The phantom tollbooth — Are workable markets for library digitization licenses just around the corner?

Introduction and Necessary Disclaimer 

This one of a series of posts concerning the Authors Guild v. Hathitrust case, specifically these posts take the form of commentary on the Authors Guild Appeal Brief (February 25, 2013). The views expressed on this site are purely my own.

The phantom tollbooth — Are workable markets for library digitization licenses just around the corner?

What if? … One of the interesting questions arising out of the Authors Guild suit against the HathiTrust is, what happens if the Authors Guild wins? Is there any way that library digitization programs could continue if the court ruled that any kind of digitization for any reason at all required permission from the copyright in advance?

Naturally the plaintiffs and the defendants see this issue differently. The plaintiffs argue that copying without permission is wrong and that they will find a way to sell permission to people like the defendants so that digitization can continue. The defendants argue that copying without permission is permitted for specific reasons and that in this case there is no practical way to obtain the permissions the plaintiffs insist are required.

Whether a market for digitization licenses (either in general or for educational access to orphan works in particular) would work in practice goes to the heart of the fourth fair use factor under Section 107 of the Copyright Act.

The fourth fair use factor is “the effect of the use upon the potential market for or value of the copyrighted work.” The Authors Guild argues that “the District Court erred in failing to recognize the actual and potential harm to the Authors caused by the Libraries’ unlicensed mass digitization.” (Authors Guild Ap. Br. page 38). My guess is that the defendants will argue the exact opposite – that the district court was right to conclude that copyright owners were not likely to suffer any harm from the defendants library digitization project. The district court never got to the issue of the defendants’ orphan works project for reasons covered in previous posts, so the best the plaintiffs could hope for on that issue is a favorable remand from the Second Circuit.

Market effect and market definition

The question of market effect risks collapsing into tautology because every use by a defendant represents something that could, in theory, be licensed to the defendant if the court rules that it is not fair use. Courts try to avoid trap of circular reasoning by limiting market effect to effects that are (a) that are cognizable under copyright and (b) not too remote or speculative.

(a) Cognizable Injury

Not every perceived harm will count towards the court’s assessment of market effect in fair use cases. A few examples from the leading cases are illustrative:

In Campbell v. Acuff Rose the Supreme Court said:

[W]hen a lethal parody, like a scathing theater review, kills demand for the original, it does not produce a harm cognizable under the Copyright Act.  Because parody may quite legitimately aim at garroting the original, destroying it commercially as well as artistically, the role of the courts is to distinguish between biting criticism that merely suppresses demand and copyright infringement, which usurps it. [Campbell v. Acuff-Rose Music, 510 U.S. 569, 591–92 (1994) (internal quotation marks and citations omitted).]

To take an example closer to library digitization, consider the software reverse engineering cases. Courts have consistently held that making unauthorized copies of a computer program, as a necessary step in reverse engineering, is fair use. In Sony v. Connectix, the Ninth Circuit held that although the defendant’s Virtual Game Station console directly competed with Sony in the market for platforms capable of playing Sony Playstation games, the Virtual Game Station was a “legitimate competitor” in that market. The court concluded that Sony’s desire to control the market for gaming platforms was understandable but that

“copyright law . . . does not confer such a monopoly.” [Sony Computer Entm’t, Inc. v. Connectix Corp., 203 F.3d 596, 607 (9th Cir. 2000)]

In Bill Graham Archives v. Dorling Kindersley Ltd., 448 F.3d 605, 615 (2d Cir. 2006) the court of appeals held that the defendant’s use of the plaintiffs images was

“transformatively different from their original expressive purpose. In a case such as this, a copyright holder cannot prevent others from entering fair use markets merely by developing or licensing a market for parody, news reporting, educational or other transformative uses of its own creative work.” (citations and quotations omitted).

In the case the Fourth Circuit addressed claims of copyright infringement by students who objected to their papers being put through an automated plagiarism detection system.

“Clearly no market substitute was created by iParadigms, whose archived student works do not supplant the plaintiffs’ works in the “paper mill” market so much as merely suppress demand for them, by keeping record of the fact that such works had been previously submitted. … In our view, then, any harm here is not of the kind protected against by copyright law.” (AV ex rel. Vanderhye v. iparadigms, LLC, 562 F. 3d 630, 464 (4th Cir. 2009))

What is the lesson here?

Before deciding whether an alleged commercial injury has or is likely to occur, a court has to figure out whether it is the kind of injury that copyright is supposed to prevent. Copyright law is not meant to prevent the harm of critical review or mockery, nor is it meant to prevent competition based on interoperable technology, nor is it meant to prevent computerized analysis of text.

Authors have certain rights in relation to original expression – but they don’t have the right to prevent other people building meta data out of that expression. Section 102(b) of the Copyright Act makes it quite clear that

“In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work.”

So, it is hard to see a copyright injury in this case if the only harm the plaintiffs can point to is that the defendants can now generate valuable data about library book (this is what you get of text-mining, computational analysis of text and search engines in general).

(b) Non-speculative Injury

Even if a court were to decide that in an ideal world digitization for non-expressive use should be an exclusive right of the copyright owner, that same court might still think that in the real world library digitization qualifies as a fair use because there is no functioning market for such rights.

Most of what I have said above applies to the non-expressive use aspects of library digitization and not to the important question of access to orphan works for expressive use. But on this issue of market effect, the two issues begin to merge again. [It is hard to say much about the market effect of any particular orphan works project without seeing the details, which is why the district court was almost certainly right that the issue was not ripe for adjudication.]

What do the plaintiffs need to show in terms of future harm?

The plaintiffs don’t need to show that there is, right here and now, a well function licensing system that would enable libraries to obtain permission to digitize on a book by book basis. According to the Supreme Court in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 451 (1984)

“What is necessary is a showing by a preponderance of the evidence that some meaningful likelihood of future harm exists.”

If there is no market at present, plaintiffs must show that such a market is “likely to be developed”. (American Geophysical Union v. Texaco, 60 F.3d at 930 (2d Cir. 1994)]

In American Geophysical Union v. Texaco, the Second Circuit held that a corporate library’s systematic photocopying of scientific journal articles for research and archival purposes was not fair use, in part because the then recently created Copyright Clearance Center (“CCC”) constituted

“a workable market for institutional users to obtain licenses for the right to produce their own copies of individual articles via photocopying.” [60 F.3d at 915]

As I have already noted in a previous post, you can only take the photocopying cases so far in relation to library digitization. The court in Texaco was not dealing with an orphan works problem, nor was it dealing with a situation where literally millions of permissions would be required.

A deep dive into the “undisputed evidence”

“The undisputed evidence establishes that the Libraries’ activities will harm the Authors by undermining existing and emerging licensing opportunities.” (Authors Guild Ap. Br. Page 41)

What exactly is the Plaintiff’s evidence of “existing and emerging licensing opportunities”?

After reviewing the Texaco journal photocopying case, the plaintiffs’ Appeal Brief announces (at page 41) that

“Here, too, there are several existing and likely to be developed workable markets for the Libraries to obtain licenses to digitize, store and make various uses of the copyrighted books in their collections.” (Authors Guild Ap. Br. Page 41 (citing the Plaintiff’s Expert Report by Professor Gervais [Daniel Gervais in Authors Guild v HT(2012)])

At paragraph 33 of his report, Professor Gervais states:

“I believe that if the Defendants’ uses are not determined to be fair uses, the market will provide a collective licensing system for the types of uses that the Defendants have been making so that they would not have to negotiate a transactional license for each book or other work they wish to use.”

No one can doubt that Professor Gervais believes this, but the evidence is far from indisputable. In the American context, Gervais points to two sets of voluntary organizations where the copyright owner has to opt in to collective management – performing rights organizations like ASCAP, BMI and SESAC and also the Copyright Clearance Center. These are opt-in organizations and it is hard to see how anything like the ASCAP model would work to address the orphan works issue.

Gervais also points to several compulsory licensing regimes created by statute in the U.S. and overseas. Section 115 of the Copyright Act establishes a compulsory license for making and distributing phonorecords, sometimes called the compulsory cover license. This license came into being when Congress broadened the definition of copying under the 1909 Copyright Act. In addition, the Digital Performance Right in Sound Recordings Act set up several different compulsory licenses for the digital audio transmission of sound recordings in 1995. The compulsory cover license has worked fairly well for the past hundred years, the DPRSR has been an almost unmitigated disaster. [See Peter DiCola & Matthew Sag, An Information-Gathering Approach to Copyright Policy, Cardozo Law Review (2012).]

But that is really beside the point; neither of these examples shows that collective licensing schemes spontaneously emerge! All they show that collective licensing schemes can emerge when Congress deliberately creates them—in both cases as the quid pro quo for extending a new right to copyright holders.

Likewise, the fact that a handful of Nordic countries have legislated for extended collective licensing for mass-digitization or that serious British academics have recommended the same does not prove much either. It might suggest that the U.S. government should consider this option, but it in no way shows that market based solutions to the transaction costs problems associated with library digitization will spring forth without direct action by Congress.

My favorite part of the Authors Guild’s brief on this point is where it says, without any hint of irony, that

“The ASA [Amended Settlement Agreement] exemplifies how a mass digitization licensing system could operate …” (Authors Guild Ap. Br. page 43).

The ASA would have turned the Google Book search engine into the world’s largest book store – the orphan works problem was solved by making virtually everything for sale by default. The court rejected this settlement as going beyond the scope of a permissible class action, so it seems a bit perverse to argue that the defeat of the ASA offers any hope for a solution to the transaction costs problems inherent in digitizing old library books.

How would a market for library digitization licenses actually work?

Back to Professor Gervais’ belief that “if the Defendants’ uses are not determined to be fair uses, the market will provide a collective licensing system for the types of uses that the Defendants have been making so that they would not have to negotiate a transactional license for each book or other work they wish to use.” (Gervais para 33)

This might work in some limited fashion for new works, but there is nothing in the Gervais report that explains how the CCC or some equivalent organization would be able to deal with the unclear allocation of digital rights between authors and publishers or address the orphan works issues that plague older out of print works.

If library digitization for non-expressive uses or to meet the needs of the print-disabled requires a license, that is not a license most publishers will have the authority to give.  We know from the Georgia State Copyright case (Cambridge University Press et al. v. Becker et al. 863 F. Supp. 2d 1190 – Dist. Court, ND Georgia, 2012) that only a small percentage of the works that are available through the CCC’s academic permission system are currently licensed for electronic distribution. In general the figure is about 12%, in the GSU case specifically digital licenses were available in only 44 of the 75 claimed instances of infringement – those 75 claims were hand-picked by publishers as their best evidence of infringement.

In 2001 a federal court in the Southern District of New York ruled that a widely used publishing contract between authors and publishers which granted publisher the rights to publish a work “in book form” did not include electronic rights to the book. Random House, Inc. v. Rosetta Books LLC, 150 F. Supp. 2d 613 (S.D.N.Y. 2001). Publishers now write better contracts (better for them), but for all but relatively recent works, publishers do not typically own the rights to most books in digital formats – those rights typically belong to individual authors. It is curious that Professor Gervais’ expert report does not address this most salient of facts.

The Authors Guild’s Appeal Brief attempts to gloss over these fundamental problem by noting simply that:

“In the United States, organizations like the CCC presently license the same general type of copyrighted content as the material copied through the Google Library Project.” (Authors Guild Ap. Br. page 41)

The fact the CCC licenses some books (which is what they mean by “the same general type of copyrighted content) for some uses does nothing to show that the CCC could license the millions of books at issue here for the purpose of library digitization.

The Authors Guild also points to the fact that

“The CCC has existing licenses with academic institutions like the Libraries that allow for the rights of thousands of works to be collectively negotiated.” (Authors Guild Ap. Br. page 42).

“…there are existing mechanisms that would allow the Libraries to obtain licenses for thousands of works at once.’ (page 43).

This is hardly persuasive when the problem of library digitization relates to millions, not thousands.

Was there any other evidence to which the Authors Guild could have cited?

In one of their submissions to the district court the plaintiffs stated that “defendants also permit the Infringed Books to be used for non-consumptive research, an emerging field that represents another potential licensing stream for orphans.” (Memorandum Of Law In Support Of Plaintiffs’ Motion For Summary Judgment, June 29, 2012, Page 28).

The plaintiffs’ memorandum cites UF130 as evidence. This is a reference to the Declaration of T.J. Stiles (Case 1:11-cv-06351-HB Document 83, Filed June 29, 2012), one of the individual author plaintiffs and his associated deposition (Case 1:11-cv-06351-HB Document 114-3 Filed June 29, 2012). [Declaration of Stiles in Authors Guild v. Hathitrust]

I have extracted some of the highlights:

  • Declaration of T.J. Stiles, paragraph 13:

“From what I’ve learned about it, non-consumptive research represents a potentially exciting field for academics and therefore an emerging licensing opportunity for authors at a time when revenues are decreasing.”

  • Declaration of T.J. Stiles, paragraph 15:

 “Moreover, as a copyright owner, I (not Defendants) should be allowed to decide whether or not my works are copied and included in a database used for non-consumptive research, full text search indexing or other uses.” …

  •  Deposition of T.J. Stiles, Page 35 line 9 -20:

“Despite my own uncertainty about the actual means and uses of non-consumptive research, I must add that I think it’s a very exciting field, it’s
 very interesting and as an author, it sounds like a tremendous emerging market that I would love to license my book to be — my books to be taken advantage of in such a manner. And so as a potentially important emerging market, I certainly have no difficulties or problems with non-consumptive research. In fact I find that there may be great market potential in it. And so 
it interests me as a creator of works in terms of
potential licensing.”

  • Deposition of T.J. Stiles, Page 168 lines 11-19

“So non-consumptive research again, if I understand it correctly, allows scholars or others to conduct searches across large quantities of books that have been digitized and then to generate statistical or otherwise interesting analysis of multiple works in the same piece of research. And, again, I would be very interested in licensing my book for use in non-consumptive research. So I’m very excited to have this emerging market identified for me.”

  • Deposition of T.J. Stiles, Page 168 -169

 “Question. You said you’re interested in licensing your book for non-consumptive research; is that correct?

Answer. Absolutely.

Question. Why have you not done that so far?

Answer. Not all markets are as mature as others. And not every market is determined by the — in this case the owner of an intellectual property going out and seeking to create that market.

In non-consumptive research, my book, this 
individual title, would be by definition, you know, one 
small element. Non-consumptive research, to my understanding, requires large numbers of books. So
 for — it would not make any sense at all for me to take
a backlist title of mine and try to go out and create a
market. But that fact that it makes no sense for me to 
spend a lot of time trying to create this market does not mean that I in any way give up my rights to a
 potential market as it emerges, to take part as a 
licensor of rights. I think that it’s very interesting 
and potentially very powerful. But it’s certainly not 
incumbent upon me to create that market in order to preserve my rights within it.”

Wishful thinking is a far cry from evidence.

Props from a Potemkin village

It seems to me, the plaintiffs in Authors Guild v. HathiTrust are asking the court to create a new and unprecedented right—to give copyright holders the right to control intermediate non-expressive uses—and to simply assume that an efficient market to allocate these new rights will spontaneously appear. It would be just as wrong to allow copyright holders to license non-expressive uses of copyrighted works as it would be to allow them to license quotation for the purpose of criticism and transformative copying for the purpose of parody.

You can’t just wish a new legal right into existence by establishing a set of tollbooths to collect on it. And in this case the tollbooths are just props from a Potemkin village. The ‘injury’ the plaintiffs assert strikes me as both speculative and beyond the scope of their statutory entitlements.