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On October 19 A number of book publishers filed suit against Google Inc. They took issue with the company’s library book scanning project, claiming that if the Internet powerhouse made digital copies of library books available online for search purposes, Google would be committing massive copyright infringement. While Google’s program had the industry up in arms, publishers soon had another, equally troubling trend to worry about. One book publisher, HarperCollins, announced that it would make its entire backlist, about 20,000 titles, including such classics as Charlotte’s Web, available online. HarperCollins’s announcement had authors scrambling to review their book contracts with the publisher, (and other publishers worrying about their own contracts with authors). According to various sources in the book industry, many of these contracts make no mention of publishers getting “electronic rights” (also called “digital” or “display” rights). And even where they do, some authors are having second thoughts. At least one IP lawyer who represents HarperCollins authors, solo practitioner Charlie Petit, says several of his clients want the publisher to revert copyright back to them and not include their work in the company’s digital archive. Since the mid-1990s, books have been marching toward the digital age, and publishers have struggled to keep step. With only a loose grip on their most valuable intellectual property, book publishers have had little luck fighting for their digital rights in court, losing a string of cases to authors. Now, with authors emboldened by these wins, and Google and others looking into new ways to distribute content, the publishing industry is at a turning point. For the past century, publishers like Random House, Simon & Schuster, and Penguin have been guardians of copyright. Publishers gave authors money, described as an “advance” on sales, for the privilege of holding copyright and publishing a book. Publishers hold copyright only as long as the book sells, however. Otherwise, publishers typically take a book “out of print,” and revert copyright back to the author. Though reversion clauses are customary in contracts, publishers decide when to pull the trigger. Gary Rinck, senior vice president and general counsel at Hoboken, New Jersey � based publisher John Wiley & Sons, Inc., says that in the past, literary publishers have been “gentlemen” about this. But new technologies may make this arrangement obsolete. The Internet has allowed writers to do their own marketing, produce hardcover or paperback books on demand (through technological ventures like Lightning Source Inc.), and distribute works in multiple formats. Some authors, like science fiction writer Cory Doctorow, have released free electronic versions of books under the Creative Commons license. Others, like literary legend Kurt Vonnegut, have licensed older works to e-book vendors like RosettaBooks LLC. Many publishers, sensing both a competitive threat and a new marketplace opportunity, have concluded that contracts with authors should include language about digital rights. Some realized this sooner than others. New York � based Simon & Schuster put electronic rights clauses into its contracts in the mid-1980s. Time Warner Inc. (owner of Little, Brown and Warner Books) waited until the mid-1990s. But that’s not a panacea. In-print books like HarperCollins’s The Chronicles of Narnia by C.S. Lewis were published when contracts were silent on the issue of electronic rights. Furthermore, many superstar agents and their best-selling author-clients have refused to give up digital rights without sufficient compensation. Maggie Drucker, an in-house lawyer at Martha Stewart Living Omnimedia, Inc., and former senior counsel at Simon & Schuster, says there is a “definite lack of clarity” about how to treat these books. “I don’t know how publishers are going to handle it,” she says. So far, when the issue of digital rights has come up in court, publishers have stumbled. In 2000, when literary agent Arthur Klebanoff founded RosettaBooks, he bypassed publishers and secured digital rights directly from authors, whose contracts predated “electronic rights” language. The following year, Random House filed a copyright suit against RosettaBooks for selling some Random House titles as e-books, including William Styron’s Confessions of Nat Turner and Vonnegut’s Slaughterhouse-Five. Random House sought a preliminary injunction and lost. In a strongly worded 20-page opinion, Judge Sidney Stein wrote that the rights to publish a work in “book form” do not include the rights to publish it in “e-book form.” Random House, Stein ruled, was “not likely to succeed on the merits” of its case. Random House appealed the decision to the U.S. Court of Appeals for the Second Circuit, and lost. The company settled with RosettaBooks. In 2001 the U.S. Supreme Court delivered another blow to publishers, ordering The New York Times and other publications to compensate freelancers because their contracts did not grant publishers the right to republish works in electronic databases such as Lexis-Nexis or on a CD-ROM. The same year, the Eleventh Circuit ruled that National Geographic infringed a freelance photographer’s copyright by including his images in a CD-ROM. This past year, the Second Circuit sided with National Geographic in a different suit on the same issue. Since the Supreme Court refused certiorari on both cases, many publishing lawyers, like Association of American Publishers (AAP) general counsel Allen Adler and Debevoise & Plimpton partner Bruce Keller, admit that the digital rights issue is at the very least a gray area where publishers should proceed very cautiously. “It depends on how [a publisher] exercises those rights,” says Keller. These issues will likely come to a head with the litigation over Google’s online book search. So far, the fight has taken place outside the courtroom. Both sides in the case have appeared in public, and vociferously argued their respective positions. Publishers have said that Google needs permission to digitize copyrighted books. Google and its defenders point out the virtual impossibility of attaining copyright-holder approval for its project. They point to “orphan works,” certain books produced between 1923 and 1976 whose copyright ownership for various reasons is difficult to ascertain. The subject of digital rights hasn’t attracted as much attention. But the issue has already impacted settlement discussions, according to insiders. Before the publishers filed suit against Google, members of the AAP’s copyright committee met with the company to hear about the library digitization project, then called Google Print and now called Google Book Search. On July 1, 2005, Google offered a now infamous compromise called “opt-out.” Google proposed that copyright holders could inform the company if they wanted their works excluded from the program, and Google would comply. The publishers rejected it. Insiders say that under this program, publishers without electronic rights wouldn’t be able to block Google from making digital versions of works � even if the publishers have the copyright and the book is still in print. Over the next couple of months, the two sides exchanged memorandums repeating their positions. In the first week of August, the publishers pitched a trade-off. For works published from the 1920s to the 1960s, AAP general counsel Adler says, publishers “wouldn’t waive copyright, but we were willing to ensure Google’s use of those works wouldn’t make them subject to a lawsuit.” In exchange, the publishers wanted Google to consult R.R. Bowker LLC, a third-party agency that has assigned every published book since 1967 a number for cataloging purposes, and exclude any work listed in the company’s database. Google rejected it. Why the Bowker database? Publishers want Google to stay away from any book published in the past 40 years, whatever its status. And the only way that publishers can give a list of books they don’t want Google to touch is by using the database. After negotiations broke down, the publishers decided to ask a judge to rule that Google’s actions violated copyright law. In October 2005 the publishers filed a complaint, which included a 17-page list of allegedly infringed books. But did the list include books over which the publishers had no digital authority? Several lawyers working at the publishing houses named in the complaint say their lists were carefully scrubbed. But at least one publisher, Simon & Schuster, may not have been as cautious, including works by F. Scott Fitzgerald and Ernest Hemingway, authors who signed contracts before the digital age. “We operate under the assumption that our earlier contracts allow us to publish electronically,” says Adam Rothberg, a spokesperson at Simon & Schuster. Rothberg won’t say whether the contract or any of its amendments explicitly mention “electronic rights,” but says, “If you are going to conduct a new venture,” referring to the company’s recent launch of an online e-book store, “You have to go back and negotiate a royalty structure.” As the publishing world transitions to a state where books are sold as bits and bytes, and never go out of print, old publishing powerhouses are trying to modernize. Publishers have been launching their own electronic efforts and signing licensing deals. In the past few years, publishers have signed agreements with Amazon.com, Inc., allowing the Seattle-based online bookseller to let consumers search inside the book and buy books by the page. But these programs could come back to haunt publishers. Vonnegut’s Slaughterhouse-Five, the subject of litigation in the RosettaBooks suit, for instance, is included in Amazon.com’s “Search Inside the Book” program. According to Vonnegut’s agent, Don Farber, Random House never went back to his client after the ruling to get “electronic rights” to this book. A spokesperson from Random House says they granted Amazon.com the right to include the work, citing the promotional clause in the author’s contract. David Zapolsky, Amazon.com vice president and associate general counsel, says the company “work[s] closely with the publishers who participate in the Search Inside program to resolve any issues raised by authors on a case-by-case basis.” As for HarperCollins’s own digitization plan, the authors’ reaction could be further evidence that the battle over digital rights is just heating up. Ironically, the company announced the project as a way to beat Google at its own game and take ownership over digital copies. HarperCollins chief executive Jane Friedman told The Wall Street Journal in December 2005 that not only would the publisher produce digital copies, but that it would “store the digital copies and license them out to those who want to use them.” Making licensing arrangements for digital copies of C.S. Lewis books strikes some observers as added evidence that HarperCollins is asserting digital rights it might not have. But HarperCollins says it is doing nothing wrong. In a written statement, the company said that the digital copies were being made for “production purposes” and added, “We have no immediate plans to monetize content and therefore are not exercising ‘electronic’ rights.” Many copyright attorneys aren’t buying that. Cydney Tune at Pillsbury Winthrop Shaw Pittman, who chairs the firm’s copyright practice and has represented publishers, authors, and technology companies, says that digitization itself means producing a “derivative work,” similar to a translation. That requires authorization from an author, she says. “The issue as to whether a digitized copy was used for financial gain would only be relevant to a fair use defense and to a calculation of actual damages.” Even if these authors, or their estates, don’t take action, HarperCollins will face difficulties. In its statement, the company says “the reaction we have had from authors and agents has been enthusiastic and entirely positive.” But interviews with some authors and agents don’t bear this out. Charlie Petit says that some of his clients are concerned that the publisher won’t make good on its “gentlemen’s” promise to revert copyrights back to them if a digital copy exists. Publishers, he says, can let a book linger in electronic hell, without much promotion, and exploit print-on-demand technology whenever a consumer orders a book online. In the past, this option wasn’t available, and putting a book back into print was costly. Nowadays, a book might never go out of print, and copyright reversion clauses might never kick in. As a result, Petit has reopened negotiations with HarperCollins. “We have a Gordian knot here,” Petit says. “The only way to cut through it is to start back at zero.” The cost of selling a few copies here and there won’t mean much to the publisher, but authors say they should have the right to take back copyright, sign a new publishing deal, and pursue new marketplace opportunities. “[HarperCollins] transferred my titles to print-on-demand several years ago, and ignored all requests to return the rights to me,” says Ken Foster, author of The Kind I’m Likely to Get, a collection of short stories published by Quill, a division of HarperCollins. “I think the aggravating thing about HarperCollins and other publishers is that they don’t even seem to know what properties they are holding, let alone what the individual rights involved might be.” In the end, the suit against Google will likely depend on the court’s interpretation of “fair use.” David Drummond, general counsel of Google, says that Book Search was designed with fair use in mind. “We are not creating a substitute for the work by scanning the full text of a book,” he says. “We are creating an electronic card catalog, and to do that, you need to copy that whole thing.” Publishers might have to resort to a similar argument if they are challenged on digital rights issues. But any judgment against Google could come back to haunt them. Roger Zissu, an IP lawyer at New York’s Fross Zelnick Lehrman & Zissu, says that the debate over digital rights authorization won’t be headlining the trial. “But this will not be a minor sideshow,” he says. “It’s not going to help publishers if they pick some books with all the rights tidied up. If they win, it doesn’t leave them with protection against books not tidied up.” This article first appeared in Corporate Counsels sibling publication IP Law & Business.

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