What next for Google after the Google Books Settlement rejection

The post below was written for the June 2011 issue of the Australian Booksellers Association magazine News on Bookselling. It was written shortly after the rejection by Judge Chin of the Google Books Settlement so it’s somewhat old news. But it did remind me that we haven’t yet heard anything from the parties about what comes next.

A status conference was due to be held for the legal teams on 25 April 2011 but I don’t recall anything public coming from this. Certainly, nothing new appears on the websites of Google, the Association of American Publishers or the Authors Guild. [Update: The video below indicates June 1st is now the status conference date).

For those of you interested in some follow-up speculation, see my blog below (some background plus the wider implications for Google’s ebooks business), or see a couple of recent links from The Laborium, the blog of James Grimmelmann who has been a particularly acute legal analyst on this topic.

Video: What Next For Google Books? Grimmelmann and guests spend a leisurely hour and a half talking about the legal issues surrounding Google Books. The first hour is mostly discussion of the background. For the panellists’ speculation on how things might turn out, start at about 1 hour in. (Filmed 26 April, posted May 25, 2011).

Legislative Alternatives to Google Books. Grimmelmann discusses the ideas of Berkeley’s Pam Samuelson on legislative alternatives to the Google Books Settlement.

And check out my article below from the ABA’s News on Bookselling magazine, June 2011 issue:

Google’s plans in the book market suffered a setback recently when a New York judge ruled against it in a high profile legal action taken by publishers and authors.

The action alleged copyright infringement by Google arising from its large scale scanning of books and led to a negotiated agreement, the Google Books Settlement. The failure to have this class action ratified by the court leaves a major part of Google’s book program in limbo and potentially facing big cost increases and legal claims.

To understand what’s happened and what impact it might have on Google’s ebook plans, we need to look at the wider context of Google’s involvement in the book market. There are actually three major strands and it’s easy to get them confused.

First, there is the Google Partner Program for publishers who submit their books to Google to scan and add to its Books search database. This is the one you access from the ‘Books’ tab on the Google home page and you’ll also see it powering a ‘Preview’ feature on many publisher and bookseller websites. The Partner Program has been running for several years and, with more than 30,000 publishers signed up, it’s a significant asset for Google as it moves into selling ebooks.

Secondly, there’s a group of mostly older and out-of-copyright works that Google has been scanning for the past few years from the collections of several major libraries. You can access these, too, from the Google Books search tab.

Finally, there is Google Ebooks. Called Google Editions until its December 2010 US launch, it’s Google’s foray into selling commercially available ebooks and a head-to-head competitor to Amazon’s Kindle and Apple’s iBookstore. It’s also the product on which booksellers here and elsewhere are pinning their own hopes to get a slice of the ebook market after Google heavily promoted its intention to sell ebooks through retail partners as well as directly.

While the three parts of Google’s book business are tightly connected, they all serve different purposes.  The ruling handed down in March by Judge Denny Chin in the US district court in New York related to the second of these three strands.

The Google Books Settlement emerged from a class action started in 2005 by authors and publishers in the US (later joined by Australia, Canada and the UK) who sued Google for copyright infringement in the US market of works scanned as part of its large-scale scanning of books held in major library collections.

The scanned works fell into three basic groups: those that were out of copyright, those that were in copyright but for which the owners couldn’t be easily located (so-called ‘orphan’ works), and those that were in copyright but out of print. To date, Google has scanned 12 million books, mostly without permission of rights holders.

The original action began as a ‘fair use’ claim (or ‘fair dealing’ as it’s called here) against Google for publishing small snippets of text from the scanned books in search results. But in the process of coming up with a negotiated settlement, it morphed into a much broader agreement which cleared Google to scan and publish snippets in search results, but also granted Google significant rights to commercialise entire scanned works, sharing revenue with authors and publishers. Among other things, Google had planned to sell libraries and institutions subscriptions to this huge collection, initially in the US where the action was taken, but eventually worldwide.

It was this extension beyond the original issue that Judge Chin found a step too far. He said it was too far-reaching in its granting of extensive commercial rights over works that would normally require copyright holder agreement. And he argued that such a fundamental change to copyright law should be decided by government rather than the courts.

The agreement isn’t completely dead. Judge Chin left the door open for the parties to bring back a narrower proposal. But for Google especially, it is a major setback. Without this settlement, the initial issue of fair use remains undecided and leaves Google open to renewed legal challenge in an area critical to its search business. And the judge’s insistence that rights holders must willingly ‘opt in’ rather than have to ‘opt out’ of the scanning of their works will greatly increase the cost of this initiative, and reduce its income potential by opening a smaller portion of the collection for sale or display.

These challenges could lead Google to scale back its books initiatives. So far, Google has given no indication it will but it would certainly have to be on the cards. Google would lose a significant scale advantage which it would no doubt have leveraged in the more competitive consumer and educational book markets where it’s up against stronger players, especially Amazon and Apple. The anti-trust investigations prompted by the Google Books Settlement in the US and Europe is evidence of its potential.

But whatever happens with the Google Books Settlement, it’s unlikely to be the deciding factor in Google’s on-going plans for the commercial ebook market. More important here is how books might fit into Google’s wider strategy to become a player in distribution of media of all kinds as digitisation transforms books, newspapers, magazines, TV, movies, and music.

In recent months, Google with partners Sony, Intel and Logitech has launched Google TV to access TV and movies over the internet. It took a shot at Apple with the February launch of Google One Pass. This alternative to Apple’s iTunes store offers a much better deal for selling digital content through apps, especially newspapers and magazines. And it has hinted at an imminent entry into the music market, made more urgent by the launch of Amazon’s Cloud Player which lets you play your music collection anywhere there’s an internet connection.

For Google, selling access to digital media on a new breed of non-PC devices is critical to its future. About 90% of Google’s revenue still comes from advertising delivered through search queries, most of which originate from PCs. Ebooks and the devices we read them on are part of a larger media landscape it needs to compete in, though ebooks are arguably less important to Google than other media which are more amenable to its core business of advertising.

So we’ll watch with interest as the Google Books Settlement process draws to a conclusion, but the real action is happening well beyond the courtroom.


Comments (2)

  1. Gene

    There’s a nice little summary article “More on that Never-Ending Story…” in the May news at http://www.e-book.com.au/news.htm, although it covers less ground than your very careful and clear explanation. I think one issue is that increasingly, really big corporations tend to do first and bother about legality later. More and more, even when they know they’re in the wtong they don’t care, they just wheel in a bevy of lawyers to send out a flurry of lawsuits in the hope of bogging things down until they no longer matter. Anyone agree with me?

  2. Martin Taylor (Post author)

    Gene, I think your point about the biggest companies’ approach to these legal issues is absolutely right. They weigh up risk and return like anyone else and, in their cases, the returns can be just massive. While there’s brinkmanship involved, the likely penalties will scare smaller players but are a fraction of what the dominant company can earn from its monopoly position. And, of course, the legal process takes years, even decades, giving them plenty of time to kill competition so that even a negative judgement makes no practical difference. Microsoft is a recent example of this: the billions it made and the extent to which it eliminated viable competitors made the fines and other remedies relatively trivial when they eventually came. It fought and delayed these consequences for over a decade.

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