THE BLOG
11/08/2009 05:12 am ET | Updated May 25, 2011

Competition That Works: Why the Google Books Project Is Good for Consumers and Its Competitors

The Internet is a great device for creating new markets, democratizing knowledge, and increasing competition. The Internet permits boundless amounts of information and commerce to be exchanged. And the Internet provides new opportunities at Internet speed.

One of the greatest achievements in the last several years is the Google Books project, which scanned millions of books many of which were available in only a handful of the most preeminent research libraries. This project led to litigation brought by publishers and authors charging a violation of copyright laws. To resolve the litigation the protagonists entered into a settlement, which created a Books Rights Registry to make sure authors are appropriately compensated for their works.

The World Series of antitrust this fall will be the debate in a court of whether the settlement is anticompetitive. Lining up in opposition are Amazon, Microsoft, and other rivals, that probably wish they had succeeded in the battle to create their own books project. On the other side are Google, the authors, and several civil liberty, disability, and educational groups.

Where should consumers line up in this battle? As a former government enforcer and advocate for consumer rights, I have studied the settlement carefully.
Consumers will win under the settlement and the court should approve it.

There are two fundamental questions at issue in this battle. First, will consumers significantly benefit? And, secondly, will the project in any way hurt the ability of others to compete in the market? In this case, the answers are straightforward: yes, there are tremendous public benefits, and no, the settlement in no way increases barriers to entry or otherwise impedes competition. In fact, the settlement actually enhances competition and opens new markets.

Let's look at each of these questions individually. The consumer benefit from the Google Books project is astounding. The settlement has the potential to transform the availability of vast amounts of knowledge. Through home computers or public library terminals, people across the U.S. will be able to access millions of out-of-print books that have until now only been available at major research libraries.

Just as Google search (and other search engines) have revolutionized access to information, the Books project will serve as a democratizing force across socioeconomic and geographic barriers. Scholars and historians at the smallest schools in remote corners of this country will obtain the same access to knowledge as those at large well-funded universities in our biggest cities. Citizens in poor communities will likewise have similar access to knowledge as those in affluent communities. Moreover, the settlement will be of particular advantage to individuals who, due to disabilities or language barriers, cannot currently read much of the information in our nation's libraries.

As a public interest attorney, I represent many who often cannot afford to purchase books and who do not live near Harvard or Stanford or other research libraries. For all of these people, and millions more, the settlement will unleash greater access to a tremendous amount of information. The public benefit of the settlement is, to me, profound and unmistakable.

Second, is the antitrust question. Certainly in this court battle endless volumes of rhetoric will be produced that will create the spectre that Google will be a monopolist and will charge monopoly prices. Others may claim Google may try to limit access to information or try to form some type of cartel. As to these allegations the proof is in the pudding: the same claims could be made about Google search but Google has never tried to engage in any of this type of conduct. Nor could it.

The key antitrust question is whether the settlement hurts the ability of other companies to compete in the market. And to that the answer is unequivocally no.

Certainly, it is not easy to do what Google did. It's expensive and risky, and it required significant time and effort. However, the issue is whether the settlement makes it harder for someone else to follow in Google's footsteps. It does not. Actually the settlement makes it easier for others to follow in the company's footsteps.

By expanding the public domain and resolving the uncertainty over the rights to millions of books, the settlement will decrease entry barriers. Many books that have already been scanned by Google actually belong in the public domain, but their status is currently unclear. To determine the copyright status of books under the settlement, Google is using records that have been scanned, compiled, corrected and disseminated by Carnegie Mellon, Project Gutenberg, the Distributed Proofreaders, and Google itself. In addition to expanding the public domain in this way, the settlement also creates a procedure for publishers and authors to determine who owns digital rights. All of these efforts significantly expand access and facilitate entry for all.

The settlement will also facilitate entry in another way: through its creation of the Book Rights Registry, an independent, nonprofit organization. The Registry will significantly enhance the ability of subsequent entities to pursue book digitization initiatives. It will function in much the same manner as other collective rights management organizations that have long been acknowledged as pro-competitive under the antitrust laws, in part because they facilitate entry by new providers.

The Registry will represent the interests of authors and publishers and locate rights holders who have been separated from their works. With rights holders' permission, it will be able to license millions of books, among them the most commercially valuable works covered by the settlement, to third parties, including Google competitors, on terms that might disfavor or disadvantage Google. Licenses will be provided on a nonexclusive basis, which means that authors and publishers will have the ability to negotiate with the Registry or separately with digital book providers. The ability to negotiate with other entities makes it unlikely that the Registry could impose unreasonable license fees or otherwise restrict the availability of electronic books.

While publishers or authors may not have had any incentive to assert their digital rights in the past because their books were out of print or no longer profitable, the settlement creates an incentive for them to come forward. To ensure that copyright holders worldwide are aware of these financial incentives, the settlement has established the most comprehensive class-action notification program ever.

Much has been discussed about the competitive implications of two other important topics related to the settlement: the so-called "Most Favored Nation" provision and treatment of the so-called "orphan works."

What has been called the "Most Favored Nation" (MFN) provision of the settlement has been wildly misrepresented by critics. Only in an extremely limited set of circumstances would Google be entitled to receive the benefit of terms given to another entity, and those circumstances would in no way deter book distributors from negotiating the best deals for themselves that they can. I have written and testified about the competitive implications of MFNs, which often promote consumer welfare by permitting first movers to recoup their investments in innovation, thereby incentivizing such innovation to occur in the first place. Conversely, in other circumstances, MFNs can impede entry and adversely impact competition. The MFN clause in the settlement falls into the former category and simply allows Google to avoid having its own innovation used against it.

As for the competitive implications on orphan works, they can be stated simply: contrary to the claims of many critics, Google will affirmatively not obtain a monopoly over orphan works because the settlement grants no exclusive rights and does nothing to make entry more difficult for a second entrant. Indeed, any company that chooses to scan orphan works will face fewer obstacles -- due to the settlement itself -- than Google has confronted.

Additionally, the number of true orphan works that will exist post-settlement warrants closer scrutiny. It is overwhelmingly apparent that the combined effect of the settlement's rights clarification efforts and financial incentives will be to clarify the copyright status of many works. As a result, the number of orphan works will be substantially reduced; some potential orphans will be identified as having entered the public domain, whereas others will have their owners step forward to claim them. While issues inherent in our current system of copyright law, including orphaned works, will continue to impede access, none of these problems is increased by the settlement. In the post-settlement world, it will be in no way harder and in many ways much easier for companies other than Google to provide digital access to books.

As Judge Learned Hand instructed half a century ago, the antitrust laws are not intended to punish "superior skill, insight, and industry." When Google announced this project five years ago, book scanning technology was in its relative infancy and cost-prohibitive for operations at scale. Google had to develop its own scanning technology, negotiate numerous agreements with libraries, and navigate the uncertainty surrounding complex copyright issues. Its ability to do all of these things led to a virtual library that offers an unprecedented level of access to millions of consumers. The purpose of the antitrust laws is to open access and opportunities and that is precisely what the books registry and the settlement does.

Innovation should not be confused with monopoly power. The Google Books settlement should unquestionably be approved.