Google Book Settlement and 'Unclaimed Funds'

For earlier posts on the Google Book Settlement, see:

Google Book Settlement: the Background

How the Google Book Settlement affects European authors and rights-holders: 1

How the Google Book Settlement affects European authors and rights-holders: 2

Google Book Settlement: the Proposed Book Rights Registry 1

Google Book Settlement: Some Clarifications

Google Book Settlement: the Proposed Book Rights Registry 2

***

One provision of the Settlement that has attracted much critical comment is the plan for distributing what the Agreement terms ‘unclaimed funds’, revenues flowing from the use of works belonging to rights-holders who have not registered with the Book Rights Registry (the so-called ‘orphan works’). These funds would be held for five years; then what remains unclaimed would be applied in the first instance to paying ‘the operational expenses of the Registry’.* Any funds left after that would be distributed among the rightsholders according to a formula that means that the more their own works have earned, the larger the share they would receive of the unclaimed funds; and finally, the remaining funds, if there were any, would be allocated to charities with educational objects, such as the promotion of literacy. This latter provision is plainly a sop to public opinion.

[http://www.googlebooksettlement.com/intl/en-gb/Settlement-Agreement.pdf § 6.3.(a).(i);
http://www.googlebooksettlement.com/intl/en/Attachment-A-Author-Publisher-Procedures.pdf § 8.1,2,3]

The bland language of ‘unclaimed funds’ glosses over the fact that this is money that cannot, in equity, be applied to the purposes of the Book Rights Registry, since that entity is to be set up purely to represent the interests of the registered rights-holders; nor is there any justification for dividing part of it among the registered rights-holders, since they have no copyright interest in the works that earned it.

Strong critics of this aspect of the Settlement Agreement include Pamela Samuelson, and James Grimmelmann, an Associate Professor at New York Law School.

[http://radar.oreilly.com/2009/04/legally-speaking-the-dead-soul.html;
http://www.acslaw.org/files/Grimmelmann%20Issue%20Brief.pdf;
see also http://paulcourant.net/2009/03/15/orphan-works-legislation-and-the-google-settlement/]

It seems a well-founded assumption that only a minority of rights-holders would be likely to register their works with the Book Rights Registry [see above § 9]. The ‘unclaimed funds’ would therefore make up the bulk of the revenues earned by the Google repository. It is noteworthy that the money is to be applied first to paying the expenses of running the Registry, and that the language used (‘any remaining funds’) clearly opens up the possibility that the whole of this money may be lavished on that task.

One quite persuasive inference from this is that Google Inc. and its partners in the Authors Guild and the AAP suspect that the revenues flowing from the proposed uses of the repository might turn out to be paltry; while the establishment and maintenance of the book rights database would inevitably swallow up a good deal of money [see above § 15]. Without the ‘unclaimed funds’ to draw on the Book Rights Registry and its database may not be an economic prospect.

The diversion of the income from the so-called ‘orphan works’ (in reality mostly works by non-US authors) would thus be a crucial feature of the whole scheme: and it is equally crucial that not too many of these ‘orphans’ are claimed by their rightful owners. Under the Settlement, one of the functions of the Book Rights Registry is to ‘attempt to locate Rightsholders with respect to Books and Inserts’. However, one cannot miss the point that every rights-holder they locate will reduce their available funding.

It may well be the case that the Google Book Settlement, if it comes into force, will function in a way quite similar to a Ponzi scheme: if every rights-holder whose work has been appropriated for the repository were to register a claim for the revenues earned by their work, the system would collapse.

*Post Scriptum

I spent part of the morning listening to a lecture delivered by Alexander Macgillivray, Senior Product and Intellectual Property Counsel at Google Inc.,at the Berkman Center, Harvard on 21 July. (Well, it was raining outside.) Macgillivray explained the calculation behind the way in which the 'unclaimed funds' are to be distributed to the registered rights-holders, and also clarified a couple of points. So I have amended my paper as follows:

If there were any money left [after paying the 'operational expenses' of the Book Rights Registry], it would be distributed differently depending on its source.

(a) If it was earned from advertising, or sales of access to works by consumers, it is to be used to top up the payments to the registered rights-holders until the sum arrives at 70% of what their works have earned from Google. The thinking behind this [as explained by Macgillivray] is as follows: under the Settlement, 70% is the notional percentage of a work’s earnings allocated to the rights-holders, but 10% of this will be sliced off by Google to pay for ‘operating costs’, thus arriving at the figure of 63%. The intention is that where there is money available from the ‘unclaimed funds’ it should be applied to returning this 10% slice to the registered rights-holders. If there is any money left after this, and only if, it is to be allocated to charities with educational objects, such as the promotion of literacy.

(b) If, after the ‘operational expenses’ of the Registry have been met, there are ‘unclaimed funds’ earned from the sales of library subscriptions to the repository, these are to be distributed in their entirety among the registered rights-holders.

Macgillivray was challenged to defend these provisions, but ducked the issue. He pointed out instead that there are a diversity of opinions about what should be done with this money; he suggested that anyone who wanted to see things done differently could lobby for legislation. Neither of which arguments offer any kind of reason to accept as legitimate a plan under which Google, the Authors Guild and the AAP collude over the disposal of money earned by works the rights to which they have not the faintest shadow of a title.

Google Book Settlement and 'Unclaimed Funds'

For earlier posts on the Google Book Settlement, see:

Google Book Settlement: the Background

How the Google Book Settlement affects European authors and rights-holders: 1

How the Google Book Settlement affects European authors and rights-holders: 2

Google Book Settlement: the Proposed Book Rights Registry 1

Google Book Settlement: Some Clarifications

Google Book Settlement: the Proposed Book Rights Registry 2

***

One provision of the Settlement that has attracted much critical comment is the plan for distributing what the Agreement terms ‘unclaimed funds’, revenues flowing from the use of works belonging to rights-holders who have not registered with the Book Rights Registry (the so-called ‘orphan works’). These funds would be held for five years; then what remains unclaimed would be applied in the first instance to paying ‘the operational expenses of the Registry’.* Any funds left after that would be distributed among the rightsholders according to a formula that means that the more their own works have earned, the larger the share they would receive of the unclaimed funds; and finally, the remaining funds, if there were any, would be allocated to charities with educational objects, such as the promotion of literacy. This latter provision is plainly a sop to public opinion.

[http://www.googlebooksettlement.com/intl/en-gb/Settlement-Agreement.pdf § 6.3.(a).(i);
http://www.googlebooksettlement.com/intl/en/Attachment-A-Author-Publisher-Procedures.pdf § 8.1,2,3]

The bland language of ‘unclaimed funds’ glosses over the fact that this is money that cannot, in equity, be applied to the purposes of the Book Rights Registry, since that entity is to be set up purely to represent the interests of the registered rights-holders; nor is there any justification for dividing part of it among the registered rights-holders, since they have no copyright interest in the works that earned it.

Strong critics of this aspect of the Settlement Agreement include Pamela Samuelson, and James Grimmelmann, an Associate Professor at New York Law School.

[http://radar.oreilly.com/2009/04/legally-speaking-the-dead-soul.html;
http://www.acslaw.org/files/Grimmelmann%20Issue%20Brief.pdf;
see also http://paulcourant.net/2009/03/15/orphan-works-legislation-and-the-google-settlement/]

It seems a well-founded assumption that only a minority of rights-holders would be likely to register their works with the Book Rights Registry [see above § 9]. The ‘unclaimed funds’ would therefore make up the bulk of the revenues earned by the Google repository. It is noteworthy that the money is to be applied first to paying the expenses of running the Registry, and that the language used (‘any remaining funds’) clearly opens up the possibility that the whole of this money may be lavished on that task.

One quite persuasive inference from this is that Google Inc. and its partners in the Authors Guild and the AAP suspect that the revenues flowing from the proposed uses of the repository might turn out to be paltry; while the establishment and maintenance of the book rights database would inevitably swallow up a good deal of money [see above § 15]. Without the ‘unclaimed funds’ to draw on the Book Rights Registry and its database may not be an economic prospect.

The diversion of the income from the so-called ‘orphan works’ (in reality mostly works by non-US authors) would thus be a crucial feature of the whole scheme: and it is equally crucial that not too many of these ‘orphans’ are claimed by their rightful owners. Under the Settlement, one of the functions of the Book Rights Registry is to ‘attempt to locate Rightsholders with respect to Books and Inserts’. However, one cannot miss the point that every rights-holder they locate will reduce their available funding.

It may well be the case that the Google Book Settlement, if it comes into force, will function in a way quite similar to a Ponzi scheme: if every rights-holder whose work has been appropriated for the repository were to register a claim for the revenues earned by their work, the system would collapse.

*Post Scriptum

I spent part of the morning listening to a lecture delivered by Alexander Macgillivray, Senior Product and Intellectual Property Counsel at Google Inc.,at the Berkman Center, Harvard on 21 July. (Well, it was raining outside.) Macgillivray explained the calculation behind the way in which the 'unclaimed funds' are to be distributed to the registered rights-holders, and also clarified a couple of points. So I have amended my paper as follows:

If there were any money left [after paying the 'operational expenses' of the Book Rights Registry], it would be distributed differently depending on its source.

(a) If it was earned from advertising, or sales of access to works by consumers, it is to be used to top up the payments to the registered rights-holders until the sum arrives at 70% of what their works have earned from Google. The thinking behind this [as explained by Macgillivray] is as follows: under the Settlement, 70% is the notional percentage of a work’s earnings allocated to the rights-holders, but 10% of this will be sliced off by Google to pay for ‘operating costs’, thus arriving at the figure of 63%. The intention is that where there is money available from the ‘unclaimed funds’ it should be applied to returning this 10% slice to the registered rights-holders. If there is any money left after this, and only if, it is to be allocated to charities with educational objects, such as the promotion of literacy.

(b) If, after the ‘operational expenses’ of the Registry have been met, there are ‘unclaimed funds’ earned from the sales of library subscriptions to the repository, these are to be distributed in their entirety among the registered rights-holders.

Macgillivray was challenged to defend these provisions, but ducked the issue. He pointed out instead that there are a diversity of opinions about what should be done with this money; he suggested that anyone who wanted to see things done differently could lobby for legislation. Neither of which arguments offer any kind of reason to accept as legitimate a plan under which Google, the Authors Guild and the AAP collude over the disposal of money earned by works the rights to which they have not the faintest shadow of a title.