Cengage authors David Knox and Caroline Schacht filed a class action lawsuit in the U.S. District Court for the Southern District of New York on May 15 against Cengage claiming the company’s emphasis on digital distribution, including its new Cengage Unlimited model and expanded digital courseware offerings, have violated their publishing agreements. The suit also claims that the company is refusing to provide information that would allow them to audit their royalty payments.
Cengage’s royalty calculation model for its new subscription service Cengage Unlimited has raised a few questions that remain unanswered, primarily, will their model account for the range of existing publishing agreements—which have a variety of different provisions for accounting for royalties?
“Here’s the key problem,” said Stephen E. Gillen, a partner with Wood, Herron & Evans. “Cengage has a wide variety of different contracts that were entered over time. Some of their longer lasting titles, those in their 10th edition and up, are the subjects of original contracts still in place that were entered 40 or more years ago. Many of their contracts were not done on Cengage forms but were acquired from other publishers, all of which have different provisions for accounting for royalties. Some of them were done before the days of bundling, custom publishing, digital publishing, and publishing through interactive/adaptive learning platforms and so do not provide expressly for those then unanticipated media or channels of distribution. But Cengage has thousands of authors and almost certainly a greater number of contracts (no author will have less than one contract, and many will have multiple contracts). It’s hard for me to imagine that they are going to have lawyers go back over every single contract to determine if and how it should be treated in the current scheme.”
Cengage’s Chief Product Officer Fernando Bleichmar said the company will continue to honor its contractual obligations with authors under the Cengage Unlimited model, but that the contract they have with authors generally grants them the discretion to publish the work in the way they think best helps drive the sales of those titles.
“We have spent significant time with our internal teams making sure the contracts allow us to do the Unlimited model,” he said. “The contracts are established in a way in which the publishers have the discretion of evolving the model that benefits both the authors and the publisher, and our contracts allow the creation of different models. We are going through all the details in the contracts, having those conversations with our authors to make sure they are comfortable with the Unlimited model as we move forward.”
Cengage Unlimited, that gives students at U.S. higher education institutions access to all of the company’s digital higher education materials for $119.99 a semester has Cengage authors concerned about how their contracts will be affected.
“I think the authors should find out as soon as possible how we are going to be paid,” said mathematics author Pat McKeague, who did not receive any information from his publisher about the new service prior to its public announcement, and has not been able to reach his editor for more information. “My contracts require my written permission before any electronic version of my book can be published.”
A royalty statement should be simple to understand, right? “Show me my sales and my royalty rate, perform a simple mathematical calculation, and — boom! There’s my royalty check!” But how often have you looked at your publisher’s royalty statement and muttered, “I have no idea where these numbers are coming from,” and spent hours trying to understand the calculations? Or perhaps you’ve become so frustrated that you simply gave up, took the royalty check out of the envelope, cashed it, and threw the rest of the statement in the recycling bin, reassuring yourself that the amount must be correct if it’s this complicated.
During the 2017 TAA Conference session, “Wanna Get Away? Maybe Now You Can: Parting with Your Publisher,” intellectual property attorney Stephen E. Gillen, a partner at Wood, Herron & Evans, said that one event that can open the door to parting with your publisher is when your textbook goes out of print.
When and how your textbook goes out of print is governed by your contract, said Gillen, which means it’s best to think about these situations in the early stages of negotiating your publishing contract. “They [your publisher] are probably going to be more inclined to make changes in that language in the beginning than they would be somewhere along the way,” he said.