Google Book Project Settlement News

Library Journal reports that the American Library Association, the Association of Research Libraries and the Association of College and Research Libraries have joined in writing a letter to the Antitrust Division of the DOJ, in which they ask that department to actively supervise the Google Book settlement. Here is a link to the PDF of the joint letter.

The letter refers to an earlier joint letter sent from these library associations in July, and recaps the points they made in that letter. They broadly support the Book Settlement, as providing the public with unprecedented access to millions of digitized books. They recognize the Settlement as "...perhaps the most efficient mechanism for cutting the Gordian knot of the huge transaction costs of clearing the copyrights in millions of works whose ownership often is obscure." But then, the authors raise concerns:

• The digital repository enabled by the settlement will be under the control of Google and the Book Rights Registry. The cost of creating such a repository and Google’s significant lead time advantage suggest that no other entity will create a competing digital repository for the foreseeable future. In the absence of competition for the services it will enable, the settlement could compromise fundamental library values such as equity of access to information, patron privacy, and intellectual freedom.

• In particular, the absence of competition for the institutional subscription service, combined with the high likely demand among academic libraries for this service, makes libraries particularly vulnerable to profit maximizing pricing.

The United States in its September 18, 2009 Statement of Interest agreed that Google would have exclusive control over the database, noting that under the settlement there was “a dangerous probability that only Google would have the ability to market to libraries and other institutions a comprehensive digital book subscription.” U.S.Statement of Interest at 24. To address this problem, the United States urged the parties to amend the settlement “to provide some mechanism by which Google’s competitors[] could gain comparable access to orphan works….” Id. at 25.

As you are no doubt aware, the Amended Settlement Agreement does not provide such a mechanism. It may well be that the parties ultimately agreed with the Statement’s intimation that “an industry-wide arrangement for the licensing of copyrighted works for digital distribution” would not comply with “the limitations of Rule 23.” Id.

However, even if the parties had found a way to create an industry-wide arrangement that did comply with Rule 23, it would not have solved the fundamental problem of Google’s exclusive control of the database. Google has a five-year lead-time advantage over potential competitors, during which it has refined the scanning process and scanned as many as 12 million books into its search database. Considering this significant head start, it is unlikely that any commercial competitor will enter into this unproven market in the foreseeable future. And there is no indication that the federal government or private foundations would fund the creation of a comprehensive database of books to compete with Google’s.

Moreover, assuming that a competitor to Google did emerge, the competition problem would remain because the Registry would still control the rights to the “orphan works.” The Registry would have no competition, and it could attempt to push the price of the institutional subscription to a profit maximizing point.

Given these marketplace realities, the Library Associations believe that the most effective way to prevent the Registry and Google from abusing the control they will have over the essential research facility enabled by the settlement would be for the court to regulate the parties’ conduct under the settlement. Specifically, when requested, the court should review the pricing of the institutional subscription to ensure that it meets the economic objectives set forth in the settlement, i.e., “(1) the realization of revenue at market rates for each Book and license on behalf of Rightsholders and (2) the realization of broad access to the Books by the public, including institutions of higher education.” Settlement Agreement at 4.1(a)(i).

Rule 23 and the settlement agreement already provide the court with the authority to conduct this oversight. However, the United States should advise the court that it has this authority, and urge the court to use this authority to the extent necessary to prevent abuse by the parties and to maximize the public benefit of the settlement. Additionally, the United States should carefully monitor implementation of the settlement, including the pricing of the institutional subscription. If the United States concludes that Google, the Registry, or rightsholders are acting in a manner inimical to the public interest, the United States should petition the court to address the situation. We believe that supervision of this sort will be far more effective in preventing abuses of market power than attempting to create industry-wide licensing arrangements that will never be used.

Finally, we wish to express our great disappointment that the United States in its Statement of Interest did not urge the parties to require representation of academic
authors on the Registry board. As we explained in our filings with the court and in our meeting with the Division staff, academic authors wrote the vast majority of the books Google will include in its database. These academic authors probably would want the Registry to price the institutional subscription in a manner that maximizes public access rather than profits. Accordingly, we requested the staff to advocate for representation of academic authors on the Registry board.

While the Statement of Interest articulates at great length concern about the adequacy of representation of foreign rightsholders, it contains no mention whatsoever of academic authors. (snip)

Currently, the fairness hearing on the amended Settlement is set for February 18, 2010. You may want to check the ALA Guide to the amended Settlement here. It's very succinct.