Original URL: http://www.theregister.co.uk/2008/12/31/chris_castle_google_books_and_beyond/

Is Google's culture grab unstoppable?

Monopoly Money from Digital Books

By Chris Castle

Posted in Media, 31st December 2008 20:54 GMT

Google dealt itself a powerful piece of the future in the proposed settlement of the "Google Books" case in 2008.

The plaintiffs, the Authors Guild and the Association of American Publishers, permitted Google to pay itself to build a proprietary technology infrastructure for a "Book Rights Registry". This effectively creates a single purpose author's society, but one that grants licenses to one user - Google. While nominally "non exclusive", there's little incentive for competitors - a formidable position. Let's have a look at how Google is set to own the Digital Book.

Google pays itself $34.5m of the $125m settlement to "provide reasonable technical assistance with respect to the design, development and maintenance of the Registry". Google's control of the registry’s operation places Google in a very powerful position against even its largest natural competitors.

The $125m buys Google - and only Google - permission not just to scan books for indexing purposes, but also to expand Book Search further. As the EFF noted, "if Google can strike a settlement with a large slice of the aggrieved copyright owners, then it solves the copyright problem for itself, while leaving it as a barrier to entry for [Google’s] competitors."

The British Booksellers Association, anticipating that Google will attempt to impose the registry on UK authors and publishers, agreed:

"As such a dominant player in the online world, Google will now occupy a unique gateway position that, if abused, could easily create a de facto monopoly. A situation where competition is removed from the market place by placing the keys in the hands of one company cannot, ultimately, be good for the consumer. This is a bridge too far," the British Booksellers Association noted.

An Most Favoured Nation Unto Itself

So how does Google’s nominally "non-exclusive" registry arrangement foster competition? That's hard to see.

If a competitor tried building a competing book registry by negotiating licenses for in-copyright works, that competitor would have to bear the startup costs — and the cost of licensing. If the competitor is rewarded for respecting authors’ rights by obtaining favorable terms, that advantage can be taken away by Google. Why? Because one of Google’s goodies from its dominant position in the settlement negotiation is “most favored nations” price protection.

The registry is contractually required to offer Google any better terms it would give to anyone using any data or resources that Google provides the registry, or that is of the type that Google provides. So even if a competitor wants to build a parallel infrastructure from scratch, and wasn’t using any of Google’s data—any reward for their legitimacy would be trumped by Google’s MFN. There is no advantage in “doing it right” except a clear conscience—an MFN inhibits competition.

There are several potential competitors, but fewer than a year ago. Microsoft abandoned its book scanning program earlier this year (although Microsoft constrained itself to scanning books with permission unless clearly in the public domain). It might be a good guess that uncertainties due to litigation affected Microsoft’s decision.

How about Yahoo!’s Open Content Alliance? Google leads OCA in scanning, and then there’s Google’s MFN. Now that may be kind of interesting to regulators. As one commentator noted, "[a]s a condition of settlement approval, the Registry should be required to negotiate and sign an antitrust consent decree with the Department of Justice.” Since ASCAP and BMI each already operate under consent decrees, there is a predicate for Justice Department scrutiny and "rate court" oversight of the registry, particularly given Google's market domination. Why should societies have to suffer the rate court burden when Google does not?

Who is left? Europeana, the European digital library and cultural museum, is possibly the most interesting potential competitor to Google Books. The idea of a European organization duking it out with an advertising machine in a battle over who can offer the public the best cultural opportunity has a certain appeal.

Europeana is a rich archive working cooperatively with its cultural partners. The secular Europeana may not be Sergei Brin’s "mind of God", but it has attracted an impressive list of European museums and libraries nonetheless - with no advertising or back door scanning. Europeana is a neutral participant in the quest for online access to culture, and that's a neutrality that registries should emulate.

Now to the technology - which is troubling to advocates of free and open systems and protocols.

Who Cares Who Owns It?

The Google Books registry has two big parts, one part used by authors to register their works and set commercial rules. The other is the technology build by and operated for Google: the vast databases, rulesets, accounting systems and operating code.

It matters if Google even nominally controls the books registry. The registry is a natural extension of search. Search identifies content, but a registry can tell you who owns the content you found, what that owner wants done with their work and how much they want to charge - or that the owner doesn’t care to hear your offer or have anyone sell advertising in their book. Silence does not, and should not, equal consent.

An opt-in registry is as essential to the online monetization chain as a county recorder’s office is to the real property market. But the Google Books registry is opt-out - meaning that until a copyright owner notifies the registry that they don’t want their works exploited, the works can be commercialized. In the Google world, silence equals consent - even if there’s no reasonable way an author could ever know of the exploitation. An opt-out registry is not neutral - it clearly benefits the registry owner.

Allowing a content registry to be controlled by a company that also exploits that content creates anticompetitive conditions even without the MFN. Potential competitors will worry that their business depends on an infrastructure controlled by a dominant competitor.

History shows that if a company that does the paying also does the counting, there is an inherent tendency for shenanigans against the creators. Imagine if the British performing rights society the MCPS-PRS Alliance outsourced its royalty collection and accounting to broadcasters. The fox would be in the chicken house, and the writers would revolt.

To the Universe, and beyond

But wait: Google is just getting started. As Google's Sergey Brin told the Wall Street Journal:

WSJ: Is establishing a registry for rights holders a model that Google thinks it can replicate in other areas of digital media, like video?

Brin: Very much so. In fact, with video and our fingerprinting technology, we are essentially building the [opt-in] registry. We have a number of big media companies that send us their raw video files and we fingerprint that and we can attribute those videos to them.

Regulators should care who controls the Google Books registry because it can easily reach out to other content. Google is well on its way to dominating all search and advertising, and now maybe a significant share of online content. Google’s ability to accomplish transparent accounting is definitely in doubt.

What's good for General Google is good for the USA

The Google Books lawsuit demonstrates that it is nigh impossible for individual creators to stop the rampage of a corporate King Kong that is willing to spend endless sums on lawsuits to commoditize art. The unspoken lesson to every young entrepreneur in Silicon Valley is to stonewall—litigate if you can, particularly if you are richer than your opponent. Do not underestimate Google’s influence on the Valley - who would argue with the "mind of God"?

Only governments can take on Google-sized bad boys when the big dogs come after your culture. Governments are concerned about the market power of big search companies - this settlement should alarm both regulators and consumers.

As the Booksellers Association correctly concludes, "[A]n over zealous embrace of this new Google initiative may well, in the long term, deliver a more limited route-to-market for books rather than the incremental benefits that seem to be the current perception."

So what might a better policy look like?

The plaintiffs got it half right - our business needs a registry. But that registry ought to be independent, and opt-in. If the Google class action settlement is approved, US courts will essentially create the opposite - an opt-out registry controlled by a dominant player with "most favoured nation" price protection. It is a fundamental principle of international law that an author should not be compelled to submit to formalities (such as an opt-out registry) in order to enjoy their rights.

But the borderless Internet drives creators toward at least pan-economic area licensing to encourage and facilitate competition among legitimate businesses. It is hard to see how a single-purpose opt-out books registry with a goodie-laden court-ordered license reached in the context of unequal litigation furthers any worthwhile public policy.

Regulators urgently need to take a closer look at this settlement. A win-win resolution of the harms done by Google to the authors and publishers would be to make Google pay for (or at least pay to start) a truly independent registry in line with current policy trends that could further these goals of cultural protections for all authors and citizens, voluntary opt-in licensing regimes that promote competition, and royalties for creators.

Unfortunately, it appears that creators are getting Googled - again. ®

©2008 Christian L. Castle

Editor's note: Attorney Chris Castle was a attorney for the original Napster: read our interview with him here.

Related links

Settlement Summary (pdf)

The Agreement