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FAQ on the Google Book Settlement

by Lynn Chu

This Q&A is in response to questions asked of me on April 16, 2009 by Doris Booth of Authorlink.com.

Here are a couple of preliminary questions. I may have a few more on Monday. Before we talk about the particular dangers of this settlement, let’s begin by having you give us a bit of background on the case, from your perspective.

1. May 5 is the deadline for opting in or out of the settlement. What are the dangers of simply ignoring the “opt in” “opt out” choices of the settlement. As I understand it, if you do nothing you are automatically opted into the settlement. So if you simply ignore it, and later decide to sue you will not be able to do so. True?

Let me preface by saying that all these issues are extremely complex and I am not rendering legal advice. I am giving my honest business opinion. I am a lawyer, but I am not a practicing litigator or expert in every aspect of this matter. Law is always complex, and this is beyond just about any single person.

My view is that the plaintiffs, the AAP and the Author’s Guild, have no legal authority to represent any one of, much less the whole, owner class. They are “class representatives” solely for purposes of this single litigation. It is a suit they and only they chose to bring. They have no power to bind any author or publisher to any particular terms of agreement, unless those individuals sign on and “opt in” to what is, in essence, their proferred contract. They are no-one’s agent. This is simple agent-principal law.

I believe that there will be no effect, if you fail to opt out by May 5, 2009, on any owner’s copyrights, or upon your right to sue Google or its Registry for copyright infringement for unauthorized online displays. These parties simply have no authority to convey or dispose of anyone’s copyrights, nor to grant or authorize any publications for others. I consider the use of the class action to be a bit of a PR trick.

To do anything like that they would have to convince Congress to change the law of copyright.

However, I caution that given the multiple areas of specialized law here, I can’t be totally certain about every aspect of this. It is a Rube Goldberg contraption. Still if absolutely everyone, including hosts of smart lawyers, are silently stunned and baffled, it is very hard to believe that all authors in America could possibly be legally bound to a thing by simply doing nothing.

Nor should the Registry be able to favor those who do sign up (and these may be falsely claiming to own or control a copyright), or discriminate against those who fail to, by paying only signers-on. For a court to sanction any such process may violate people's due process rights and work an unconstitutional “taking.”

By the way, if you have approval rights in your contract, you may be able to claim that your publisher does not have the right to sign on to the Registry at all, or claim your revenues, without getting your prior written approval. Arguably, only you have the right to authorize this type of publication. The fact that this sort of publication was entirely unforeseen when you signed your book contract may also mean that these particular rights—which are very different from ebook rights—were not granted to your publisher at all. Your publisher, however, may disagree. Publishers often plant vague terminology in contracts which seems to grant themselves exclusive discretion over a lot of rights. But courts tend not to look favorably on vague self- serving language of that kind because specificity is required in any grant of rights. Authors have always historically been at a great disadvantage with publishers in contract negotiations. Courts and the law in this area generally recognize that authors, by and large, are a bit of an oppressed class when it comes to the fine print that publishers lard into their publishing contracts. A publishing contract is supposed to be an obligation to publish. Not to sit around passively collecting money from others.

2. You have said that under the settlement every rights owner in America must hand over their contract data on every edition of every work they ever wrote, unless of course they opt out. Hand their contracts over to whom? The Book Rights Registry?

Yes, the process they envision is that everyone must log on and sign up with the Registry, naming all their books, the nature of your control over them, and all portions of those books that ever appeared in other books, ie, anthologies, under any license you, your publisher, or one of their licensees ever executed. They call these “Inserts.”

How you get ahold of all this data is a huge question. It’s generally unavailable, unless you have been remarkably anal over the course of your entire life. Computers are only beginning to make such things easier, but only if we assume that over the course of a lifetime everyone will be maintaining and transferring their dbases seamlessly from system to system.

3. In what ways will Google compete with the U.S. copyright Office and the federal courts?

Google is requiring everyone in America to register with their Registry, their process, and play by their rules, sidestepping the U.S. Copyright Office and reversing the law of property and of copyright. Under the actual law, it is Google’s burden and not yours to ask you for permission and then fairly negotiate terms of contract acceptable to you personally, not jam some monstrosity down your throat.

The settlement agreement is a big contract, which, if you agree to it, will bar you from the federal courts forever when it comes to Google. The Registry permits itself under this contract to reinterpret and in effect rewrite your contracts, as they prefer to see them, and not as a federal court might, or as you and your ex-publisher might in the far future amicably agree.

4. Doesn’t the Book Rights Registry have the final say over determining whether a book is out of print or not? Doesn’t that hand the BRR a lot of power?

Yes. And yes.

5. You have made the point that as publishers’ costs go down, authors earn more. But not in the case of Google. Elaborate a bit.

Not exactly. This structure says that Google takes 37% off the top. Then comes the Registry. We know nothing about what the Registry will take off the top in its costs. That share is thus potentially unlimited, reducing you to a sliver. The author comes last after everyone else has taken their cuts. This reverses the economic structure of books.

In a standard well negotiated book agreement the Author has a royalty based on retail list price. That means the Author’s share is paid to him first in line and the Publisher must pay all its costs of publication out of whatever is left over to it. So, the Publisher, not the Author, bears all the risk of publication. The Publisher pays its own costs. This aligns economic incentives correctly. This prioritization of the Author is an important component of the classic book contract. It is justified because the Author is the creator of the work. He is due his fairly negotiated, constant amount, per copy sold, as his guaranteed payback for his creation, and first before everyone else. For the Publisher to bear all publishing costs means they have the motivation to save on those costs. The Registry has no incentive to save on such costs because it all comes out of your money. It is like a sleepy government agency, but worse, because even a government agency only gets a limited budget from Congress. This is a private company. Nonprofit doesn’t mean they aren’t going to incur costs. Nor is it any guarantee of fealty to you, or competence on their part. It just means they have no revenue stream to defray costs other than your money, and their total dependence on their pal Google.

In this way, Google cleverly pushes the greatest risks of its whole publishing enterprise off on the Author. Google takes its big, fixed, guaranteed profit and overhead share off the top first. The Author then is forced to bear the very considerable risks of this type of publication and all the squabbling and fighting this structure will unnecessarily create. I believe it will be a terrific cauldron of disputes over who is due what money. Publishers will also all start gaming all their new book contracts to position themselves first at this particular spout forever, and authors will lose every advantage they might have had by reference to past industry tradition in their future contracts.

The author will then be forced into a determination the Registry will make about whether and how much to give claimant publishers (there may be several if your book was licensed in multiple editions) and you. This will not be a determination under U.S. law, but under new rules the Registry will make up, such as their rule that, for a pre-1987 book, unless the author has have a full written reversion of rights in hand from the original publisher, the author will have to share its Google distribution with that publisher to receive 35% forever.

6. Who owns the digital rights that flow from the author and/or publisher through the BRR to Google? I have heard it said the BRR does.

The author-publisher contract determines who owns online display rights in works.

The Registry would like to be the central authority to receive all Google money and decide whom to give it to, rewriting those contracts if it so desires on any rules it would like to create.

7. Are you aware that out of the 63% in royalties the author is supposed to earn from Google, up to another 20% in fees can be collected from the BRR (not to mention possible arbitration fees for disputes. Doesn’t that make the BRR more likely to create disputes in order to earn more money?).

I think the Registry's mere existence makes disputes far more likely regardless of what they intend. They probably have all good intentions. As I read the agreement, the amount off the top by the Registry is in fact unlimited and there is no cap, if its expenses are high. In any event, they get to give it all to the charity of their choice in 5 years, if you don’t present yourself to them.

I regard the Registry as one of Google’s costs of publication. It is Google’s liability. Not authors’.

8. The BRR is “temporarily” funded by Google (the very entity the AAR and Guild were supposed to be opposing). When the $34 million in the Google’s startup funding runs out the BRR’s fees of up to 20% of the author’s royalties kick in. The BRR says it will take up to five years for the authors to get paid from the settlement. That would indicate that the BRR fees will begin to be charged long before the first payment ever goes out to the authors. Thus every author on the planet will be soaked for as much as 20% of their royalties before they even see their measly $60 check from the settlement. Can you imagine how much money this will amount to across thousands and thousands of authors? (I’m not real clear on this point yet, Lynn, but wanted you to think about it.

Authors are a fully subordinated net residuary here. That is a bad economic position to be in, period.

The simple and fair thing would be to ignore the AAP and the Author’s Guild, who are doing nothing but empire building for themselves. If Google had any sense of fair dealing, it would have digitized and indexed the entire library catalog, then, devised a simple agreement listing several types of publication for authors to authorize, from mere listing, to snippets, to x%, to full display. It would have set its database to be in the “Off” position for everything. Then it would have promoted their new author ability to display works so long as the work was on their library scan list. People would then log on and decide for themselves. Like every other publisher in the world, Google’s agreement to turn a thing “On” would contain a warranty of ownership and right to authorize the publication, and indemnity for breach of that warranty. If you turn “On” a publication feature, you would sign that agreement. Easy, fair, simple. The agreement would have to be fair and simple. Because otherwise authors would not sign up. It would be up to Google to offer better terms to attract the more reluctant (or more valuable, who have other options).

Google would also have to figure out ways to guard against tricksters in all this, but this would be little more than what every online merchant always has to do.

In this manuever, Google is just trying to use the court system in a tricky way to set up a separate entity, so as to get full separation from all the hassle of contracts and claims. That is a publisher responsibility now pawned off on the Registry—so now you get to pay for it. Not because you ever gave a hoot about Google’s scanning activities, but because AAP and Authors Guild decided to anoint themselves as your agent and award themselves an unlimited commission and permanent bureaucratic fiefdom managing you.

Are they competent? I don’t think so, not after looking at their documents. They have no sense for what the online business is or will be in the future. They copy formbooks relating to the print industry which has radically different economics and far higher costs. Costs that include editorial selection, line editing, design, production, warehousing, physical distribution, launch, marketing, sales, and library curatorial skills. They skip all the work and creativity of the entire publishing industry. Dealwise, the plaintiffs are being rolled. The 70/30 split has been rejected by major media content providers such as Viacom in dealings with just such online aggregators as Google.

You the author will be politically weak up against publishers within the Registry entity. In the end, publishers will wind up owning your rights forever and taking a piece, or 100%, of them, forever. In any head to head with publishers, authors will lose, especially if they waive all their rights to access to federal court.

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