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contract, also require semiannual accountings and royalty
payments; and the procedures followed with respect to royalties
payable under all three forms of author contract are identical.
Thus, along with the royalty check for the 6-month royalty period,
Random House typically issued a royalty statement to the author
covering such period. Each statement contains a column entitled
"earnings" and a subsequent column entitled "charges". The former
shows cumulative earnings to date based upon total books sold less
total books actually returned through the beginning of the
statement period. Where the prior withholding based upon the
"reasonable reserve for returns" was in excess of the amount
justified by the actual returns for the prior period, the earnings
column also includes an amount for "refund of reserves" (refund of
reserves). Thus, for each 6-month royalty period, the prior
estimated reserve is adjusted to reflect actual experience. The
"charges" column includes an amount representing actual returns
for the period and an amount for the "current reserve for
returns". These charges are an offset to any royalty based on
sales that might otherwise be due for the period.
Random House was contractually required to, and did, pay
royalties with respect to books that were sold and not returned,
even though Random House never received payment for the books and
wrote off the debt as uncollectible (e.g., because of the
customer’s bankruptcy). The royalty payable upon the sale of a
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Last modified: May 25, 2011