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On the Google Book Settlement. Part 2.

by Lynn Chu

The ugly accounting details of the Author's new status under the Google Settlement, a fully subordinated net residuary to multiple intermediary entities with unknowable costs. Revised June 12, 2009.

My impulse in late March and April on this blog was to do nothing. To boycott. To neither opt in or out, and just avoid their electronic plantation entirely, resting my confidence in American law, copyright property, individual rights, and a decent sense of justice. Now, in mid June, after talking to a ton of lawyers, I see that the plaintiffs in concert with the defendant have in fact laid a sickening litigation trap for everyone. While, by the way, creating two distinct classes of the soon to be blatantly infringed. The favored. And the disfavored. The favored are those who sign onto their non-negotiable vast contract's dotted line without a peep. The disfavored are to be those known as "orphans." They get a much worse deal than those who choose to just sign.

Now, in theory, this should be flatly against the law. But is it? We shall have to await the judgment of the federal court in light of the objections soon to be raised with the able guidance of Kellogg, Huber, Hansen, Todd, Evans & Figel. None but an expert in class action practice can possibly know what to do here, and frankly, not even them. Since that is so, personally, I would like to know why America is being subjected to these litigants' self serving games. They have set a series of legal puzzles and mazes and traps for the unwary. Unfair to the point of fraud, in my book.

Under US copyright law, what Google is planning to do with your work—scan it and post it online—is unquestionably copyright infringement. The statutory remedy for this is $150,000 per infringement. In theory we can all just pay our friendly local lawyer a visit, and ask him or her to sue Google (you might make an especially a nice deal for her—offer her 50% of the proceeds, i.e., considerably more than the usual 33% lawyer contingency fee, in exchange for picking up all court fees and expenses, thereby avoiding any and all expenses of suit whatsoever). Even if you settle for a tiny fraction of what the law says you are due, you’ll be better off than you would be with the $60.00 to $25.00 this class action will pay out per title (and per article title contributed to books). Best of all, you’ll own your rights free and clear of any costly and complicated bureaucratic organizations determining the meaning of your rights and your ownership of them as author, in the future. You can settle quickly if you like for several thousands, not $60.00. Or go for the whole $150,000.00.

The plaintiffs and Google, now best of pals, propose to split a pot of $45M to fund the $60 per book payout for books that have been scanned as of now. The class action attorneys get $30M. Another $35M will be set aside for BRR to take in all your rights data and administer all rights claims and payments. This is pure peanuts for what they are intending to do to us all. All it is is a corrupt bribe and payoff of the activist groups who brought this "suit," who now eagerly await their piece of the action.

What Google is really doing here is outsourcing its own contracts and payments department, in the guise of a nonprofit called the Book Rights Registry (BRR). Most ingeniously, in doing so, Google shifts all of the costs of it to you. Publishers are supposed to pay all the overhead to run their own contracts and royalty payments operations themselves—because that is what a publisher is. This way, Google positions itself at the head of the line to siphon out its guaranteed minimum profit share of 30% (which they have opportunities to shift upwards, through their ability under the Settlement Agreement to play accounting games with “net,” using vendor discounts and insider third party sales and other types of commissions and fees, in unknown multiples). Then Google passes its leftovers to BRR, who then takes all its (uncapped) costs off that top, and passes the remaining leftovers to you.

If you own rights of any value, now or in the long term, you will want to avoid this contraption like the plague. It creates what will inevitably be a big, costly impersonal bureaucracy, all of whose expenses you are required to pay, to serve as middleman between you and Google. The entity owes no fiduciary duty to you, the detail in the accounting will be nil, you personally will have no rights of audit, and your ability to step back through the levels to obtain accounting detail will be nonexistent. The deal negotiated between Google and the plaintiffs—now excitedly looking forward to running BRR themselves—is, as to be expected, largely to their benefit, not yours. Their expenses (of unlimited scope) all come off the top. This will account for 40%-50% at least. This structure is in stark contrast to the traditional moral right of the author to be paid on each copy sold of his work, first in line. Now, the author is to be nothing but a fully subordinated back end net residuary, with no right, still less any opportunity, to question the layers of faceless middlemen in front of him, or to pierce any of their thick corporate veils. To sign on, you would have to trust these entities fully. Behold the Settlement Agreement in its 335 pages of clotted glory. You trust that thing?

Registering and feeding your claims data to BRR will immediately set off conflicts over the terms stated in your contract and what they mean, among all parties who register as author-owner, publisher, publisher-licensee, contributor to an anthology, and agent of a literary work. Publishers forced to undergo BRR’s laborious registration exercise, keyboarding in all their claims to entire lists, will naturally take a hard line on their interpretations of their rights and their control, and BRR will write these characterizations into stone. Registration upends the current reality and practice, which is that publishers years from now may be out of business and care less about what their contracts say, much less about enforcing it against you individually in any lawsuit. With the Registry process, publisher hard-line claims will be given a kind of quasi-judicial sanction by BRR, as of now, the data to which will be immediately accessible online.

You do not want BRR reading your contracts and making determinations of what the letter of your contract seems to say right now, even for this limited purpose—particularly not by binding arbitration. From sheer ease of access, BRR’s limited purpose display rights readings of your contract will tend to color all interpretations of author versus publisher control as to all other rights in your work. BRR at some point may even seek to market their book rights claims data and their ownership determinations. You absolutely do not want this third party intruding into your rights data privacy in this way.

To participate in the settlement, you are forced to sign a contract that gives to BRR the right to settle, via binding arbitration, all disputes concerning your rights between you and other claimants. These disputes will be set off immediately, rather than later, only when and if some truly live controversy makes some kind of determination necessary. Later, the odds would be with you. Now, the odds are all against you. Your publisher, not you, will have gotten a BRR determination that they have sole control, perhaps forever, because the letter of all book contracts run heavily against the author. This destroys the author-friendly reality in which current law, in its zen wisdom, now exists. Years later, after a publisher has effectively washed its hands of a property, authors often simply proceed to act as if they fully owned their rights. At that point they are rarely questioned about it. Publishers do not sue their authors by pointing out the technicalities of the terms in old contracts, or parse whether reversions formally occurred, or the like. Why? It is incredibly bad business for publishers to go around suing authors, particularly when any one of those suits over 99% of literary works are over peanuts.

The BRR contraption however, by aggregating that 99% and reinforcing contract readings in determinations made as of now, allows publishers to rid themselves in a fell swoop of this gradual loss of control over the back end, over increasingly potentially valuable electronic rights. Authors are therefore facing, through this contraption, a permanent loss of control unalleviated by the moderating effect of actual reality, and lapse of time, that the law now heeds and respects. The dynamic is shifted, in a very bad way for authors.

So the plaintiffs in this suit have, wittingly or unwittingly, engineered a situation that is terrible for authors, eliminating their ability, by default as it were, to reclaim effective ownership and control over their rights, individually, one by one, later on when nobody but the author very much cares about them.

There are many contracts out there whose term may be triggered and extended indefinitely by the mere existence of the Google compulsory license. You probably do not want BRR interpreting whether that has occurred in your contracts either.

Arbitration will also lock you out of traditionally author-friendly federal courts. You may think this arbitration clause applies just to this one purpose, Google display rights payments, but it is impossible to know what conclusive, negative impacts BRR determinations, databased, about your contract will have with respect to other rights and publishers. The settlement’s hidden motive seems to be to try to destroy the sanctity of an author’s property interest in his literary works by shifting all of the default assumptions in the law which currently favor the author, to turn it on its head—today for Google, tomorrow for everyone else.

Access to your rights as an author at common law in federal court is very important, because U.S. courts have historically been very author-friendly, often overturning publisher contracts of adhesion to uphold author rights. Any reading of a book contract a publisher essentially forced you at gunpoint to sign, without benefit of counsel, which they alone drafted while obstinately refusing to make any changes whatsoever to your benefit, will inevitably be read by a BRR bureaucrat literally, by the letter.

Permissions people generally seek permissions from authors. Why? First because the law presumes that authors own their works. Second because authors are more likely than publishers to grant permissions for cheap. And third because authors are more likely to grant permissions mistakenly, thinking they have the authority to do so when in fact they might not. Authors, flattered by the attention, tend to act kindly. If they do so, the grantee is pretty much entitled to rely on it. In this situation almost no publisher later bothers to complain about mistaken grants by their author. The grantee will have a defense to any claim of infringement and there will be few damages, no particular reason for suit, and no cause for acrimony. The other reason no publisher bothers to confront an author about such erroneous grants is that getting into fights with authors is bad business. 99% of the time, even to complain isn’t worth the effort.

These delicate dynamics in the realities of copyright licensing and enforcement, clearly played no part in the considerations of the propeller-heads who rigged up this Rube Goldberg contraption. Seeking bathwater, they threw out the baby. In fact the whole thing is a vehicle for fat legal fees and bureaucratic turfbuilding.

By the time you find out that you strongly disagree with BRR determinations about your rights and control versus those of your publisher, you’ll have no recourse. You will have signed on to binding arbitration, which you are likely to lose. Expect arbitration to be publisher-centric, and focused on letter-of-the-contract analities, not author-centric. Arbitrators are never as open as federal courts to arguments of justice in equity to exploited authors.

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