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Summary:

A new court decision reflects the ongoing difficulties in deciding how old book contracts should address the issue of ebook royalties. In the ruling, a federal judge dismissed a class action brought by writers against Harlequin Romance.

Harlequin Romance has prevailed in a class action suit brought by three authors who accused the book publisher of depriving writers who published books between 1990 and 2004 of their fair share of ebook revenue.

In a ruling issued on Tuesday, a New York federal judge threw out the authors claim that Harlequin had used a corporate sleight-of-hand to pay them 3-4 percent of ebook royalties instead of the 50 percent they believed they were due.

The case, which turned on technical questions of law, is an example of the collisions that can arise as a result of book contracts signed in an age that pre-dated the current boom in ebooks. (In another case in the same court, parties are squawking over whether an author signed to a 1971 contract can shop ebook rights to another publisher.)

In the Harlequin case, the authors pointed to publishing contracts that granted them 50 percent of the digital royalties that the publisher collected. The authors believe this should let them collect half of the $4 Harlequin earned from an ebook with a cover price of $8.

Harlequin instead decided to pay 3-4 percent ($0.24 to $0.32 on an $8 book) on the grounds that this was half of the 6-8 percent it received from licensing the rights to a different publisher. The issue became contentious because the third party publishers in this case were subsidiaries created by Harlequin for tax purposes.

In a related letter to authors, Harlequin explained that, prior to 2005, no one had foreseen the growth of ebooks and that it was reasonable to pay authors less than 50 percent.

In a four-page decision, the New York court declined to consider the authors’ arguments that the “third party publishers” were alter-egos for Harlequin. Instead, the court relied on a narrow interpretation of contract law to dismiss the claim.

The decision is very brief and contains an unusual footnote stating that the judge’s clerk, a second-year law student, had largely researched and drafted the opinion (clerks often help with such tasks but judges rarely acknowledge this).

The authors’ counsel included veteran publishing lawyer David Wolf. Reached by phone, Wolf declined to comment and said his clients were considering their options. You can read the ruling for yourself here:

Harlequin Dismissal

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  1. Bad ruling.

    This is similar to the scrap The Beatles had with iTunes.
    Of course, the band won because they had the money and the clout to take Apple on and they won.

    Every authors should avoid pitching any books to Harelquin.

    All authors should check their contracts and make sure there is a clause to cover them for ‘technology yet to be invented’

    ______________


  2. Sorry about the typos …

  3. Ugh. Super-sleezy. These kind of deals create bad vibes in the publishing business and make it hard for legit publishers to set up revenue sharing agreements with authors. These authors will hate publishers and the next one will need to pay a large advance to land them. The author will be right not to trust the next publisher to come along.

    It’s bad for business.

  4. The proliferation of self-publishing will doom any publishers that don’t treat their authors as equals. New technologies and improve social media will soon render this type of publishers out of business. Much like any employer that don’t value their talented employees…they are welcome to keep the crappy ones around. Backlist can only get you so far.

  5. Teri Payton Miller Saturday, May 4, 2013

    What an ugly ruling..figures..the authors do all the work and the greedy publishing company gets all the money….is there any end to corporate greed? Makes me sick. And the judge needs to have his head examined. This really makes me mad.

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