I think Tim is right that courts are beginning to realize that “new technological realities” make the kind of copying that search engines and other net applications engage in different from “the copying prohibited by traditional copyright law.” But they are really going to have to get it if Google Print Library is to succeed in court.
To me, the most important factor in a court’s fair use analysis is “the effect of the use upon the potential market for or value of the copyrighted work.” 17 USC § 107(4). A parody or critique is certainly fair use because you’ll never be able to buy a parody from the creator of the original. That is a parody will never be a substitute for either the original or derivatives and so won’t have an impact on the market for the original.
However, to have an impact on the market for the original doesn’t require there to be a copy that is an exact substitute for the original. In UMG v. MP3.com, the service in question wasn’t a direct substitute for the record companies’ product, namely CDs. But the use did affect the market for licensing. MP3.com’s wholesale copying of the plaintiffs’ music catalogs prevented them from exercising their exclusive right under copyright to decide whether to license their works or not. This isn’t contradicted by the holding in Kelly v. Arriba Soft either. In that case the court just didn’t find any evidence of market harm. And one thing the courts in MP3.com and Arriba both agreed on explicitly is that even if the allegedly fair use helps the market for the original that’s still no excuse.
So, is there a market that Google is affecting negatively? Well, the case can be made that there is a market for licensing the text of books for just the kind of thing that Google Print wants to do. Amazon.com has a “Search inside the book” feature and they get permission from every publisher before they make their books searchable. You also have to look no further than Google’s Print Publisher program that, unlike its Library program, gets permission and shares revenues. And mind you, the statute only requires that there be a “potential market” that is affected.
As a normative matter I think that what Google Print is trying to do should definitely be included within the meaning of fair use. But I think it might not be such an open-and-shut case as long as the market effect factor of the fair use doctrine isn’t updated to reflect the new realities of the net.