In September 2005, Google was sued by the Authors Guild, the American Association of Publishers and a number of individual authors for copyright infringement for its “Google Book Search” project (which was launched in 2004). The plaintiffs claimed that the project was “massive copyright infringement” and should be shut down. Google held the plaintiffs at bay for more than three years, during which time it scanned, digitized and indexed large numbers of books from major university libraries. (The exact number of books has not been disclosed, but it is believed that millions of books have been digitized.)
On October 28, 2008, Google and the AAP announced a settlement of the litigation. The agreement, stretching to 141 pages, provides that Google pay $125 million, plus establish a new licensing system with publishers. The system will allow any copyright owner to opt-out of the project, will require Google to pay 63% of all revenues generated by users’ access to the database to a “collection society” (the “Book Rights Registry”) for distribution to copyright owners, and will result in the implementation of a DRM/subscription model for full-text access, but not for search – which will be limited to short snippets for in-copyright works.
While the copyright owners will receive compensation for the use of their works, the settlement (if approved by the court) will definitely work in Google’s favor going forward. First, the high settlement amount will discourage others from entering the field – giving Google a virtual monopoly on every book, periodical and other copyrighted work coming within the settlement. Second, it will be more difficult for others to claim “fair use” if they decided to compete with Google. While there was no determination of whether Google’s conduct was or is “fair use,” a judge in a subsequent case may look at this settlement as “evidence” that massive digitizing of copyrighted works is not a fair use – otherwise, why would Google, which claimed fair use all along, have settled for such a large amount? A decision in this case that Google’s use of copyrighted material was a fair use would have opened the door for many competitors who could have piggybacked on the court’s decision and built competitive databases protected by fair use. So a lack of a ruling on this pivotal issue plays into Google’s hands.
The settlement allows Google to charge for access to these millions of digitized works – something that previously would have been difficult for Google to do and still claim “fair use.” So the settlement establishes a legal business model for Google to monetize this huge and growing database of copyrighted materials with the copyright owners’ blessing. Google get 37% of all revenues generated, where previously it was getting nothing. (Much more than iTunes gets for their music downloads.)
The settlement agreement is, in essence, a compulsory license for Google to copy virtually any copyrighted work without having to negotiate individually with copyright owners. And it sets the “market rate” for any negotiations Google will have in the future with copyright owners who are not part of the settlement. While copyright owners are free to opt-out of the system, it would be foolish for most copyright owners to do so. They essentially have three choices – go along with the system, opt-out and forego the revenues they would get under the system, or try to set up their own system to monetized digitized version of their works (which hasn’t worked in the music industry and is unlikely to work here). A fourth choice — do a deal with another database developer — is unlikely, since this settlement sets up huge barriers to entry for any competitive service.
So, despite the price tag, I would say that Google is the big winner in this battle, and that the publishing industry may (no, I predict, WILL) live to regret the day they gave Google exclusive control over the online, worldwide distribution of their works.