In 2012, authors sued the largest publisher of romance novels, Harlequin. Here's a summary of the situation, as described at www.harlegquinlawsuit.com:
THE LEGAL ISSUES
"A class action lawsuit was filed today against Harlequin Enterprises, Ltd., the world’s leading publisher of romance fiction, as well as Harlequin Books S.A., a Swiss corporation, and Harlequin Enterprises B.V., a Dutch corporation, on behalf of authors who entered into contracts with the company.
This lawsuit results from Defendant Harlequin Enterprises Limited, the world’s leading publisher of romance fiction, depriving Plaintiffs and the other authors in the class, of e-book royalties due to them under publishing agreements entered into between 1990 and 2004.
Harlequin required the authors to enter into those agreements with a Swiss entity that it created for tax purposes, and that it dominates and controls. However, Harlequin, before and after the signing of these agreements, performed all the publishing functions related to the agreements, including exercising, selling, licensing, or sublicensing the e-book rights granted by the authors. Instead of paying the authors a royalty of 50% of its net receipts as required by the agreements, an intercompany license was created by Harlequin with its Swiss entity resulting in authors receiving 3% to 4% of the e-books’ cover price as their 50% share instead of 50% of Harlequin Enterprises’ receipts.
Instead of paying the authors a royalty of 50% of its net receipts as required by the agreements, an intercompany license was created by Harlequin with its Swiss entity resulting in authors receiving 3% to 4% of the e-books’ cover price as their 50% share instead of 50% of Harlequin Enterprises’ receipts.
What this means to the authors can be illustrated by an e-book with a hypothetical cover price of $8.00. The “net receipts” made by Harlequin Enterprises Limited from the exercise, sale or license of e-book rights would be at least $4.00, of which authors would be entitled to $2.00 based on their 50% royalty. Computing the “net receipts” based on the “license” between Harlequin’s Swiss entity and Harlequin Enterprises, Plaintiffs’ 50% royalty amounts to only 24 to 32 cents."
In April, 2013, the court dismissed the claim (it gets too technical to get into here, but basically the court found that Harlequin had covered their behind adequately in the wording of their contracts with the authors). The plaintiffs filed an appeal.
The plaintiffs filed an appeal.
In September, 2013, the Romance Writers of America and the Authors Guild filed a 'friend of the court' brief in support of the plaintiffs.
In May, 2014, the Second Court of Appeals reversed the dismissal of one claim and sent the case to the district court for further proceedings.
THE BIGGER ISSUE: TRUST
Undoubtedly the case will continue to grind through the court system. In the end, it may be that Harlequin prevails on strictly legal grounds. To my mind, however, the bigger issue is one of trust. Authors and publishers are supposed to be on the same side, not figuring out legal loopholes that permit them to screw each other. I don't know the state of the finances of Harlequin. Maybe they, like many other publishers, are suffering financially. The best response cannot have been to poison the well that is the source of their income.
Authors and publishers are supposed to be on the same side, not figuring out legal loopholes that permit them to screw each other. I don't know the state of the finances of Harlequin. Maybe they, like many other publishers, are suffering financially. The best response cannot be to poison the well that is the source of their income.
Regardless of the result of the lawsuit, are authors going to want to work with Harlequin? Or will this drive more of them to self-publish and cut Harlequin out of the equation totally?
Yes, publishing faces huge challenges now. I don't know whether working together more closely with authors will save traditional publishing (whether or not it deserves to be saved in its current form is another question) but surely turning on authors won't.
