I’m certainly not going to claim that Google is going to win in court, since fair use determinations are notoriously hard to predict. But I think that on the merits, their case is a lot stronger than Jerry gives them credit for.
It’s not clear to me why Jerry doesn’t consider a parody a derivative work. By definition, a parody takes a work, retains some elements of it, drops some others, and transforms it into a new work. We could imagine an alternative universe in which publishers sold “parody rights” the same way they now sell film rights or sequel rights.
UMG v. mp3.com was a badly reasoned, short-sighted decision, and I think there’s a very good chance that it would have been overturned on appeal. If the decision is right that “Any allegedly positive impact of defendant’s activities on plaintiffs’ prior market in no way frees defendant to usurp a further market that directly derives from reproduction of the plaintiffs’ copyrighted works,” then it’s hard to see how any fair use defense could succeed. After all, one could imagine a world in which Hollywood won the Sony Betamax case and licensed Hollywood-approved VCRs that charged the consumer a fee every time a TV show was recorded. Or, if the music industry had won the Diamond case, they could have licensed MP3 players that send the appropriate publisher a penny every time a song was played. Likewise, if Kelly v. Arriba Soft had come out in favor of Mr. Kelly, perhaps owners of photographs could have licensed “search engine rights” to their photographs.
All fair uses involve reproducing copyrighted content in order to create derivative works. By definition, that undermines the ability of the copyright holder to sell derivative works of the same kind. If that were the standard, no use would withstand fair use scrutiny. That’s why courts have generally focused on the market for the original product, not the market for hypothetical derivative works.
Personally, I think the factor that will weigh most heavily in Google’s favor is factor 1, the purpose and character of the use. As the Supreme Court put it, that factor asks whether a use “merely supersedes the objects of the original creation, or whether and to what extent it is transformative.” MP3.com was arguably superseding the market for ordinary CDs. Google Print is clearly not superseding the market for books. And it’s every bit as transformative as Arriba Soft’s software was.