Google Book Settlement

In 2004, Google released the Google Book Library Project, a partnership between Google and several university libraries. The objective of the project is 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.

Among the many legal issues surrounding this settlement, the potential copyright infringement of orphan works has drawn the most attention from legal scholars. Orphan works are “abandoned book” which are still in-copyright, but the contact information of the copyright holders are either missing or incorrect. Many such books are rotting on the shelves of libraries because people do not want to publish 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.

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 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, the property rule 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 a copyright holder opts out. Google will transfer a portion of its profit to the Registry; then the Registry will use the money 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. Many critics fear that the opt-out arrangement and anti-competition exclusionary provision of the Settlement will essentially create a Google monopoly. The critics are right in a sense that Google is creating a monopoly through the Settlement, however, the real issue is a monopoly of what.

Jonathan Band, a leading intellectual property expert, estimated that, if the cost of digitalizing a page is 10 cents and average book contains 250 pages, Google has to spend $750 million dollars to accomplish its goal of digitalizing 30 million books. Also taking into consideration the amount of damage stipulated in the Settlement and the sharing of revenue in the future with the Registry, it is puzzling why Google would willingly make such a enormous investment for a market which is questionable to possess any real profit. Just like illegal downloading of music, a physical book can be easily ripped into an electronic copy; then this electronic copy will quickly become accessible on the internet and freely shared by all the online users. The marginal profit of digitalizing books is too low to justify its investment, evident by Microsoft’s withdrawal from the Open Content Alliance (another digital archiving organization) in 2008. If we draw connection between the Settlement and all the other Google services, it becomes clear that Google’s real motive is to further enhance its advertising business by expanding its monopoly of consumer information. The alleged copyright infringement and orphan work monopoly are simply distractions to conceal the treacherous peril of privacy invasion.

Just like Google search, Gmail, Google map, and the countless services that Google provides, the settlement, if approved, will become an additional tool to entice unwitting users to submit their personal information. A traditional library or an online bookseller, such as Amazon, only knows what books individuals borrows/purchases and when the transactions are made. However, Google will know exactly which phrase a user entered to search the book, why a user is interested in a book, how long a user stayed on a particular page and much more. Although a Google account is not mandatory to preview the books, but it is required if a user wants to purchase a book and read it later. Google can correlate all the information it gathered on a user from all of its services. It is not an overstatement to say that the Big Google is watching us. 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 orphan works, but it will also permit Google to get one step closer in creating a database of everyone and everything about them. Till today, Google has not issued an official privacy policy for the settlement, leaving room open to do whatever it pleases. Until Google clarifies what it intends to do with all the information it gathers from the users, this Settlement should not be approved .

-- RyanSong - 08 Jun 2010