Google Defends Book Settlement, Amazon Cries Cartel

Google and Amazon traded barbs Thursday morning in a House Judiciary Committee hearing about competition in the digital book market, joined by supporters and detractors of the proposed Google Books settlement.

The settlement, announced last October and awaiting judicial approval, would end Google's copyright liability for scanning and digitizing millions of books and set up a Book Rights Registry to distribute revenue to authors from Google's settlement payment and from Google Book Search. It would also allow Google to sell access to, and advertising for, digital books, including orphaned works -- books without an identifiable rights holder.

The settlement has elicited opposition from a wide variety of companies and advocacy groups that have expressed concerns about the antitrust and privacy implications of the deal. It has also drawn support among those who believe the arrangement will make books more accessible to a broader set of people.

In prepared remarks, David Drummond, Google's SVP of corporate development and chief legal officer, argued that Google's entry into the digital book market would free readers from the shackles of Amazon's Kindle.

"What we anticipate will revolutionize the way some people read books is an open cloud-based platform, where users buy and store digital books in online personal libraries accessible from any Internet-connected device," he said. "Amazon's Kindle approach links its online bookstore with its hardware device in a proprietary system, where users buy their books and device from a single source -- Amazon."

Google, he said, intends to partner with a variety of companies "to develop an open platform."

Elaborating on that point in a separate statement, Drummond addressed a point of confusion about the settlement, namely the misapprehension that Google alone will be able to sell the out-of-print books it has scanned.

"[W]e will let any book retailer sell access to those books," said Drummond. "Google will host the digital books online, and retailers such as Amazon, Barnes & Noble or your local bookstore will be able to sell access to users on any Internet-connected device they choose. Retailers can also pursue their own digitization efforts of out-of-print books in parallel."

With regard to in-print books, Google won't sell a digital version without consent from the publisher or author. That just leaves orphaned works as a problematic category of books -- Google will be able to distribute them without fear of prosecution but others, not being party to the settlement, will not have that assurance. The reason retailers might want to pursue their own digitization effort, as Amazon is doing, is that Google and the retailer divide, in undisclosed portions, 37% of any such sale, while rights holder -- publisher or indie author -- gets the remaining 63%. Google has spent many millions scanning books and some of the opposition to the settlement comes from potential competitors that recognize the high cost required to compete with Google through a separate scanning effort.

Drummond in his testimony also said that Google supports legislation to grant other book sellers the same copyright claim indemnification for use of orphaned works that Google will gain from the settlement.

Paul Misener, VP of global policy for Amazon, however, dismissed Google's claims and likened Amazon's interest in blocking the settlement with its interest in network neutrality. "Amazon takes no pleasure in opposing Google in the class action case or in today's hearing," he said in prepared remarks, citing Amazon's alliance with Google in support of network neutrality.

Despite such past comity between the two companies, Misener insisted that the settlement would give Google an advantage rather than provide a level playing field. "Under the proposed settlement, Google would become a consumer's nightmare: the only store in town," he said, ironically echoing Drummond's assertion that Kindle users can only buy books from Amazon.

Perhaps the most damaging testimony as far as Google is concerned came from Marybeth Peters of the U.S. Copyright Office who described the settlement as "tantamount to creating a private compulsory license through the judiciary."

As if to prompt Congress to wake up and do something to rein in Google's attempt to reshape the copyright landscape, she later added, "Compulsory licenses in the context of copyright law have traditionally been the domain of Congress."

When the hearing on the settlement finally occurs next month, the issue of competition -- currently the subject of a Justice Department antitrust inquiry -- will be one the government may want to solve through legislation rather than limiting the scope of Google's ambitions.

As University of Chicago Law School professor Randal C. Picker, testified at the Thursday's hearing, "Congress should pass orphan-works legislation. To its great credit, Google remains in favor of such legislation. That legislation should track many of the features of the Google Book Search settlement so as to enable full competition in the use of orphan works. Only the government can make that competition possible."

That just leaves the issue of privacy.

Update: Corrected Google/retailer compensation percentage.

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