Google Books Decision – The Second Best Outcome?

Judge Denny Chin’s Google Books ruling sparked a considerable amount of welcome reaction. It is submitted that everybody, not just Google, will now greatly benefit from broader fair use defence, that it is a “huge victory for online innovation” and a “big win for libraries and researchers”. But is the decision really the first best outcome?
[Cross-posting with the IPKat; thanks to Jeremy for improving the language]
Let’s recall the context. The heart of the problem behind the Google Books project is not that Google did not want to pay for scanning and storing books, but had often nobody whom to pay to, as lot of the works were “orphans”. The problem is thus one of expensive transactions. Using a fair use to remedy this failure of copyright regulation means not making those transactions cheaper, but making them irrelevant, because what is free does not have to be licensed. Fair use also tries to solve the problem of prohibitively high transaction costs. But if the copyright regulation blocks transactions, our first response should be unblocking them, and only the second should be to remove their need entirely. It is like curing a wound with amputation, when you can stitch it up.

In general, using fair use as a remedy to the mass digitization problem of “orphans” has its obvious anticompetitive shortcomings. The Google Books decision is just a manifestation of this. The factual circumstances of this ruling, to which the decision is confined, leave only a little room for creative business models that can directly help to recoup the investment in digitalization. It appears that, unless you can monetize the digitization in some other market (e.g. improving your search engine), fair use will be only of a little help to you. This is why the decision does not enable lots other companies to replicate what Google did. You would need to be as big or at least as broadly integrated as Google to build-in such a business model that is permissible and free of charge. Anybody else doing “more” (e.g. putting ads above the search results) will face a need to license anyway. This ultimately means that fair use is giving a great competitive advantage mostly to Google itself, which can afford to have only a modest direct commercialization model. Moreover, considering that “orphans” still cannot be licensed in the event that you do “more”, the probability of existence of “digitizing competition” in this segment approaches zero.

To be clear, Google Books is a great innovation with tremendous social benefits. I guess that only few people doubt this today. But isn’t judge Chin also collaterally accepting as fair use, and hence free of charge, uses that are less inevitable consequences of mass digitization of “orphans”? Should substantial extraction of snippets from the books be really free of charge? As ironic as it might sound, it was the overprotection of authors that most likely led judge Chin to accept as free also uses from which the authors could normally benefit since the only alternative to fair use available to the judge, namely, to prohibit the Google Books service, would arguably make all concerned only worse off. The first best solution, however, would be stitching up the wound, and not amputating it — in other words, unblock the transaction for “orphans” (e.g. by extended collective licensing), which would be a more appropriate and pro-competitive response to the problem. If the possibility of unblocking transactions had existed under the US law, I doubt that the systematic snippets preview would constitute a fair use.

The Google Books decision thus at least sends one clear message to the copyright lobbyists who fought against US Orphan Works Act of 2008 or Directive 2012/28/EU in its previous form. Rigid copyright can paradoxically lead to lessening of the scope of the rights they advocate — at least if you have a flexible fair use to counterbalance “copyright non-sense” that slows down innovation. This is because, if the first best solution is not available, society is still better off accepting at least the second best one.

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