Cengage faces fresh lawsuit from authors over digital sale royalties

Textbook authors who claim Cengage has not paid them correct royalties for sales from its digital services have filed a class action lawsuit against the publisher.

The complaint, which Cengage has vowed to "vigorously respond" to centres around MindTap, a product that provides electronic versions of textbooks with multimedia capabilities and additions like quizzes, and subscription service Cengage Unlimited.

According to the claim, filed with the Southern District of New York on behalf of several textbook authors, Cengage has been “diluting the net receipts from which royalties are calculated and paid to plaintiffs” from the digital products, breaching its contracts.

It alleges the contractually specified royalty rate to net receipts has not been used for sales through MindTap via a series of “accounting shenanigans”

With the Unlimited service, the complainants argue Cengage applies a “made-up formula that serves to enrich Cengage and reduce the royalty bearing revenue of its authors.”

The filing states: “Rather than paying authors pursuant to the terms of their contracts, Cengage has made its own decisions about how and from what pool of money to pay authors’ royalties. Cengage has stopped paying Plaintiffs royalties on net receipts from sales, as the Publishing Agreements require.

“This class action therefore alleges a breach of contract for damages due to Cengage’s uniform violations of its Publishing Agreements. The advent of new digital sales channels for academic textbooks is not an excuse to somehow start cheating the textbooks’ authors and violate their binding contracts with Cengage.”

It also highlights that the recently announced merger with McGraw-Hill has the stated aim of expanding digital offerings and cutting prices.

This week’s class action, seeking unpaid royalties, is the second time in just over a year Cengage has been challenged over its Unlimited service, which launched in 2017. Last year, a suit was filed by authors David Knox and Caroline Schact, saying their royalties would decline because the service was “systematically dismantling and frustrating the business of selling Plaintiffs’ work" in favour of selling subscriptions to the publisher’s digital products. The company reached a resolution in October.

A spokesman for Cengage said: "We are disappointed to see this complaint against our efforts to improve students’ access to affordable, quality learning materials. Since its inception in March 2011, the MindTap learning platform has consistently helped students achieve higher retention, grades and confidence. However, despite significant investments in proven products, it became increasingly apparent that students were not able to afford them. Our authors, like those at our competitors, saw declining royalties as a result of high prices that lowered students’ demand. The Cengage Unlimited subscription service was created to address this longstanding problem. It also enables a more sustainable business model for the company and our authors.

“We have communicated clearly with our authors that the subscription service is consistent with the terms of their contracts, which we continue to honor. Since the service launched, we are in regular communication with them about the impact of the subscription on their royalties.

“We look forward to vigorously responding to this complaint as we remain steadfast in our belief that our industry must do more to contribute to affordable higher education.”