It is strongly recommended that you include your outline in the body of your essay by using the outline as section titles. The headings below are there to remind you how section and subsection titles are formatted.

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. As the current copyright law is inadequate of resolving this growing waste of creative materials, 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 the private sector to take action: the Google Book Settlement (“Settlement”), if approved, will create a new market for orphan works on the internet. The Settlement will provide greater public access to the orphan works, but its anti-competition measures will also lead to a Google monopoly over this new-found on-line market of orphan works.

History of The Google Book Settlement

In 2004, Google created the Google Book Library Project, a partnership between Google, several university libraries and numerous publishers to scan book pages and make the scanned image searchable online. In 2005, the Authors Guild and the Association of American Publishers brought copyright infringement lawsuits against Google for digitalizing copyrighted works without permission. Without resolving whether Google’s practice satisfied the fair use doctrine, the parties settled.

In October 2008, the initial draft of the Settlement required Google to pay $125 million in damages. $34.5 million of the damage would fund the Book Rights Registry (“Registry”), a collective copyrights organization that would act as the middleman to collect revenues from Google and distribute them to the copyrights holders. The settlement also included several revenue models: institutional subscription for colleges and universities; the consumer perpetual access to individual books; and various others. The settlement is pending approval by the court.

The Orphan Work Problem

One particular category of books covered under the Settlement, known as orphan works, presents a unique legal challenge. The orphan books are essentially “abandoned book” which are still in-copyright, but it is impossible or too difficult to reach the copyright holders to secure a license. Many of the books are rotting on the shelves of libraries because people do not want to risk potential copyright infringement litigations. The 1976 Copyright Act exacerbated the problem of orphan works because it permitted automatic attachment of copyright without registration and longer duration for the copyrights once attached.

Property Rule v. Liability Rule

A workable solution to resolve the orphan work problem should both maximize the usefulness of the orphan works and promote creativity and innovation. The current copyright law adopts a property rule approach: a user must obtain permission first before using the copyrighted material. The purpose of the rule is to protect the copyright holders from potential exploitation. However, when the transaction cost of locating the copyright holders and bargaining for an exchange of the right is prohibitively high, it also prevents the copyright of orphan works from moving to the person that value them the most. Essentially this rule produces zero net benefit to society because neither the copyright holders nor the users are getting what they want. An alternative to the property rule is the “liability rule” which allows people to use the material without fear of infringing anyone’s right; then the court will decide the right amount of compensation. The liability rule reduces the transaction cost of negotiating for a license and it can still protect copyright holders from exploitation. The Settlement follows the liability rule and it stipulates that, for out-of-print books, Google can adopt an “opt-out” approach, which means it can digitalize orphan works with impunity and profit from it unless the copyright holder opts out. The Registry will use some of these profits to actively seek out copyright holders of orphan works and create a database to store their contact information. Google will be the first to partner with the Registry. Any third party who wishes to work with the Registry must obtain the permission from the copyright holders, which is practically impossible for orphan works.

Google Book Settlement and Orphan Works Monopoly

There is no denying that digitally archiving the orphan works serves the important public interest of preserving creative materials and also eliminating the geographical limitation to access, but the opt-out arrangement and anti-competition exclusionary provision essentially create a Google monopoly in the on-line orphan work market. The liability rule rests on the assumptions that copyright holders will assert their claims and the court will be able to award just compensation. Neither assumption is met here. Orphan work copyright holders are unlikely to know that someone used their work. The revenue model proposed by the Settlement affords Google tremendous leverage in fixing prices for its institutional and private subscriptions because there are no other competitors. If approved, Google and the Registry will successfully usurp the judicial function of determining the appropriate amount of “just compensation.” Liability rule lifts some of the obstacles of negotiating for a copyright license, but it does not eliminate copyright protection all together.

Conclusion

Orphan works present the unique challenge we face here because it is impractically to ask the user and the copyright holder to bargain in an efficient way. The idea of digital archiving orphan works is a great method to preserve creative materials, and the liability rule is the right approach when the transaction cost of bargaining is too high. However, the Settlement has abandoned the spirit of the liability rule and gives Google unbounded power to monopolize the orphan work online market. Therefore the court should order the Settlement to be amended. If Google wants to profit from digitally archiving books, it must bear the corporate responsibility to surrender all its profits from orphan works to the Registry or another independent agency and this money should be dedicated for the sole purpose of locating copyright holders and compensating them for their work. Google will likely attempt to undermine the effect of such amendment with techniques such as modifying the definition of orphan work, reducing the overall amount of orphan works it archives, and etc. The court must ensure the amended Settlement will provide clear guidelines to prevent such evasive strategies.

---

You are entitled to restrict access to your paper if you want to. But we all derive immense benefit from reading one another's work, and I hope you won't feel the need unless the subject matter is personal and its disclosure would be harmful or undesirable. To restrict access to your paper simply delete the "#" on the next line:

# * Set ALLOWTOPICVIEW = TWikiAdminGroup, RyanSong

Note: TWiki has strict formatting rules. Make sure you preserve the three spaces, asterisk, and extra space at the beginning of that line. If you wish to give access to any other users simply add them to the comma separated list