The HarperCollins Lawsuit: Keeping Authors Aboard As Traditional Publishing Sinks

In March, the U.S. District Court for the Southern District of New York, sitting in Manhattan, handed a victory to HarperCollins in its lawsuit against Open Road Integrated Media over the e-book publishing rights of Jean Craighead George’s award-winning children’s novel, Julie of the Wolves (1972). This “victory” for HarperCollins, however, highlights for authors one of the perils of pursuing the traditionally published route: desperate publishing corporations will stop at nothing to make sure “its” authors go down with the ship.

Let’s start with the facts of the case:

• In 1971, author Jean Craighead George signed a contract with HarperCollins (then Harper & Row) to publish Julie of the Wolves “in book form” for a $2,000 advance (just over $11,000 in today’s dollars) and royalty payments between 10-15%.
• Although the grant of publishing rights was in Paragraph 1, the contract also contained a provision (Paragraph 20) that said: “the Publisher shall grant no license without the prior written consent of the Author with respect to the following rights in the work: use thereof in storage and retrieval and information systems, and/or whether through computer, computer-stored, mechanical or other electronic means now known or hereafter invented … and net proceeds thereof shall be divided 50% to the Author and 50% to the Publisher …” (Emphases mine.)
• The contract between George and HarperCollins also had a “reserved rights” clause that reserved to George “[a]ll rights in the Work now existing, or which may hereafter come into existence, not specifically herein granted.”
• In 2010, Open Road, an e-book publisher founded in 2009, offered to publish the e-book of Julie of the Wolves for a 50-50 royalty split with George. George approached HarperCollins to see if they would match the royalty. HarperCollins wanted to publish the e-book, but insisted on giving George a meager 25% royalty for the Newbery-award winning novel.
• In 2011, George contracted with Open Road to publish Julie of the Wolves in e-book form, which sold around 1,600 copies.

Spurned, HarperCollins filed a lawsuit against Open Road for copyright infringement on December 23, 2011.* George, who passed away in 2012 at nearly age 93, was never a party to this lawsuit, even though interpretation of the contract between George and Harper Row—whether it assigned e-book publication rights (in 1971!) and whether it was breached—was key to this dispute.

Clearly, through the 1971 contract, George had granted HarperCollins the right to exploit the copyright through printed publication. But now a federal court in Manhattan, in granting the Plaintiff-HarperCollins’ motion for summary judgment, has determined that the 1971 contract also covered later-developed ways of exploiting the copyright (“new uses”).

The Southern District of New York opinion, available here (PDF), is disappointing.

In law school, property rights are often referred to as “a bundle of sticks.” When you own something, you can grant another person some rights to that property while keeping others, or you can give them the whole bundle. There’s a big difference between granting all of the rights in the Work — which would be the whole bundle — and granting the right to publish a Work in book form. So, when a 1971 publishing contract gives rights to the Work “in book form,” that does not necessarily include the right to publish an e-book decades later.

Back in 2001, another judge in the same New York federal court found that a very similar contract (the publishing contract for a variety of works, including Kurt Vonnegut’s Slaughterhouse-Five) that granted a publisher the right to “print, publish and sell the work in book form” did not grant e-book rights.Random House, Inc. v. Rosetta Books LLC, 150 F. Supp. 2d 613 (S.D.N.Y. 2001), aff’d, 283 F.3d 490 (2d. Cir. 2002). Also, importantly, in George’s case, while the full contract has been kept confidential, we do know that the royalty schedule in paragraph 17 of the contract only discusses print forms, like “bound copies of the original edition” and “unbound sheets” and the “cheap edition” (an industry term to describe paperback editions), and a “plate royalty” for books sold by a book club.

To me, those two points largely answer the question in this case: the “book form” referred to in George’s contract meant printed versions of the Work, and nothing more. Rights to everything else were “reserved.”

But the Court held exactly the opposite, concluding “the e-book format constitutes a permissible extension of ‘book form’ via ‘storage and retrieval and information systems, and/or whether through computer, computer-stored, mechanical or other electronic means.’” That language comes much later in the agreement, in Paragraph 20 of the contract (see “facts section” above).

The phrase “and/or whether” in Paragraph 20  isn’t just bad English, it’s bad legal writing as well, and the parties and the Court spent a long time debating what that language could possibly mean, with the Court concluding that “and/or” somehow trumped “whether” and the rest of the contract.

To me, regardless of how the “and/or whether” question is resolved, the overall point of Paragraph 20 remains clear, particularly when viewed in the context of the technology available in 1971. HarperCollins’ memorandum of law gives some examples of what those “storage and retrieval and information systems” could be: in 1969, MIT created “an experimental computer system for accessing the full text of 10,000 journals,” and in 1971, Project Gutenberg was set up to “create electronic books of public domain works that would be stored, retrieved and read on computers.”

That seems to be what the contract was getting at: if the publisher wanted to put the text of the book in some sort of electronic database (either then known or later invented)— which under copyright law would require its own separate license — then George had the option of saying “no” or of receiving 50/50 royalty.

I disagree with the Court that a reference much later in the contract to antiquated database systems is the same thing as an e-book license — indeed, from the 1990s onward, HarperCollins’ own contracts drew a clear distinction between rights relating to e-book versions and rights relating to information storage systems — but even if we assume that Paragraph 20 granted HarperCollins publishing rights in the e-book form, it requires a 50/50 split. That would just mean HarperCollins breached their agreement with George by refusing to publish the e-book form unless she accepted a 25% royalty instead of the 50% royalty required by the very same sentence they claim covers ebooks.

Apparently, it seems to be the norm for publishing corporations to present their authors with the choice to either accept a 25% royalty for e-book publication (regardless of the royalty on the page) or not have their novel published as an e-book at all (even though this would mean that the publisher has failed to “exploit the copyright,” probably breaching its obligations to the author).**

In You Can’t Buy That! The Great E-Book Royalty War, Salon writer Laura Miller explains that publishing corporations insist on the 25% royalty even though e-book production costs are limited. As she points out about George’s book in particular:

[I]t’s unlikely that HarperCollins is still paying off the cost of editing and promoting “Julie of the Wolves,” a title that has sold 4 million copies in print since it was first published 41 years ago. It’s also unlikely that they’d be doing much to promote the e-book if they did publish it, since publishers tend to concentrate those resources on new titles.

At the end of the day, this case suggests that one of the ways big publishers are trying to stay afloat in the current market is by holding e-books of popular authors for ransom, a strategy that has now been blessed by the Southern District of New York.

The shaky legal reasoning in the HarperCollins v. Open Road Media court opinion will likely do nothing but encourage publishing corporations to threaten authors with years of litigation if they dare to try to bargain for even equal treatment (such as a 50-50 split) for “new uses.”

So, what are the lessons from the HarperCollins lawsuit?

Well, if authors have any bargaining power at all, it may be worth it to consider the possibility of limiting copyright grants to ways of distribution known at the time of the contract. However, a better course of action may be to avoid traditional publishing entirely.

*By the way, Jane Friedman, cofounder and CEO of Open Road, had actually been the President and Chief Executive Officer of HarperCollins Publishers Worldwide. I remember having seen Friedman quoted in George Packer’s Cheap Words piece in The New Yorker, which I criticized in my post, What’s Troubling About Amazon?.

**The entire contract isn’t available for public view. So, apart from the paragraphs discussed in the court opinion, I don’t know what the terms are.