your work may not be selected for distribution by Apple.

Let’s assume for the moment that this is an enforceable contract (although that is not a certainty, as will be explained below).

Compliance with this restriction—you can sell your iBook-formatted work only through Apple—is a condition to your grant of license. If you sell it through any other channel or means, you violate the condition and the license is void.

The result is not a simple breach of contract with money damages for the provable injury to Apple. Instead, it is copyright infringement. Your license was void from the beginning and so your use of the iBook Author software was unlicensed and infringing.

Unlike a breach of contract claim, a copyright infringement claim carries with it certain presumptions and strategic consequences in litigation that significantly favor the plaintiff (that would be Apple) together with exposure for statutory damages of up to $150,000 and exposure for Apple’s attorney fees and costs if you lose the case.

This would be the result even if Apple did not accept your iBook-formatted work for distribution through the Apple store.

Serious Side Effects

Although the monopoly Apple purports to assert over your work, and the consequences of a violation, may be clear (and conspicuous, since they’re in bold at the top of page 1), other implications may be more subtle.

You may build a book using iBook Author, but if Apple does not decide to distribute it, “they” will not come, and you cannot take it to them another way.

And if Apple does decide to distribute, it will do so on terms that it will dictate and that you have yet to see. Everyone seems to be assuming that these will be the agency terms historically employed—you set the price; 30 percent of the proceeds from sale are retained by Apple, 70 percent goes to you. But the end-user license agreement does not promise that those are the terms that will be offered to you. In fact, nothing in the EULA prevents Apple from varying those terms—for everyone, or just for you.

If you sell a single copy of your iBook Author book, it must be through Apple, and you will not be able to distribute it any other way—no examination copies via your Web site; no other promotional offers; no other uses at all except as consented by Apple.

Although Apple is not attempting to grab the copyrights to your work, as some early commentators feared, you will not get the protections usually accorded authors who sign a publishing/distribution contract, skimpy though these sometimes are.

This is because:

• Apple has not told you what the terms will be.

• Apple has provided no guarantee that it will distribute an iBook that is professionally competent and fit for publication (put another way, Apple has reserved the right to be capricious in its distribution decisions).

• Apple has not promised to begin distribution with reasonable promptness or on any timetable other than what it finds convenient.

• Apple has not promised to keep the market supplied.

• Apple has not promised to revert the rights to you if and when it stops keeping the market supplied.

Considering Challenges

Commentators have suggested a number of legal arguments that might be used to challenge the enforceability of the Apple EULA.

1. This EULA is what lawyers sometimes describe as a contract of adhesion—essentially a preprinted form offered by a party with greatly superior bargaining strength as a take-it-or-leave-it proposition not subject to any negotiation.

When a court determines that such a contract contains terms that are so unfair as to be unconscionable, and when those terms have been foisted upon a less sophisticated party not fully capable of appreciating the unfairness of the offer, the court may decline to enforce that contract.

2. The EULA’s restriction to sale only through the Apple store makes it essentially an exclusive license of copyright reproduction/distribution rights. U.S. copyright law requires exclusive licenses to be in writing and signed in order to be enforceable. The EULA is a click-through agreement not comprised of ink on paper and not physically signed at the end in the way we customarily think of as comprising a signature, and so at least one commentator has suggested that the writing/signature requirement has not been met.

However, a federal law known as the e-sign law enacted in 2000 provides that an electronic document satisfies any statutory writing requirement and any insignia or process executed by a person who intends it as her/his sign of assent (e.g., a click-through) satisfies the signature requirement. So I think this argument lacks merit.

3. The EULA in combination with Apple’s market power and the terms that have heretofore been included in its distribution agreements raise antitrust concerns as a consequence of Apple’s ability to block access to the market and to restrain price competition.

Although several investigations are under way and a number of class action suits are pending, these are complex and expensive issues to litigate, and it may be some time before we have any read on their viability.

Advice for Publishers

Given the potential problems described above and the nature and significance of what we don’t yet know, I think the only prudent course is not to rush in, and perhaps to add a provision in your author contract that warns your authors not develop or deliver their work in the .iBook format.

Let others check that horse outside your castle walls while you watch from a safe distance. Although the restrictions in Apple’s .iBook EULA are expressly limited to that format and would not preclude exploiting the underlying work in any other form or format, creating an .iBook version would mean building an edition you might not be able to use. Odds are you have better options for limited resources.

Steve Gillen is a lawyer and partner in the intellectual property firm of Wood Herron & Evans and has focused his practice on publishing and media matters for 30 years. He is a member of IBPA and a frequent contributor to the Independent. For more information: sgillen@whepatent.com; 513/241-2324, ext. 470.