Originally Posted by Kali Yuga
Some authors signed with Harlequin Enterprises B.V. or Harlequin Books S.A.
In turn, Harlequin Enterprises B.V. and Harlequin Books S.A. licensed the books to the parent company.
The contract supposedly says that miscellaneous digital rights get 50% of the royalty that the parent company received. I haven't seen the contracts, but I'm guessing they say that the authors get 100% of the received royalties for print.
Thus for print they got 6-8%, for any unspecified digital rights they got half that.
This guy seems to know more
The contract said that they get 6-8% for print, with no parent company involved and 50% of what the subsidiary got for digital rights.
The Swiss subsidiary isn't allowed to distribute ebooks so all they can do license them. And they passed the license to the parent company only asking 6-8%.
The author of the article points out 4 things:
1. [...]And yet... the difficult thing for Harlequin is going to be explaining why, if Harlequin Switzerland could be the publisher for the paperback books, why couldn't it also be the publisher for the e-books? Harlequin is going to have a tough time explaining that one.
2. [...]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.
3. Harlequin wouldn't let authors negotiate their deals: they were take-it-or-leave-it. The technical term for that is "contracts of adhesion". Although it's different from state to state in its details, there's a contract law principle that says contracts of adhesion have to be reasonable and can't contain crazy terms.
The Harlequin contracts contained a clause saying that the rights could be assigned within the Harlequin family at Harlequin's sole discretion. Harlequin is relying on this to say they were allowed to do what they did. Maybe so, but this principle of law would also hold that Harlequin would have to be reasonable in exercising its rights to do so. Otherwise they should have given people the chance to negotiate that clause away. They didn't and so that becomes another, albeit lesser, point for the authors.
4. The authors argue that Harlequin Switzerland was just a tax shelter and Harlequin Enterprises was really fulfilling all the obligations of a publisher. Example: Harlequin Enterprises was marked on the copyright pages of the book as "publisher". This is going to matter a lot. If two companies run themselves as a joint unit when it's convenient, they have to be treated as a joint unit when it's inconvenient.