Friday, July 20

Writers Sue Harlequin For Underpayment

Three writers--Barbara Keiler, Mona Gay Thomas and Linda Barrett--have filed a suit against Harlequin, the world's largest publisher of romance books. They claim that Harlequin has unfairly deprived authors of monies owed.

The complaint is fairly involved and has to do with alleged legal trickery on Harlequin's part. I'll let Joe Konrath explain it:
Now I'm not a lawyer, but I'm pretty sure ... Harlequin contracts state they'll pay authors 50% for foreign and ebook royalties. This 50% is based on the amount they receive. But then they took those rights and sub-licensed them to another company for 6%, which means the author got 3% of the wholesale price, not 50%.

Confused? Here's an example.

Harlequin has an ebook it lists for $3.99. It sells that to Amazon at a wholesale price of $2.00. The author should make $1.00 for each $3.99 ebook that Amazon sells.

But instead of selling direct to Amazon, Harlequin sells the ebook to Company X for 12 cents. So the author only gets 6 cents. Company X than sells the same ebook to Amazon for $2.00, but because they are a sub-licensing company, they don't have to pay the author anything.

Sub-licensing is common. My publisher, Headline in the UK, sold book club rights to my novel AFRAID. The book club paid Headline a flat fee, and HEADLINE gave me 50% of that fee, according to my contract. The book club wasn't required to pay me royalties on each book club edition is sold. Just like Company X isn't required to pay authors anything.

This is all fine and legal. So why are authors suing Harlequin?

Because Harlequin and Company X are the same company.

In other words, it is sub-licensing the rights it holds to itself. Then it only has to pay the author 3% instead of 50%.

That's seems pretty shitty. It also doesn't seem like something a judge or jury will casually dismiss, even if Harlequin made sure it kept the two companies separate through an umbrella company.

No publishing company would ever sub-license rights for a paltry 6%, unless it was selling the rights to itself. Does Harlequin really expect a judge to believe that it sells a $3.99 ebook and only makes 6 cents? And according to the complaint, the 6% was not equivalent to the amount reasonably obtainable from an unrelated party, as required by the publishing agreements.

Ya think?
I love Joe's explanation, lots of flare but with a smidgeon of restraint. I'd encourage you to read Joe's entire post here: Harlequin Fail Part 2

Here is Harlequin's response to the lawsuit:
Harlequin announced today that they have been made aware of a class action lawsuit brought against them by three former authors.

The publisher wishes to make clear that this is the first it has heard of the proceedings and that a complaint has not yet been served.

“Our authors have been recompensed fairly and properly for their work, and we will be defending ourselves vigorously,” said Donna Hayes, Publisher and Chief Executive Officer of Harlequin. (Harlequin Blog)

Passive Guy, a practicing IP attorney, dissects Harlequin's responce:
Let’s see, this lawsuit has been in the works for months and generally discussed among romance writers during that time. PG has no inside information, but it’s not unusual for settlement discussions to precede the filing of a suit. HQ looks either clueless or dishonest when it claims to be surprised.

As far as the core issue of using one HQ company to license publishing rights to another HQ company in order to substantially reduce royalties paid to authors, PG figured that out the first time he reviewed an HQ publishing contract and authors have been complaining about it for years.

HQ’s statement that the complaint has not been served on it will draw a giant “duh” from any lawyer familiar with litigation. You file the complaint, then serve the defendant. Yet another clueless statement.

Since PG is always a helpful guy, he’ll provide Harlequin with a copy of the complaint below so they can read it. [PG put a copy of the author's complaint up on his blog, you can read it here.]

On a more serious note, most companies that are defendants in a major class-action suit incorporate a sophisticated public communications program to show themselves in the best possible light and minimize damage to their reputation.

Evidently, HQ doesn’t plan to do that.
You can read PG's entire article here: Harlequin Responds to Lawsuit by Authors Seeking Royalties.

That's all the information I have at the moment. I use to be involved with the Romance Writers Of America and many, if not most, of the published writers in that group either published through Harlequin, had at one time published through them or were actively submitting work there. I can't imagine this lawsuit will bolster the RWA's shrinking numbers.

If true, Harlequin's underhanded dealings not only hurt authors but they hurt readers as well. Of course I would be surprised if Harlequin was the only publishing company doing something like this. I hope this suit sets a president that encourages all publishers to deal fairly and honestly with their authors.

Further reading:
- Harlequin author Patricia McLinn, one of those involved with the lawsuit, has written about the suit on her Facebook page.

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