Heartbreak for Harlequin authors as judge tosses e-book case

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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