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Google book settlement: the future for orphan works?

-- By RyanSong - 16 Feb 2010

The 1976 Copyright Act has lead to a proliferation of copyrighted materials known as the orphan works. This generates significant waste of creative materials and traditional copyright law is incapable of resolving this growing issue. Some members of the Congress have proposed to ameliorate this problem through legislative acts. However, the pressures from special interest groups nipped the proposed act in the bud. The Congress’s failure has not discouraged private sections to take action: the Google Book Settlement is the most recent action by private parties to resolve this issue. The proposed settlement improves efficiency and increases incentives for copyright holders. However, it will also create a monopoly by Google to dominate the market of orphan works. The courts should request the parties to amend the settlement to include more limitations on Google’s ability to profit from digitalized orphan works.

History of The Google Book Settlement

In 2004, Google proposed a new service known as Google Book Library Project. Google digitalized books and made the scanned images of book pages searchable online. In 2005, the Authors Guild and the Association of American Publishers brought class action copyright infringement lawsuits against Google for digitalizing copyrighted works without permission. Google invoked the defense of “fair use” doctrine on the ground that only snippets of text from a book were viewable. Before resolving the issue of fair use doctrine at trial, parties reached a settlement. In October 2008, the details of the initial draft of the Google Book Settlement (“Settlement”) were released. Google will pay $125 million in damages: $45 million would go to pay rights holders whose copyrights had allegedly been infringed; $45.5 million to the plaintiffs’ legal fees; and $34.5 million toward the funding of the establishment of the Book Rights Registry (“Registry”), a collective copyrights organization that will act as the middleman to collect revenues from Google and distribute them to the copyrights holders (“holders”). The settlement also included several revenue models: institutional subscription database for colleges and universities; the "consumer" model of selling perpetual access to individual books; and various other models. The settlement has not been officially approved by the court yet.

The Orphan Work Problem

Among the books covered by the Settlement, one particular category of books, known as orphan works, presents a challenging legal issue. Orphan books are essentially “abandoned book” which are still in-copyright, but the work cannot be licensed because the copyright holder cannot be discovered to secure a license. Large volumes of these orphan works are rotting on the shelves of libraries and in storage rooms because the public are reluctant to use them due to the fear of potential copyright infringement litigations. The 1976 Copyright Act has exacerbated the problem of orphan works because it permits automatic attachment of copyright without registration and longer duration for the copyrights once attached. A workable solution to resolve the orphan work problem should reduce the inefficiency of the public in using the orphan works, and at the same time protect the existing copyright holders from potential exploitation. [1] The two important policies here are the incentives for innovation and the efficiency for maximizing the usefulness of the orphan works. Property rights can be defined as the relationship between people regarding the right to something. The purpose of the copyright is to allow copyright holders to reap benefits by precluding others from using the copyrighted materials, so the copyright holders will be incentivized to invest more time and efforts to create useful materials. Maximum efficiency of the copyrights is achieved where the copyrights go to the parties who value the copyright the most. The factor that reduces efficiency in the case of orphan works is the transaction cost: the total cost of locating the copyright holders and bargains for an exchange of a right. [1] The current copyright law uses “property rules”. A user must obtain permission first before using the copyrighted material. An alternative to the property rule is the “liability rule” which allows the public to use the material without fear of infringing anyone’s right; then the copyright holders can be compensated later when they assert their rights. Liability rule is more applicable to orphan works because it is prohibitively expensive and difficult, if not impossible, to find the copyright holders of orphan works. If we want the law to incentivize innovation and creativity, so we should allow the public to use the orphan works and encourage the copyright holders to show themselves. Once they can obtain some benefits from their work, they will be encouraged to invest time and efforts in writing. The liability rule also reduces transaction cost in searching the copyright holders because it encourages the copyright holders to show up and claim their rights. Exploitation can be avoided by creating a information agency that can provide notice to copyright holders any use of their work. Potential solutions of the orphan work using the liability rule can come from three sources: the court, the congress, and the private sector. Relying on the court to design a solution will be too slow because it can only deal with the issue on a case by case basis. The Congress has already failed due to the pressure of interest groups and lobbyists. The private sector is the only option left. The publishing industry is intimately familiar with the problem and it has the financial incentive to utilize orphan works.

Google Book Settlement and The Orphan Work

Google book settlement is a major movement by the private sector to take the issue into its own hands. The Registry will be administered by a representation from publishers and authors. It will actively seek out copyright holders of out-of-print books and create a database to store the contact information of such copyright holders. Google will be the first company to partner with the Registry. Any other third parties who wish to take advantage of the Registry must obtain the permission from the copyright holders. The settlements stipulates that for out of print books, Google can adopt an “opt-out” approach; Google can digitalize orphan works, display a snippet of it to the readers, and provide full view to institutional and private subscribers. The settlement allows Google to avoid the transaction cost of finding and negotiating with each individual copyright holder, and essentially create a monopoly of digitalized orphan works. Although the Registry is allowed to sign with third parties, but the requirement of obtaining permission from the copyright holder is simply a pretext for barring competitors from using any orphan works. These books are called orphan works precisely because their copyright holders cannot be contacted. The revenue model proposed by the settlement also gives the Google tremendous leverage in fixing prices for its institutional and private subscriptions.

The Google Book Settlement is on the right track to resolve the orphan work problem using liability rules. However, it affords Google unbounded power to create a monopoly of digitalized orphan works. The court should order the parties to continuously amend the Settlement until we have a more competition friendly solution.

Reference

[1] 19 S. Cal. Interdis. L.J. 97

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