Google Print and Transaction Cost-Based Analysis for Fair Use Law

Last Friday, PFF hosted a forum on the Google Print battle featuring 4 excellent panelists. I’m not going to go into all the issues at stake in this debate, but I did find it interesting that the panel of legal experts speaking at the event spent so much time focusing on transaction costs, something we usually only hear about when the panel consists of a bunch of economists. Economists love to engage in debates over transaction costs issues because they often dominate many public policy disputes. But what role should transaction cost-based analysis play in the outcome of the Google dispute with publishers?

Quite a bit, if we are to believe copyright lawyer Jonathan Band. He repeatedly stressed how part of Google’s winning case can be built around the notion of transaction costs. (Jonathan has written a nice background paper on the issues involved in the Google controversy that you can find here).

Specifically, he argues that the transactions costs for Google would be exorbitant if the company would first have to find every copyright holder and receive their permission before copying a text for the GP program. Band elaborated on his point quite a bit, and also made mention of Jim DeLong’s recent congressional testimony
in which he employs a transaction cost-based framework in discussing various interpretations of fair use. Jim argues for “focusing on fair use as a transaction cost issue.”

Well, I completely agree with Jim and Jonathan that it would make a great deal of sense to the courts and copyright lawyers to focus on fair use as a transaction cost issue and even apply that logic in the case if Google Print. But while that logic provides a useful way to look at fair use law, and perhaps a seemingly powerful defense for Google in their case, I just don’t know if it really makes a damn bit of difference in a legal context.

Now, let me start by admitting that I’m not a copyright expert; hell, I’m not even a lawyer. But I’ve studied copyright law and fair use jurisprudence enough to know that transaction cost analysis is not a core part of many of those cases. Of course, it goes without saying that the term is never mentioned in the famous 4-part fair use test, but it goes beyond that. When you go back and read many of the famous fair use cases always cited in the law books, you just don’t find many judges using the term of even thinking in such terms. So, as much as I’d like Jim’s “fair-use-as-transaction-costs” paradigm to become the more accepted way of looking at many copyright disputes, I’m just not sure that we’re there yet.

That’s too bad because, as Band suggests, transaction costs are really crucial to making Google’s case work. They will have to successfully convince the court that the alternative is just impossible and that fair use will need to be broadly read in this case to account for the enormous transaction costs associated with what the publishers propose.

Of course, Google has other arguments working their favor. Specifically, they will argue that this program provides a great benefit to society that only marginally hurts copyright holders, if it hurts them at all. Indeed, Google will argue that it will actually benefit copyright holders at the end of the day by helping to generate more attention / sales for works. In conjunction with their transaction cost argument, they hope that this argument will enable them to win on the fourth part of the 4-part fair use analysis regarding the impact of the market / value of the works in question.

But I’m not sure that the court will buy that. Moreover, even if it does, other fair use factors could weigh against Google. Specifically, the third prong of the test (dealing with the amount of the work being taken or used) could really hurt them. After all, Google is copying the ENTIRE book and keeping that copy for themselves. While many people in this debate are focusing solely on a sort of ends-based analysis of this case, making the case that Google should prevail because this service is just so damn cool or socially beneficially, that doesn’t necessarily amount to a hill of beans in the world of copyright law. The benefit of the doubt will tilt in the copyright holder’s favor to begin with and when they can use any one of the fair use defenses against them, it could be enough to take Google down. So that third favor could weigh more heavily than the others in this case.

Let me just conclude but noting that I do hope Google somehow prevails in this case for many of the reasons stated above. I would hope that fair use could be read broadly enough to accommodate a service like this. But I also believe it will require the courts to be willing to engage in exactly the sort of transaction cost-based analysis that Band and DeLong favor; a mode of analysis which, at least so far, doesn’t seem to have been tapped much in prior case law.

[P.S. I really enjoyed Tim Lee and Jerry Brito’s exchange on the Google Print dispute and learned a lot from it. I encourage you all to take a second look at it here to learn more about this interesting and important case.]

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