Originally Posted by Edward M. Grant
So they could have given the rights to the subsidiary for free to avoid paying any royalties and that would be 'perfectly legal'?
From what I can tell, and note that I have not seen the contracts in question:
The authors signed with the subsidiary
at the 6-8% rate.
The contracts with Harlequin (not the subsidiary) said "with unspecified digital rights, you get 50% of what Harlequin receives." Since what Harlequin got was 6-8% from its subsidiary, they cut that in half for those ebook royalties.
Harlequin apparently revised its contracts in 2005 to specify ebook rates.
Harlequin did not take any additional steps to "avoid paying royalties." The reality is that ebooks weren't even a consideration in 2004, let alone 1999.
In other words, as long as they abided by the contracts, they paid the correct royalty rates.
The lawsuit doesn't allege criminality or fraud or collusion. It's merely a dispute over whether it is valid for Harlequin to treat the subsidiary as an actual company in terms of the royalty payments stipulated in the contract.