REPOST 6/21/2007 When did IP rights cease to be rights?

By now, many of you have heard that Triskelion is closing doors and filing for bankruptcy. Even with the problems they've had over the last few years, I am sad to see them go. The company had a lot of potential, but sometimes things get in the way of that potential. Enough said about that.

What I do want to address is the deplorable state of law in the US today. This is one I wasn't aware of, until Triskelion filed for bankruptcy. It's looking like, no matter the needs of the company, bankruptcy could turn out to be a real shaft for the authors there at the time of filing...or even those released shortly before the filing.

Here's the deal, as I've been able to understand it so far.... Now, I do know people who will be talking to IP attys later today, so we'll see what information I get after that. I'll update as information comes in.

The Triskelion contract has, by my count, four separate clauses that would make the rights revert back to authors in case of closing and filing bankruptcy. Those would include: the bankruptcy clause (which says rights revert back to authors in case of bankruptcy, liquidation or reorganization), the promise to keep books up for sale (most of the books have been removed from the Triskelion site), the promise of royalties (at the point where they aren't paid, like the books not being available for sale, the contract is considered in breach) and the breach of contract release (which the previous two would trigger). Seems cut and dried, to me. Triskelion is closing doors on July 2, the books are coming down, and bankruptcy has been filed. The rights revert to the authors, right?

Possibly not, and this is where I think the US legal system falls on it's face. Bankruptcy law, a federal law just like the copyright laws that govern rights management, allows (according to some legal sources) the debtors to seize the contracts as assets of the business in bankruptcy. Now, this is where things get sticky.

I could understand this, if Triskelion were BUYING something. They aren't. They are RENTING it. They are renting the rights to distribute and reproduce these books, for a period of two to five years (depending on how old the contract you signed is), on the condition that they will pay rent in the form of royalties to the authors.

Here's another thing to consider... The similarities between the two systems (rental income and royalties/rights) are so close that income from the two sources are paid on the SAME tax form. I mean that. Look at your 1099 sometime. Rental income and royalty income are two of the income sources specifically named on it.

Now, if the debtors intended to take the place of the publisher, I would agree that they have the right to reproduce and distribute said books, as long as they paid the authors their agreed-upon royalties and, in all other ways, lived to the contract. That includes: having the books BACK out for sale within 30 days and releasing rights back to authors, when their contracts come to a close.

Since that isn't going to happen, here is my opinion of this highly questionable practice...

1) The contracts should not be considered assets of the business, since they haven't PURCHASED anything. They are renting it. If the publisher was renting a storage unit, they wouldn't be able to seize the storage unit as part of the business assets, though they could seize the physical property stored inside the unit. Being IP should not make it fair game for seizure.
2) The rights are not an asset, if they are not exercised. IOW, holding some poor author's rights gets them no money, unless they publish and distribute the books, acting as publisher instead of the bankrupt publisher that originally contracted.
3) The authors contracted in good faith and for a particular set of conditions to be met. If those conditions are not met, the contract is in breach, no matter who forced the contract to go into breach. At that time, legally, the contract is no more. If the debtors are going to exercise the contract, they should be forced to live to it fully.

At what point did the bankruptcy laws lose track of what businesses actually OWN? Publishers do not own IP rights on books. They rent them. Depending on what happens next, I'd say it might be time to make some noise.