Google Settlement 2.0 Changes Little

Defendant Google and two of the plaintiffs, the Authors Guild and the American Association of Publishers, filed their revised settlement proposal at the end of the day on Friday, November 13th. Facing vehement objections from European rights holders this year, not to mention the threat of more litigation, the parties decided to limit the settlement to books published in the U.S., the U.K., Canada and Australia. But little has changed for writers and publishers of American books.

Orphan Works.

Under the old settlement, income collected by Google for the exploitation of orphan works (those whose rightsholders cannot be located) would have been held for 5 years, after which it would have been redistributed to known rightsholders and the Book Registry (and Google, of course). Settlement 2.0 will allow 25% of the monies collected for any orphan work to be used to locate rightsholders if the income is still unclaimed after 5 years. If the income is unclaimed after 10 years, it will be distributed to charity — not-for-profit organizations which may be designated by the Registry, the courts, or the newly-created office of the Unclaimed Works Fiduciary. No one yet knows how this will work.

In fact, Settlement 2.0 establishes Google’s total dominion over orphan (unclaimed) works. It gives Google and only Google the right to exploit them. Neither the Book Registry, which will represent the authors and publishers, nor the newly-created office of the Unclaimed Works Fiduciary will have the power to license these works to third parties (e.g., bookstores and online merchants).

Here is how the Settlement (both 1.0 and 2.0) cleverly hides this fact: the Registry, it says, may license copyrights to third parties “to the extent permitted by law.” But the law HAS no provisions to allow anyone but the actual rightsholder to issue licenses. Google knows this. As Danny Sullivan at Search Engine Land points out, “the parties have represented to the United States that they believe the Registry would lack the power and ability to license copyrighted books without the consent of the copyright owner – which consent cannot be obtained from the owners of orphan works.” The Settlement will not change the law. It will simply empower Google to skirt it.

Will Congress change the law to permit third parties to compete with Google in exploiting orphan works? Perhaps. In a conference call late Friday night, Richard Sarnoff, chairman of the American Association of Publishers, said that he hopes that the Settlement “unlocks a positive outcome on the legislative process on orphan works as now there’s a way to actually implement any legistation that Congress decides on orphan works.” Translated into English: the industry is hoping (or is it?) that Congress modifies copyright law to allow the exploitation of orphan works without permission from rightsholders. This wouldn’t be an outrageous outcome at all. However, unless and until Congress ‘waves its magic wand’ (to paraphrase James Grimmelman at The Laboratorium), no one but Google and the industry (via its Registry) will lawfully be able to exploit orphan works. At its very essence, Settlement 2.0 remains anti-competitive.

Re-Sellers of In-Copyright (but NOT Orphan) Books.

In September, when it appeared that Settlement 1.0 wouldn’t be approved, Google suddenly announced that approved book retailers will be able to sell consumers online access to the out-of-print books covered by the Settlement, including orphan work. Rightholders, Google said, would still receive their 63% specified in Settlement 1.0 as the income split with Google. But the remaining 37% would be split between Google and competing retailers. Whether that will be commercially viable for retailers is another question. Note the tricky language in Settlement 2.0:

Google will permit the reseller of a Book to retain a majority of Google’s share of Net Purchase Revnues from Consumer Purchases through such reseller.

The “majority” of 37% is anything over 18.5%, and nothing in Settlement 2.0 limits Google’s discretion in setting the actual percentage. Caveat lector.

With the Reseller program, Google will have two ways for third parties to participate in the exploitation of books to Google’s benefit. (The other is the “Affiliate Program,” already established under Settlement 1.0, in which approved websites which link to Google products will be given a small referral fee.) In both cases, Google alone will control hosting and serving of Digital Copies, and will profit from it.

Other changes in Settlement 2.0 include:

1.  Google’s Exploitation Rights Less Open-Ended. Under Settlement 2.0, income may be earned only via print-on-demand, downloads and consumer subscriptions.

2. Terminals at Public Libraries. The Registry will be permitted to increase the number of terminals at public libraries (from the mandated ONE per building). However, can doesn’t mean will. The Registry has a conflict of interest here: it would collect royalties from public libraries only for photocopies and downloads, while royalties from college, university and corporate libraries will include yearly licensing fees. There may be little incentive to expand royalty-free access.

3. FREE Books. Rightsholders will be able to tell Google that access to their books must be given away for free under Creative Commons or other licenses. (That’s for the handful of writers who don’t want income or who begrudge Google even a penny.)

Google’s claim that it is principally motivated by philanthropic concerns — the preservation, says Sergey Brin on the Google Public Policy Blog, of “our cultural heritage” — is belied by negotiations which are aimed at making Google even richer and more powerful than it already is. The Open Book Alliance, which is funded by Microsoft and Amazon, among others, got it right in its public statement shortly after Settlement 2.0 was filed:

Today, Google, the Authors Guild, and the Association of American Publishers released their revised book settlement proposal in an attempt to fix the deeply flawed legal agreement. … None of the proposed changes appear to address the fundamental flaws illuminated by the Department of Justice and other critics that impact public interest.  [Instead], Google, the AAP, and the AG are attempting to distract people from their continued efforts to establish a monopoly over digital content access and distribution; usurp Congress’s role in setting copyright policy; lock writers into their unsought registry, stripping them of their individual contract rights; put library budgets and patron privacy at risk; and establish a dangerous precedent by abusing the class action process.

In 2010, the Justice Department will weigh in once again.

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