Harlequin Responds to Lawsuit by Authors Seeking Royalties
Harlequin was sued yesterday in a class action for massively underpaying its authors.
Here’s the first response:
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.
Link to the rest at Harlequin and thanks to many for the tip.
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.
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.
, Amazon will pay Passive Guy a small affiliate commission on any of your purchases. 
Heh heh. I just blogged about the same thing at the same time.
But I wasn’t as kind.
It’s rare that I think Konrath has written a wishy-washy over liberal post.
Hang the bar stewards, that’s what I say.
Really? I liked Joe’s post this morning.
I think that my sence of humour does not always come across well in print, Mira.
Also, I have to be careful what I say. In the UK, for example, if you were to say it is pretty clear that a company regularly misreports royalties and their contracts have been deliberately written to confuse the weaker party to the contract so they believe at the time of signing that they will receive substantially more money than they will, well, under UK law I might be sued for libel and end up with a multimillion pound legal case. Even if, in such a hypothetical case, it happened to be true the legal case might bankrut me.
So, of course, there is not much I can say about this case.
Yeah the UK Libel laws are a little…um…how should I put this…one-sided.
It was bound to happen, I’m just surprised it took this long.
I enjoyed your commentary here, PG.
Thanks, Mira. I was feeling remarkably restrained this morning.
Yes, I enjoyed your subtle zingers, not the least of which was posting the complaint to help out Harlequin.
Kind of you.
One of the Harlequin authors affected by the royalty payment situation wrote a response on her FB page (it’s public & anybody can read it)
http://www.facebook.com/notes/patricia-mclinn/my-response-to-harlequins-response-to-harlequinlawsuit/443333269040321
Thanks for the link, Nadia!
Has this kind of crap become so common place that we all just shake our heads and move on? PG was rather restrained in his comments, and J.A. Konrath even more so. (Compared to some of your previous posts, Joe. *wink*)
May I ask a possibly silly question? Are the things that most of us currently call “ebooks” licensed or sold? If they are actually sold like a paper book, then how does that square with DRM and the apparent inability to re-sell them or move them from one device to another and so on? If those restrictions are signs that they are actually licensed, then do they not also qualify for 50% royalties? I am sure this depends on exact language in a particular contract, but it seems to me that there could be some confusion over whether the ebook as we know it is actually covered by the section of the contract that would appear to cover “ebooks” or whether what we have today is actually a license of some sort from the publisher to Amazon or whomever. I have no real need to know, but the whole idea of DRM and you-dont-own-it-even-though-you-bought-it annoys me, and it would be poetic if that were to come back to bite the publishers who use it. Apologies if this is off topic.
Nathan,
The answer to your question may be found here- http://legalminimum.blogspot.com/#!/2012/07/four-quick-thoughts-on-harlequin-e.html
He’s an attorney who provides his thoughts on the Harlequin case including addressing the issue of whether digital content is licensed or sold.
Thanks, Karl, for showing me a new blog to follow. It looks like Legal Minimum’s Don McGowan believes this could be a problem indeed.
If he is correct, then with a reasonable ebook pricing strategy in the future (we can dream), some authors might even earn out advances on books from which they never thought they’d see another dollar. Of course, that depends on accurate accounting.
quote from Legal Minimum:
Harlequin Switzerland had demonstrated that, at least at first glance, it thought the reasonable rate for licensing an e-book to be published was 50%. “Sales” of e-books are, upon investigation, actually licenses.
Thanks for the shout out. I’ll be posting a few more thoughts on this litigation in the coming days as I can get more information.
When those contracts were first drafted, “licensing” meant selling the (time limited) rights to another company to produce and sell the ebooks, just like you’d license the foreign rights to an overseas publisher or an audio book company to take care of some aspect that was beyond your capabilities or expertise.
So on the one hand, it would probably be hard to win the argument in court that the term “license” meant individual sales, and the royalty rate on those. On the other hand, the same argument screws HQ because they clearly didn’t license the rights to an independant company, nor did that company do any prodution work requiring a unique set of expertise. The only reason for licensing the rights to the other company was to avoid paying the author, ie, to defraud them. Given that their legal dept. also seems clueless, they are, and this is a legal term, up a creek.
Interesting thought. There’s some cases out there that make the situation a bit more complex. Example: Siegel v. Warner Bros. that says deals within a corporate family have to be arm’s length, and look to comparable deals in the industry to see what those terms should be. There’s also a recent case on license vs. sale from Europe that makes things more complex for HQ than they would have anticipated at the time.
But there are non-”screw the author” reasons to do the deal with an inter-company transaction too. Example: if you’re doing a deal with an e-book retailer that will only allow submissions from a US-based or publisher, then HQ Switzerland would have to license them to HQ to be eligible.
So: it’s complicated. I’m sure PG will have additional thoughts in future posts; I know I will.
Example: if you’re doing a deal with an e-book retailer that will only allow submissions from a US-based or publisher, then HQ Switzerland would have to license them to HQ to be eligible.
But then, what conceivable reason is there for Harlequin Switzerland to be involved at all?
It’s fun to watch a company squirm when the facts aren’t on their side
I hung out with a group of writers who wanted DESPERATELY to write for Harlequin. Unlike some of the forums I’ve been on since, these kind, gifted women were supportive of each other (and of me when I decided to DIY publish.)
They scoured the Harlequin related boards for contests and other ways to get “in” so they could realize their dreams. They debated the most minute departures from the ‘normal’ Harlequin Voice in order to still qualify for certain lines.
When someone did sell a book to Harlequin I always cringed a little bit when I thought of the draconian contract they signed.
I can only hope this helps them. I hate to see good people taken advantage of like that.
It will be interesting to see how Harlequin responds to the claims of self-dealing. They’re going to have a tough time explaining why they license the works for only 6% or 8%, when they could get more.
“pays fairly and properly…”
Yeah. Want to see what that means in Harlequin’s world?
http://jwmanus.wordpress.com/2012/07/20/harlequin-pays-fairly-properly-sure-they-do/
You got two whole dollars? Somebody screwed up, clearly. They didn’t figure out a way to end up with you owing them.
I think there’s a huge can of worms–or layers and layers of cans of worms–to be opened by this lawsuit.
To give just one example, I know a writer who has had a few dozen old titles sucked into Harlequin’s digital program and reissued as ebooks (the company has declined to revert rights to the author), and after several years… this popular author’s total earnings in e-royalties from Harlequin don’t amount to enough money to buy dinner-for-two at a moderately-priced restaurant.
And that’s just one of any number of first-hand accounts I’ve heard from experienced authors (in many cases, authors who also have SELF-published digital backlist showing -drastically- different sales and earnings from their Harlequin backlist) wondering what the HELL is going on with the reporting of their Harlequin e-royalties.
Now that this class action group has opened the door, hopefully some light will shine on this situation–and more people will enter the door, and the door will be blown off, etc.
Two things popped out at me. First, HQ isn’t running a pr campaign because they don’t have a reputation to lose. (When you sell crack the only reputation you have to lose is whether or not you sell the good stuff.) Second, they either don’t see this as a threat, or they are downplaying it to look better. “This is only three authors. It’s not like half our stable hates us. It’s not a big deal.” Usually when a class action suit is brought you don’t see references to the number of plaintifs because it doesn’t matter. The class of people as a whole is important. But stating the number downplays the issue. Which sounds worse? “A class action suit” or “a class action suit by three people”?
So how come nobody has said “Repent, Harlequin!” yet?
The Tick-Tock Man did already.