Last week, concluding the final chapter of the three-year legal dispute between HarperCollins and digital publisher Open Road over the e-book rights to Jean Craighead George’s 1971 young-adult novel Julie of the Wolves, a court rejected HarperCollins’ attempt to recover over $1 million in lawyers’ fees from its opponent. But not everything came up roses for Open Road: the court awarded HarperCollins $30,000 in damages and also blocked Open Road from distributing its e-book edition.
This phase of the litigation—HarperCollins v. Open Road—came on the heels of a March 2014 ruling that Open Road’s e-book edition of Julie infringed on HarperCollins’ right to publish electronic versions of George’s classic. At issue was whether language in the 1971 contract between George and her publisher granted HarperCollins exclusive electronic rights. Complicating the interpretation of the contract was this little thorn: there was no market for e-books when the contract was signed. The court found, however, that the contract’s “forward-looking reference to technologies ‘now known or hereafter invented’ [was] sufficiently broad to draw within its ambit e-book publication.”
Many in the industry had wondered whether this case had the potential to chip away at the precedent of the watershed authors’ victory in 2001’s Random House v. Rosetta Books, which held that pre-digital-era contracts where an author grants her publisher the right to publish a work “in print book form” or even “in book form” with no mention of electronic rights should be interpreted to reserve electronic rights to the author.
But the outcome of HarperCollins v. Open Road, it turns out, did little to disrupt the Rosetta Books standard. Judge Naomi Buchwald underscored that the Open Road decision “may be of limited applicability beyond the confines of this contract and this case.” Contemporary contracts, for one, explicitly address e-book rights. Also, these “new use” cases stand or fall based on the particular language in the contract provisions; Rosetta-like contractual terms will still receive Rosetta-like results.
George’s original decision to publish an e-book edition with Open Road (which pays a 50% e-book royalty)—rather than with HarperCollins, her longtime publisher—was a principled rebuke of the major publisher’s measly 25% net e-book royalty. HarperCollins’s aggressive strategy (the publisher spent over $1.5 million to litigate a case that ended up being worth only $30,000) illustrates the importance to publishers of keeping e-book royalty rates at 25%.
Major publishers’ strident insistence on the 25% net royalty for all but the most powerful authors, and the lengths they’re willing to go to defend it—as demonstrated by this case—looks to us very much like a fear that the status quo can’t last forever, that once the door is cracked even a bit, the light is bound to flood in.