Google book settlement: the future for orphan works?

-- By RyanSong - 16 Feb 2010

The 1976 Copyright Act has contributed to a growing proliferation of abandoned and copyrighted materials, known as orphan works. In 2008, some members of the Congress proposed to resolve this problem through legislative acts. However, their attempt eventually failed due to the uncertainty of potential future litigations. The Congress’s failure has not discouraged the private sector to take action: Google is attempting to expand its dominion of the cyberspace by creating a new on-line market of orphan works. The Google Book Settlement (“Settlement”), if approved, will provide greater public access to the orphan works, but it will also lead to a Google monopoly over this vast and untapped resource.

History of The Google Book Settlement

In 2004, Google released the Google Book Library Project, a partnership between Google and several university libraries to scan book pages and make the scanned image searchable online. In 2005, the Authors Guild and the Association of American Publishers brought copyright infringement lawsuits against Google for digitalizing copyrighted works without permission. Without resolving whether Google’s practice met the fair use doctrine, the parties settled.

In October 2008, the initial draft of the Settlement required Google to pay $125 million in damages. $34.5 million of the damage would fund the Book Rights Registry (“Registry”), a collective copyrights organization that would act as the middleman to collect revenue from Google and distribute them to copyrights holders. The settlement also included several revenue models: institutional subscription for colleges and universities; the consumer perpetual access to individual books; and various others. The settlement is pending approval by the court.

The Orphan Work Problem

One particular category of books affected by the Settlement, known as orphan works, presents a unique legal challenge. The orphan works are essentially “abandoned book” which are still in-copyright, but the contact information of the copyright holders are either missing or incorrect. Many of such books are rotting on the shelves of libraries because people do not want to use them and risk potential copyright infringement litigations. The 1976 Copyright Act exacerbated the problem of orphan works because it permitted automatic attachment of copyright without registration and longer duration for the copyrights once attached.

Property Rule v. Liability Rule

A workable solution to resolve the orphan work problem should both promote creativity among the authors and maximize the usefulness of the orphan works. For most of the copyrighted materials, the law adopts a property rule approach: a user must obtain permission first before using the copyrighted material. The purpose of the property rule is to protect the copyright holders from exploitation. However, when the transaction cost of locating the copyright holders and bargaining for an exchange of the right is prohibitively high, it also prevents copyrights from moving to the people that value them the most. In the case of orphan works, the property rule produces zero net benefit to society because neither the copyright holders nor the users are getting what they want. An alternative to the property rule is the “liability rule”, which allows people to use the material without securing a license first; then the court will decide a reasonable compensation for the copyright holders. The liability rule can promote creativity by ensuring the copyright holders are reasonably compensated and increase the usefulness of orphan works by reducing the transaction cost of negotiating for a license. The Settlement follows the liability rule and it stipulates that, for out-of-print books, Google can adopt an “opt-out” approach, which means it can profit from digitalizing orphan works with impunity unless the copyright holder opts out. The Registry will use some of these profits to actively seek out copyright holders of orphan works and create a database to store their contact information. Google will be the first company to partner with the Registry. Any third party who wishes to work with the Registry must obtain permission from the copyright holders, which is practically impossible for orphan works.

Google Book Settlement and Orphan Works Monopoly

If the Settlement is approved, there is no denying that it will serve the public interest of preserving creative materials and eliminating the geographical limitation to access, but the opt-out arrangement and anti-competition exclusionary provision of the Settlement will essentially create a Google monopoly. The liability rule rests on the assumptions that copyright holders will likely assert their claims and the court can award just compensation. Neither assumption is true here. Orphan work copyright holders are unlikely to know that someone used their work. The revenue model proposed by the Settlement affords Google tremendous leverage in fixing prices for its institutional and private subscriptions because there are no other competitors. If approved, Google and the Registry will successfully usurp the judicial function of determining the reasonable amount of “just compensation.” The liability rule only lifts some of the obstacles of negotiating for a copyright license. It is not supposed to eliminate copyright protection all together.

Conclusion

The main issue of the orphan work problem is the impossibility of bringing the user and the copyright holder together to bargain in an efficient way. Digitally archiving orphan works is great for preserving creative materials, and the liability rule is also the right approach when the transaction cost of bargaining is too high. However, the Settlement has abandoned the spirit of the liability rule and gives Google unbounded power to monopolize the orphan work online market. Therefore the court should order the Settlement to be amended. Google’s objective is to profit from digitally archiving all books, including orphan works and all other copyrighted materials. The court can use the other copyrighted materials as leverage and request Google to dedicate all its profits from orphan works to the purpose of locating copyright holders and compensating them for their works. This way, we can resolve the orphan work problem and everyone will benefit.

This is a pretty competent recitation of the meaningless dispute so far conducted, which explains to a naive reader pretty much everything except why none of it matters.

In the first place, Google isn't going to make any money giving access to these books: they have a marginal cost of zero, being bitstreams, and in a competitive market, as you may have heard, price equals marginal cost. Contrary to supposition, the market will be fully competitive, because scanning books and releasing the bitstreams on the net is nearly costless now, owing to the book ripper, which can be built at present for less than $200, and the cheap sheet-fed tabletop scanners, which cost little more.

Within a few years, every book that exists anywhere will be scanned by anyone who comes across it, and all texts will circulate in the web the way all music does now. In that competitive market, making readers pay stupidity taxes to get what they could get for free will no longer be possible, and no one will be transacting for electronic texts at non-zero prices. This settlement, which is three-quarters bullshit and one quarter final period of play pathologies, will then be remembered as the irrelevancy it is.

The route to revision is to think out of the box.