What the Collapse of the Google Book Deal Really Means

Winners, losers, next steps. From Joe Mullin at Paid Content:

"For all the growth in the digital book market over the last few years, Google (NSDQ: GOOG) Books is still the only project with the outsize ambition of scanning every book, and it’s not an exaggeration to say the deal it reached with publishers would have changed our relationship to books forever. Now, that agreement looks like a failure. So what does that mean for the digital-book business and for the universal digital library Google is trying to create?

Ultimately, the settlement failed because it was too ambitious. Yes, Judge Denny Chin didn’t like a variety of things about the way Google executed the project, but in the end that was secondary. This was just too big for a class-action settlement. The settlement created a books registry and arranged specific revenue splits; it created methods for dealing with “orphan works,” a longstanding copyright problem that, as Chin noted, should be dealt with by Congress. All those things go far beyond simply ending a dispute. The proposed settlement was without precedent in its scope. The settlement had the potential to change the way we all interact with books—to actually change human culture. A class-action settlement just wasn’t the right tool for that serious work. Even for strong supporters of the Google Books project, it’s hard to argue with that logic.

“Basically he’s saying, this is a big deal for copyright law, and a big deal for the U.S. internationally,” said James Grimmelmann, a professor at New York Law School who has studied the settlement extensively. “In light of those things, it’s better for Congress to set this policy, than for me, a judge hearing a case between private parties.”

Who are the winners and losers here? For the modern e-book market, it’s really status quo. It’s hard to see anyone coming out ahead because this deal fell through, unless you count Google competitors as indirect “winners” in any Google setback. Amazon (NSDQ: AMZN) and Apple (NSDQ: AAPL) have built healthy businesses selling contemporary, in-print e-books. The big money will continue to be in that space, which is unaffected by this settlement. It’s also a market where Google is a new entrant and a small presence, so far.

But even though there aren’t any big winners from this recent decision, there are some parties who lost out. First of all, Google would have been positioned to have a dominant position in the market for in-copyright but out-of-print works, so it has lost something. That’s not a huge or lucrative market, but it’s not insignificant either, and would have seen a fair amount of use by researchers and universities. Speaking of academics, they’re the ones most likely to want full copies of hard-to-find out-of-print books, so they have also clearly lost out here. Finally, authors of some out-of-print books would have seen a new, albeit modest, revenue stream. The “status quo” for them just means that when searchers find their works in Google Book Search, they’ll continue to be directed to used book stores—a solution that’s inconvenient for users and doesn’t get a penny to publishers and authors.

Google Book Search seems to work fine right now—so what was this lawsuit over anyhow? There’s a lot of books that aren’t affected by this. Google is already scanning millions of public-domain works that aren’t covered by copyright anymore, and making the full text available through Google Book Search. Meanwhile, the company scans in-copyright and in-print works, and despite suing Google over the scanning, publishers are working with the company to make sure their new books show up in Book Search. Typically, searchers can peruse about 20 percent of those books for free, and then have an option to pay for a full digital copy. The problem is the middle zone—books that are in copyright but out of print. Google Book Search can only display a tiny snippet of those works, and it’s impossible to purchase full digital access.

What about the scanning and searching itself—is that legal? Well, the publishers said it was illegal, but Google argued that the scanning and search functions were fair use, just like web search and the snippets displayed there. This particular dispute was put to rest by the settlement. The publishers could revive it now, but that’s very unlikely. Of course, one of the 6,800 parties who opted out of this settlement could also challenge Google independently. But mounting a legal challenge to Google Book Search as a whole looks about as attractive as challenging Google’s Web Search—that is to say, not very. Google will hire the best lawyers available and spare no expense defending their core business, and the case law looks more favorable to Google than it did in 2004, when the authors and publishers first sued over the book scanning.

What are the next legal steps? The parties could revise the settlement and make it more modest in scope; they could appeal Judge Chin’s rejection of their settlement; or they could give up on the settlement and go back to fighting each other in court. The first approach is the most likely, and the Association of American Publishers has already released a statement indicating that’s the road it would like to take.

The dream of a universal digital library now looks even further off. Judge Chin’s suggestion that the parties come back with an “opt-in” solution really means giving up on the universal library. Anyone with a scanner and an internet collection can start working on their “opt-in” library right now—but there are major legal obstacles even for an enterprise as rich as Google. Copyright is proving to be an obstacle to creating new digital businesses even when all major stakeholders have reached agreement.

Judge Chin is right that the “orphan work” problem warrants Congress’ attention. But Congress has tried and failed repeatedly to pass orphan works legislation, and for now the complaints of copyright owners—photographers in particular have fears that universal access to works could hurt them—have stalled progress on this front. Chin is right that a class-action settlement was a deeply flawed tool for building this giant library, but it was simply the tool that was available to the parties.

Many objectors to this deal, including copyright reformers like Pamela Samuelson, feared this deal gave Google too much power. The best result that could come from this settlement would be renewed attention among thinkers, librarians, and Congress to the serious problem of how to create the universal library that future generations deserve. Now that those who complained about the “audacity” of this deal have won the day, we all need—not just Sergey Brin—to start thinking audaciously about how to study and preserve human culture in the digital age