Google Books Settlement: An End Run Around Authors' Contracts and Copyright

In the controversy over Google (GOOG) Books and the proposed settlement for the class action lawsuit brought by publishers and the Authors Guild, a professional writers organization, most people focus on so-called orphaned works. There are books still under copyright protection but now out of print, whose authors are supposedly difficult to find.

But this is a red herring. What's really important to Google and the publishers is getting previously unavailable electronic rights to books that are still in print.

Orphaned works fall into the "long tail" theory -- the idea that there is money in making lightly-demanded products available online. However, a little thought shows that the only people who really do well in long-tail selling are retailers. They can leverage sparse demand for a given product (so long as they don't have to carry inventory) and do particularly well with electronically-distributed intellectual property, such as books and music tracks. However, much of the benefit comes from selling more of the most popular products. The broad product line attracts buyers who, in turn, also purchase what everyone else is buying. Most people who produce products in little demand still make few sales.

Google could sell a broad selection of electronic titles -- particularly if the company locks out such competitors as Amazon (AMZN) and Barnes & Noble (BKS) through the class action. In the process, Google would attract many buyers and make some money. And yet, the big bucks are in the hot items that many people want, just as Google probably makes far more money in ads on the most popular web sites than it does on the least popular. It's the old 80-20 rule. But how does can Google satisfy the desire for the most popular books, many of which are still in print?

It can't -- at least, not by itself. And as things stood before the suit and proposed settlement, the publishers were of little help. Until recently, book publishers did not automatically request and get e-book rights. They often don't have electronic rights to favorites on their back lists: titles that stay in print and move copies for years. As books move toward digital media, particularly among a significant percentage of high-volume consumers, the publishers find themselves out in the cold. They want those rights so they can move where they think the market is going.

So although Google and the book publishers seem to be slugging it out, their interests coincide. That's why they pushed for the current agreement structure.

Under the proposed settlement, those holding the rights to a book are the ones who can allow Google to display parts of the work online and sell e-book versions. Guess what? When the book is in print, you could make a strong argument that the publisher is the one whose rights are being infringed, because it has licensed exclusive print rights from the author, and the publisher who gets to make the call. Suddenly, a scanned version of the book becomes an e-title, and the publisher walks around the limitations of an existing contract with the author. Through the power of the settlement, authors would find that they were locked into arrangements with publishers that they never made. Publishers can now get a piece of the electronic pie, even if they didn't negotiate for it.

Additionally, the settlement addresses books that were in print by January 5, 2009. Except for big name authors that had enough bargaining power, publishers have e-book rights for almost everything from that point on. So the publishers can use Google as an outlet to offset Amazon's power, and Google becomes a favored reseller because it can electronically sell book titles when a normal e-book version isn't available. That's pretty slick strategy and negotiating -- unless you're an author, in which case it's a pretty slick screwing.

Google and the publishers beat the "orphaned works" drum loudly because it sounds good, attracts many critics of copyright as it now exists, and acts like a magician's misdirection from the real trick.

As of Friday, the U.S. Department of Justice found the amended class action settlement still falling short of where it must be, and the judge, through his questions, sounded like he leaned toward the DOJ's view. Google has put its back up, saying that no further changes should be necessary. However, this is too good a business to nail down, so expect Google and the publishers, with the Authors Guild, the one writers' association, nodding along like good boys and girls, to finish their job in a third version.

Copyright? They don't need no stinking copyright.

Image Source: RGBStock.com user lusi, site standard license. Composite by Erik Sherman.