DOJ Said to Focus on Google in Book Settlement Investigation

News reports are percolating with the Department of Justice's latest look at the Google book settlement deal.  That's not exactly fresh news.  The whispers, however, from the publishers are that the information the DOJ is gathering focuses on Google rather than them.  

Let me see if I get this straight.  Google began a book digitization program in cooperation with major academic library systems which drew the ire of an organized publishing industry, who sued Google through trade organizations representing publishers and authors.  Microsoft and Amazon had similar scanning programs.  Microsoft's project was aimless, as usual, because of the company's mentality that it had to duplicate Google to be like Google.  Then Microsoft figured out that digitized books were not going to get it search market share and abandoned the project.  Amazon still has its own digitization program where subscribers can peak inside a book and view excerpts before buying it.  Of course, that is in the interest of Amazon as it markets books to its customers.  I don't remember Amazon sharing this electronic content with search engines or anyone not involved with making a sale exclusively through Amazon.  If anything, Amazon gets double use from this content by selling it for its Kindle device.

The publishers and authors and their trade associations sued Google over violation of copyright, including that of out of print or generally books not available in any market save the used book market.  Google's position is that scanning the books does not violate copyright, nor does displaying snippets of these (copyrighted) titles.  It's fair use.  I don't remember much discussion leading up to the suit that Google was using this as a ploy to become a book marketer.  Google, in fact, links current limited and snippet view results to existing booksellers.

Rather than go to trial and decide whether Google's actions are indeed a violation of copyright law, the parties decided to talk settlement and came up with a scheme that turned Google into a distributor/marketer in concert with the publishers, particularly for out of print but in-copyright titles.  There are also provisions for institutional subscriptions for this vast catalog Google has assembled.  

The Justice Department now gets involved because it has a thing about the size and power of Google in the book market, or even generally (just like Microsoft before it).  Assuming the settlement goes forward, Google will have an instant and major presence in the electronic book market.  Here is where it gets dicey for me.  

Is Google's potential market power limited to the electronic book market, or is it measured against the larger market for information in "book" form?  I would argue the latter.  There are plenty of used book stores available where more current and older titles become available.  One can argue that these individual holdings are not aggregated from a single source online.  Still any serious seller of antiquarian books is likely to have an online catalog.  These are aggregated in specialized search engines.  Then there is eBay, which extends the market to books stored in attics and basements.  If someone wants a copy of an out of print book from the 1950s, eBay is the place to look.  Their own used book shop even categorizes by time period.  Though we don't know pricing for individual items, the auction market for physical copies of a title may actually work out to be less expensive than an electronic copy of a book.  Digitized copies can have rights restrictions that physical copies do not have.

One element of the settlement is that authors get a cut of the revenue from the sale of an electronic book.  The first sale doctrine prevents either the publishers or authors from seeing money from eBay or any other physical copy resale outlet.  Some may disagree with the fact that this settlement covers producers who are not part of the suit.  There are opt-out provisions and the court has extended the time for the settlement to go into effect for them to appear.  Either way, this agreement represents a revenue stream that never existed nor could easily come into existence.

If the Justice Department plans on examining this settlement closely, it should also consider the role of the publishers and authors in coming to terms.  The fact that Google was the defendant in this case didn't exactly give it a position of strength in the negotiations.  The publishers set the price for electronic books, which Google may adjust at its own expense.  The publishers and authors have as much to lose if the Justice Department blocks or alters the settlement.  Would going to trial and determining the fair use principle in this case be any less scary?  [MG]