I came across a really interesting blog called Legal Minimum by Don McGowan which discusses at length a class action lawsuit launched by several Harlequin authors against their publisher. In this day and age, lawsuits are nothing new, yet the outcome of this one could have huge ramifications for all authors and their publishers.
I encourage you to read the blog post for details, but it boils down to the fact that Harlequin allegedly is giving their authors only 3 to 4% royalties on their ebooks due to a strange (and possibly prejudicial) arrangement between Harlequin Enterprises (HE) and Harlequin Switzerland (HS) Authors originally signed contracts through HS, however Harlequin Canada administered those contracts. With ebooks, licensing rights were issued back to HE. Original publishing contracts with HS gave authors 50% royalties on ebooks, however, the license with HE gave HS only 6 to 8% of the cover price, which meant that authors only got 50% of that! Yikes! The authors came this was an unlawful tax dodge. Needless to say, Harlequin disagrees.
As you’ll note in the blog, there are other legal issues at play here, but McGowan notes that the ramifications could be as huge as it was in the music industry when Eminem sued his record label for treating digital music like physical goods when, in fact, consumers were making a digital purchase under the licensing agreement with iTunes. Eminem was supposed to have received 50% of digital sales, however, he was paid 12 to 20%, the same he received for the physical product. He sued and won, which improved the royalty situation for other musicians. McGowan says the same outcome could happen for authors.
He also points out, though, that publishers are entitled to produce whatever tax plan and advantage they can, provided it doesn’t prejudice authors, and this is the heart of the issue. It will be interesting to see how this turns out. To read more of McGowan’s interesting blog and related links, go to http://legalminimum.blogspot.ca/2012/11/harlequin-plaintiffs-bring-new.html