November 22, 2017

Is Google Deal a Setback for Rival Digitization Efforts?

By Andrew Albanese

In the wake of Google’s landmark settlement agreement with publishers and authors over its library book scanning program, many experts breathed a sigh of relief that fair use would not suffer a crushing defeat in court. Not everyone agrees, however, as a number of experts remain uneasy about the effect of Google’s settlement on digitization. “Claims of fair use are common in the Internet age,” noted University of Richmond law professor James Gibson in a Washington Post op-ed on the settlement. “Not so common are actual court rulings on such claims."

In this case, however, settling offered more strategic benefits than winning a fair use ruling—which potential competitors would also have been able to exploit—and more than likely cements Google’s market position. “Google’s concession has made it more difficult for anyone to invoke fair use for book searches,” Gibson explained. “The settlement itself is proof that a company can pay licensing fees and still turn a profit. So now, no one can convincingly argue that scanning a book requires no license. If Microsoft starts its own book search service and claims fair use, the courts will say, ‘hey, Google manages to pay for this sort of thing. What makes you so special?’ By settling the case, Google has made it much more difficult for others to compete with its Book Search service.” 

Gradual retreat
In a Recorder op-ed entitled “Google Is Done Paying Silicon Valley’s Legal Bills,” Electronic Frontier Foundation attorney Fred von Lohmann also lamented what the settlement may mean for future innovators. “For most of the decade, Silicon Valley technology startups have assumed that Google would pay their legal bills…by taking on the big, high-profile cases about fair use, interoperability, and other digital intellectual property issues that would set precedents that all disruptive innovators could rely on,” he noted. With the settlement, he wrote, “Google just put the Valley on notice that the free ride is over.” 

By settling the case, von Lohmann asserted, Google has solved its own copyright problems but potentially erected a barrier to innovation. “Without a legal precedent about the copyright status of book scanning, future innovators are left to defend their own copyright lawsuits,” he wrote. “In essence, Google has left its former copyright adversaries to maul any competitors that want to follow its lead.”

With Google still facing a $1 billion lawsuit from Viacom over its YouTube service, many now expect a settlement may be in the works there as well. And, like the deal with Google Book Search, it could cement Google’s position. If approved, Google’s license deals in the guise of legal settlements are essentially barriers to entry, Gibson noted, “that only Google will be able to surmount.”

In essence, von Lohmann suggested, Google has begun a strategic, “gradual retreat” from the legal battlefield, one that may put the company in a superior market position but the rest of the market at a disadvantage. “When innovators like Google cut individual deals, it weakens the Silicon Valley innovation ecology for everyone, because it leaves the smaller companies to carry on the fight against well-endowed opponents,” he wrote. “Those kinds of cases threaten to yield bad legal precedents that tilt the rules against disruptive innovation generally.”

Lessig’s argument
Gibson and von Lohmann’s concerns, meanwhile, were voiced almost from the outset by Stanford University law professor Lawrence Lessig, who, at a debate at the New York Public Library shortly after the suits were announced said that his greatest fear was just such a settlement and its potential to “tax” future innovation. Recently, however, Lessig backed off those remarks. “This is a good deal that could be the basis for something really fantastic,” Lessig wrote of the settlement on his blog. “The Authors Guild and the American Association of Publishers have settled for terms that will assure greater access to these materials than would have been the case had Google prevailed.”

That remains to be seen. In the meantime, however, as a giant, publicly-held company, Google, is no longer the “risk-taking iconoclast with deep pockets, unafraid to litigate licensing issues all the way to the Supreme Court,” as Gibson noted.

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