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Harlequin Authors' e-Book Royalties Suit Continues on “Unrelated Licensees” Rate Claim
The U.S. Court of Appeals for the Second Circuit dismissed breach of contract claims rooted in agency, assignment and alter ego liability in an authors' class action suit over the calculation of e-book royalties from the “publishers'” affiliate. But the court allowed the case to proceed on a claim of breach for allegedly failing to calculate those royalties at a rate equivalent to the “amount reasonably obtainable” from unrelated licensees. Keiler v. Harlequin Enterprises Ltd., 13-1753 (2d Cir. 2014).
Romance book authors sued Harlequin in the Southern District of New York claiming they were receiving artificially depressed royalty rates for e-book sales. The case involves contracts the authors signed with Harlequin's Swiss-based subsidiary Harlequin Enterprises B.V. (HEBV) and HEBV's Swiss-based successor-in-interest Harlequin Books S.A. (HBSA). The agreements specified that HEBV, then HBSA, (both established for tax reasons) was “publisher” and Harlequin Enterprises Ltd. a “related licensee.” (Harlequin authors previously signed directly with the latter.)
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