[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


.                      
                        COMPETITION AND COMMERCE IN 
                             DIGITAL BOOKS 

=======================================================================

                                HEARING

                               BEFORE THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               ----------                              

                           SEPTEMBER 10, 2009

                               ----------                              

                           Serial No. 111-31

                               ----------                              

         Printed for the use of the Committee on the Judiciary


   Available via the World Wide Web: http://judiciary.house.govFOR 
                               SPINE deg.














               COMPETITION AND COMMERCE IN DIGITAL BOOKS
















                      COMPETITION AND COMMERCE IN 
                             DIGITAL BOOKS

=======================================================================

                                HEARING

                               BEFORE THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 10, 2009

                               __________

                           Serial No. 111-31

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

51-994 PDF                       WASHINGTON : 2009 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
DC area (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, 
Washington, DC 20402-0001 



















                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
MAXINE WATERS, California            DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
ROBERT WEXLER, Florida               STEVE KING, Iowa
STEVE COHEN, Tennessee               TRENT FRANKS, Arizona
HENRY C. ``HANK'' JOHNSON, Jr.,      LOUIE GOHMERT, Texas
  Georgia                            JIM JORDAN, Ohio
PEDRO PIERLUISI, Puerto Rico         TED POE, Texas
MIKE QUIGLEY, Illinois               JASON CHAFFETZ, Utah
LUIS V. GUTIERREZ, Illinois          TOM ROONEY, Florida
BRAD SHERMAN, California             GREGG HARPER, Mississippi
TAMMY BALDWIN, Wisconsin
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York

       Perry Apelbaum, Majority Staff Director and Chief Counsel
      Sean McLaughlin, Minority Chief of Staff and General Counsel
















                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 10, 2009

                                                                   Page

                           OPENING STATEMENTS

The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Chairman, Committee on the 
  Judiciary......................................................     1
The Honorable Zoe Lofgren, a Representative in Congress from the 
  State of California, and Member, Committee on the Judiciary....     1
The Honorable Lamar Smith, a Representative in Congress from the 
  State of Texas, and Ranking Member, Committee on the Judiciary.     2

                               WITNESSES

Mr. David C. Drummond, Senior Vice President of Corporate 
  Development and Chief Legal Officer, Google Inc.
  Oral Testimony.................................................     4
  Prepared Statement.............................................     7
Mr. Paul Misener, Vice President of Global Policy, Amazon.com
  Oral Testimony.................................................    15
  Prepared Statement.............................................    17
Mr. Marc Maurer, JD, President, National Federation of the Blind
  Oral Testimony.................................................    22
  Prepared Statement.............................................    23
Mr. John M. Simpson, Consumer Advocate, Consumer Watchdog
  Oral Testimony.................................................    26
  Prepared Statement.............................................    28
Mr. Paul Aiken, Executive Director, Authors Guild
  Oral Testimony.................................................    32
  Prepared Statement.............................................    34
Ms. Marybeth Peters, Register of Copyrights, U.S. Copyright 
  Office
  Oral Testimony.................................................    64
  Prepared Statement.............................................    66
Mr. Randal C. Picker, Paul H. and Theo Leffmann Professor of 
  Commercial Law, University of Chicago Law School
  Oral Testimony.................................................    76
  Prepared Statement.............................................    79
Mr. David Balto, Senior Fellow, Center for American Progress
  Oral Testimony.................................................   111
  Prepared Statement.............................................   113

                                APPENDIX

Material Submitted for the Hearing Record........................   163


                      COMPETITION AND COMMERCE IN 
                             DIGITAL BOOKS

                              ----------                              


                      THURSDAY, SEPTEMBER 10, 2009

                          House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 10 a.m., in room 
2141, Rayburn House Office Building, the Honorable John 
Conyers, Jr. (Chairman of the Committee) presiding.
    Present: Representatives Conyers, Watt, Lofgren, Jackson 
Lee, Waters, Cohen, Johnson, Quigley, Sherman, Gonzalez, 
Schiff, Smith, Coble, Goodlatte, Lungren, and King.
    Staff Present: (Majority) Perry Apelbaum, Staff Director 
and Chief Counsel; Christal Sheppard, Counsel; Brandon Johns, 
Staff Assistant; (Minority) Sean McLaughlin, Chief of Staff and 
General Counsel; and Stewart Jeffries, Counsel.
    Mr. Conyers. Good morning, ladies and gentlemen. We are 
going to start some opening statements. Time is of essence 
here.
    We come here to discuss among ourselves ``Competition and 
Commerce in Digital Books.'' The Google Books settlement 
represents, without exaggeration, one of the most innovative 
developments since the press.
    I am going to start off by asking Zoe Lofgren, also from 
Silicon Valley, to just take a couple of minutes to get us off. 
And then I will turn to the distinguished Ranking Member. The 
Chair recognizes Zoe Lofgren.
    Ms. Lofgren. Thank you, Mr. Chairman. And I thank you for 
holding this hearing today.
    The future of literacy does, I think, indeed rely a great 
deal on how we get right digitizing written material. And, in 
fact, we probably wouldn't be here today if the Congress had 
been successful in dealing with the orphan works measure.
    As you know, Mr. Chairman, I was a coauthor in working with 
Howard Berman. We made a very grand effort to do something in 
that regard. It was brought to our attention by Justice Breyer 
in the Eldred case. And it seemed to me the fact that 
potentially a majority of the written works in this country are 
unavailable to the culture is a problem--is a problem. And that 
is why we worked so hard to try and come up with a solution. 
And we failed. We failed.
    We could not get parties--you know, the fact that orphan 
works are not being exploited tells us some things, which is: 
The rights holder, whoever he or she was, decided they couldn't 
make money on it. But as soon as the prospect of money was in 
the air, no one wanted to do a deal. And so I think we are here 
today because somebody in the private sector decided to seek 
forgiveness rather than permission. And that, in a way, is what 
this settlement is. It is a resolution of the rights that we, 
the Congress, could not accomplish--could not accomplish.
    And so I think that there are legitimate issues that we 
need to look at. I think this hearing is important because of 
that. But I am also mindful that, as with all antitrust and 
copyright issues, there are competitors who sometimes try and 
seek a business advantage out of a dispute. It is important for 
us--you know, and that is fair. This is America; people can do 
that--but to separate out that kind of squabbling from the 
actual legal issues that are before us.
    Now, I did want to mention one thing because it is 
something that has been overlooked, but I am a believer in the 
utility, at times, of class action lawsuits. I have been a 
critic of coupon settlements, but there are times when the 
class is so big that you have to actually group them together. 
And I am very disturbed by any criticism that would eliminate 
rule 23, which is an undercurrent in some of this. That is not 
on the table, as far as I am concerned, Mr. Chairman. And I 
know that you have felt that way in the past. So I just wanted 
to state that.
    And in this final matter, I just want to say, I am quite 
distressed that we only received testimony from the Copyright 
Office this morning. There is a rule that the testimony has to 
be here at least 24 hours in advance. I can recall when Mr. 
Sensenbrenner was Chairman that he refused witnesses to testify 
if their testimony was not here. I had looked forward to 
reviewing the testimony, and I didn't have the opportunity to 
do that. So I just think, you know, the office is not some 
newbie. It is not, you know, some volunteer. And it is just 
scandalous, really, outrageous. And I am ashamed that the 
government did that.
    With that, Mr. Chairman, I am not going to speak further 
because we have a lot of witnesses and we want to get through 
them this morning. I appreciate your hearing, and I appreciate 
all those who are here as witnesses. Thank you.
    Mr. Conyers. Yes, only eight witnesses.
    The Chair is now pleased to recognize the distinguished 
gentleman from Texas, the Ranking Member, Lamar Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    Today's hearing allows the Committee to explore the 
intersection of two areas of the Committee's jurisdiction, 
antitrust and copyright.
    In September 2008, copyright owners and Google reached a 
settlement agreement in a class action lawsuit concerning 
Google's digitization and use of millions of books in the 
Google Book Search program. The District Court for the Southern 
District of New York has scheduled a hearing for October 7, 
2009, to review and possibly approve the terms of this 
settlement agreement.
    Under this settlement, copyright infringement claims 
against Google for the unauthorized digitization of millions of 
books would be dropped and Google would be allowed to make 
commercial use of books it has scanned that were published 
prior to January 5, 2009. This includes offering individual 
books for sale and subscriptions to the entire digital 
collection of scanned books.
    In return, Google will share proceeds from use of the works 
with copyright owners. To facilitate the distribution of these 
royalties, the settlement calls for the creation of a Book 
Rights Registry that will serve as a collecting society for 
affected copyright holders.
    Google Book Search is a novel and innovative way for people 
to acquire knowledge. Google has made accessible literally 
millions of books that were out of print or otherwise largely 
unavailable to readers and researchers.
    The Google Books settlement also anticipates the creation 
of a Book Rights Registry that may be useful in resolving the 
so-called orphan works program. In the past, the absence of 
such a registry has been considered a stumbling block to the 
ultimate resolution of this matter.
    But there are countervailing concerns. Some complain that 
Google was able to negotiate this agreement only after they 
allegedly infringed the rights of tens of thousands of 
copyright holders. Without that action and the litigation that 
led to the subsequent certification of a class, we would not be 
here today.
    The class action system, by its very nature, can only 
address Google's actions. Thus, the benefits that Google would 
obtain through this settlement are not readily available to any 
of their actual or potential competitors in book search and 
sales. As a practical matter, the only way a competitor would 
be positioned to benefit from a similar arrangement would be to 
follow the same course of action pursued by Google: in other 
words, divest risk liability by digitizing massive amounts of 
copyright protected works without first receiving the express 
permission of the authors or other rights holders. Even then, 
there is a question as to whether the competitor would receive 
the same settlement terms as Google.
    From a public policy perception, it is unclear whether the 
Google Book Search settlement is the ideal way to address the 
orphan works issue. Congress had been wrestling with this issue 
for years, and the settlement agreement at issue today is but 
one, and not necessarily the right, solution.
    There is also the question of whether the Book Rights 
Registry between the publishers and authors would facilitate 
price-fixing of works not just to Google but to all book 
resellers. This would undoubtedly be a bad deal not just for 
Google and its competitors but for consumers as well.
    Mr. Chairman, these are a few of the questions raised by 
this settlement, and I think it is very helpful today to have 
such a balanced panel of experts address these concerns. And I 
thank you for holding the hearing.
    I will yield back.
    Mr. Conyers. Thank you for your thoughtful introductory set 
of comments.
    For my part, I would welcome this hearing and the eight 
participants by observing that it is a good thing to provide 
millions of Americans access to published works that otherwise 
wouldn't be available to them. A library will be available in 
every household with an Internet connection. This could be the 
greatest innovation in book publishing since the Gutenberg 
Press.
    The heart of the matter is that my primary concern is that, 
because Google reached this settlement, they now have exclusive 
access to orphan works. However, this can be remedied by 
legislation that would include others. And I have indications 
from that organization that they would support such a remedy.
    The fact is that Google is in this position, in my view, 
not because they have engaged in predatory or anticompetitive 
behavior but because they have, to date, built a better 
mousetrap in the eyes of mousetrap purchasers.
    The settlement has, in my view, been fair with copyright 
owners. It explicitly gives copyright owners the ability to 
determine the type and cost of access for consumers. As 
copyrighted books become part of the Internet, we need to be 
careful. It is important that others who wish to compete with 
Google Books adhere to the same type of copyright protections 
that Google has agreed to.
    For some books, the rights holder cannot be found. These 
are ``orphan works.'' For other works, the rights holder can be 
found but it requires some effort. We must ensure that the law 
continues to create incentives to make best efforts to find the 
rights holders of these books.
    We also should make sure that access is provided to the 
sight-impaired and others with disabilities, as this settlement 
does.
    Now, are there any other Members in the Judiciary Committee 
that have a burning desire to make a 1-minute statement?
    None. And so we will now turn to our list of witnesses. And 
what a group we have.
    We welcome senior fellow from the Center for American 
Progress David Balto. We welcome Mr. Randal Picker, the Paul H. 
and Theo Leffmann professor of commercial law, University of 
Chicago. And of course the register of copyrights for the 
United States Copyright Office, we welcome back again Ms. 
Marybeth Peters. We have also the executive director of the 
Authors Guild, Mr. Paul Aiken. And then we have John Simpson, 
consumer advocate, Consumer Watchdog; from the National 
Federation of the Blind, its president, Dr. Marc Maurer; the 
vice president of global public policy, Amazon.com, Mr. Paul 
Misener.
    And we begin with David Drummond, who will be our first 
witness. He is the senior vice president of Google's corporate 
development and its chief legal officer. He has been with 
Google since 2002, worked as outside counsel, and is no 
stranger to the Judiciary Committee.
    We will accept into the record all the witnesses' 
statements, including yours, Mr. Drummond. And we welcome you 
to begin our discussion this morning.

   TESTIMONY OF DAVID C. DRUMMOND, SENIOR VICE PRESIDENT OF 
   CORPORATE DEVELOPMENT AND CHIEF LEGAL OFFICER, GOOGLE INC.

    Mr. Drummond. Well, thanks so much, Chairman Conyers. It is 
indeed an honor to be back. Ranking Member Smith, Committee 
Members, thanks for having me here to discuss how the Google 
Books settlement will benefit the reading public and spur 
competition in the emerging electronic book industry.
    Imagine if a student living in a rural area or inner-city 
could go to a local public library and read from millions of 
books in the combined collections of some of our Nation's 
greatest universities and libraries--the University of 
Michigan, University of Texas, Stanford, the New York Public 
Library--or if a blind student suddenly could access millions 
of digital books to unlock knowledge foreclosed from the 
visually impaired today. Then consider the author, whose life's 
work, a book no longer in publication, suddenly becomes 
available online so anyone could find it, buy it, and read it.
    That is why I am excited to be here: Because these and 
other opportunities will be created by the settlement of a 
lawsuit brought against Google by authors and publishers.
    Now, this settlement is the result of 3 years of 
painstaking negotiation, but I am proud of what we have 
achieved. The settlement will create an educational, cultural, 
and commercial platform to expand access to millions of long-
forgotten books for anyone in the United States. It will enrich 
our country's cultural heritage and intellectual strength.
    As I will explain, the product we provide today is fully 
compliant with copyright law. The settlement will let us 
improve our product in ways that will expand access for the 
public, provide rights holders choice and compensation, lower 
barriers to entry in the electronic book market, complement 
orphan works legislation, and preserve Congress's role in 
setting copyright policy.
    Now, there has been a lot of talk that our scanning efforts 
originally violated copyright law. I reject that, and I reject 
it wholeheartedly. We strongly believe that we would have won 
the case on the basis that copying for the purpose of indexing, 
which is the same thing we do on the Internet, is a fair use 
under existing precedent.
    And let me be clear about one thing, because there is some 
confusion. It is an important point. Although we have scanned 
books, if it is an in-copyright book, we are not displaying any 
more than a few lines of text around the search term. We call 
this a snippet view. And we believe that just like Web search, 
indexing and showing snippets does not violate anyone's 
copyrights.
    Now, if you are on Google Books today and you see more than 
a short snippet, you are looking at a book that is directly 
licensed to us from one of our 30,000 publishing partners or 
you are looking at a book that is in the public domain.
    Now, since 2004, Google has scanned more than 10 million 
books: 2 million public domain books and 2 million from our 
partners. The other 6 million are still subject to copyright 
protection but largely out of print, meaning that there is no 
current market or easy access to these books.
    The settlement dramatically expands access to these out-of-
print books, and it's this new access that makes the settlement 
a far better outcome for the parties and for society than if 
either of us had won the lawsuit.
    First, rather than showing just snippets, we will now be 
able to show a preview of up to 20 percent of the book. This 
will let users browse books and read a few pages, as they do in 
bookstores today.
    Second, Google can offer for sale a digital version of the 
book, with 63 percent of the revenue going to the rights 
holder. We don't sell books today, so we are entering this with 
absolutely zero market share.
    Third, we can provide an institutional subscription for 
colleges, libraries, and other organizations. Small colleges 
are eager to use the subscription to attract faculty and 
students and level the playing field with larger institutions. 
And we will give every public library across the country free 
access to our database at one on-site computer.
    Now, at any time, a rights holder can direct Google to turn 
these displays off, set the purchase price itself, or make 
other granular choices.
    Out-of-print books stopped generating revenue for authors 
and publishers long ago, so no incentive exists to resolve the 
complicated question of who owns the digital rights. And it is 
not simply a matter of locating the author. Decades-old 
contracts may or may not have included digital rights. Long 
ago, communications may have been disputed, and clearing the 
rights often costs more than the economic value of the out-of-
print work. The settlement will change that. It creates a 
registry to locate rights holders, distribute revenue, resolve 
disputes, and license works to other providers besides Google.
    Some claim that the settlement will harm competition, but 
the agreement is nonexclusive in every possible respect and 
actually lowers barriers. Let's be clear about this: Any search 
engine that wants to scan and index in-copyright books to 
compete with us can already do that as a fair use. And any book 
retailer who wants to scan books can make deals with our 
library partners and do what we did.
    So, many of the critics confuse orphan works with the real 
problem, which is rights clearing. It is not that the book is 
orphaned; it is that the two parents, sort of, can't work out 
who owns it, and it is not really cost-effective to try. The 
settlement doesn't make it any harder for anybody to do this. 
It actually makes it easier.
    Now, there might be a small portion of books that are truly 
abandoned, and here the settlement complements orphan works 
legislation. Past measures didn't really address the rights-
clearance issues, which really are the lion's share of the 
problem. Years ago we called for effective orphan works 
legislation, as the Chairman alluded to. We will continue to 
support these efforts. And we believe that the settlement makes 
this legislative task easier, as we have funded a private-
sector initiative and a mechanism to clear rights that actually 
reduces the scope of the problem.
    Now, let me clarify one last thing. The settlement of 
private litigation does not take away Congress's power to set 
copyright policy. Critics may dislike the use of class actions 
in copyright cases, but it is the judge's role to apply rule 23 
to assure a fair process for the class members. And as a means 
to redress private litigation in the U.S., the settlement is 
consistent with all of our international treaty obligations, 
which is a view that is confirmed by the leading scholars.
    While much time and energy has been spent on the 
settlement, it is not really Google's vision for the future of 
digital books. It is kind of the past. We are partnering with 
bookstores, publishers, and device-makers to develop an open 
platform that allows readers to find and purchase digital books 
from any device. It is this open platform and the availability 
of the newest titles that is going to drive competition and 
commerce with digital books, not the out-of-print books.
    Thanks very much, Mr. Chairman.
    [The prepared statement of Mr. Drummond follows:]
                  Prepared Statement of David Drummond

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               __________

    Mr. Conyers. Thank you.
    Now, sitting amicably next to Mr. Drummond is the vice 
president of Amazon.com's global public policy. And for nearly 
10 years, he has been doing that work and is responsible for 
formulating and representing the company's public policy 
positions worldwide.
    We are glad that you are here, Mr. Misener. You may 
proceed.

         TESTIMONY OF PAUL MISENER, VICE PRESIDENT OF 
                   GLOBAL POLICY, AMAZON.com

    Mr. Misener. Thank you very much, Mr. Chairman. I am also 
very happy to be here. And I appreciate you and Mr. Smith 
holding this hearing and inviting me to testify.
    I was going to read my written statement, but since that is 
already part of the record, I think it probably is more 
important that I take on one particular issue in my 5 minutes.
    First of all, we fully appreciate the value of scanning 
books and making them more widely available. We began scanning 
books before Google did. And, to date, we have scanned 3 
million books. Three million books we have scanned.
    The difference is, and probably the only significant 
difference between their book-scanning project and ours, is we 
first sought permission from the rights holders. We went to the 
rights holders and, one by one, negotiated deals with the 
rights holders to be allowed legally to scan these books.
    It has been said repeatedly that this is a nonexclusive 
arrangement, that the proposed settlement would somehow not be 
exclusive, would not give Google exclusive rights over 
competitors. That simply is not true. The proposed settlement, 
if approved, would give Google exclusive liability, free 
monopoly rights over millions of works--exclusive.
    Now, this exclusivity has two principal components, and I 
thought it would be most helpful if I explained how this 
exclusivity arises.
    One is the release from liability. Now, clearly, as any 
settlement of a class action would do, it releases Google for 
past actions. But this settlement goes much further. It 
releases Google prospectively for future infringement. It even, 
as Mr. Drummond outlined, releases Google for future 
infringement using business models that they haven't even used 
yet. This is remarkable for a class action settlement, to say 
the least.
    The other aspect of exclusivity is the composition of the 
corpus, what body of works are available to Google with this 
exclusive release of infringement liability.
    Well, first, the corpus initially available to Google is 
essentially everything, right? It is U.S. books in copyright 
published before January of this year. It is all that, 
everything minus a few opt-outs. There are opportunities for 
rights holders to either opt out of the proposed settlement, so 
they can pull their works out that way. And there are also 
exclusion and removal procedures where rights holders can opt 
out their works out of the Google corpus.
    But what does a competitor get? Nothing, except what is 
opted in by rights holders.
    Rights holders can opt in to have a competing distributor 
of digital books in two ways. One is the traditional, the time-
honored way, going out, negotiating one on one with rights 
holders. This is what Amazon has done for its 3 million books. 
We have done this, and the rights holders clearly have opted in 
to this.
    The other way arises within the proposed settlement, if 
approved. This other way would be through the registry that has 
been discussed by Mr. Drummond and others. The registry has its 
own problems because it would combine erstwhile competitors in 
agreement, which would allow them to fix prices for books.
    But setting aside that, we have to ask, what is the corpus 
available to the registry? The corpus available to the registry 
is, again, limited only to the rights holders who have opted in 
their works.
    So what does this mean overall? Google gets everything, 
minus some opt-outs. Competitors get nothing, plus some opt-
ins. Well, what do orphans do? By definition, orphans don't do 
any opting. They won't be opting out. They are not to be found. 
They are not potentially findable. They won't be opting in to 
the competitor. So, by this mechanism, Google has exclusive, 
liability-free monopoly rights over millions of works which are 
orphans.
    They also have, in addition to the orphans, the same 
circumstance applies to rights holders who could be found with 
a diligent search, as would have been required by the orphan 
works legislation. But they are just not interested, they are 
busy with other things, they have moved on in their lives, 
whatever. But they don't out opt of the Google corpus, and they 
don't opt in to the competitor's corpus.
    Again, the proposed settlement would set up a monopoly for 
Google for liability-free treatment of millions of works.
    And I look forward to your questions. My time is out.
    [The prepared statement of Mr. Misener follows:]
                   Prepared Statement of Paul Misener

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               __________
    Mr. Conyers. Thank you very much.
    We now are pleased to hear from Dr. Marc Maurer, president 
of the National Federation of the Blind. As its president, he 
is leading the organization, I think boldly, in its expansion 
of the National Center of the Blind.
    And, sir, we welcome you here this morning.

           TESTIMONY OF MARC MAURER, JD, PRESIDENT, 
                NATIONAL FEDERATION OF THE BLIND

    Mr. Maurer. Thank you, Chairman Conyers and Members of the 
Committee. I am Marc Maurer, and I do serve as president of the 
National Federation of the Blind, which is the largest 
organization of the blind in the United States, with over 
50,000 members.
    Approximately 1.3 million blind people live in the United 
States. Thirty million people in the United States, 
approximately, have print disabilities. We favor the Google 
settlement because it provides electronic books in accessible 
formats to individuals with print disabilities.
    Electronic books are the trend in education and reading. A 
number of State governments are seeking to change from print 
textbooks in the public schools to electronic books. Many 
universities are using an increasing number of electronic 
books. And several large companies are distributing these 
books. So far, Google is the only company that has planned to 
make millions of these books available to the public in ways 
that can be used by individuals with print disabilities.
    In the National Federation of the Blind, we have urged 
governments, universities, and commercial entities to make 
electronic information accessible to the blind. The technology 
exists to do this with only a minimum of difficulty. Most of 
the time, the response we get is either a delaying tactic, a 
refusal to accept the importance of our proposals, or an 
ignorant assertion that access to information for these 
disenfranchised individuals is of minimal importance.
    We spend our lives trying to get at information that others 
take for granted. One of the real disadvantages of blindness is 
that access to readily available information is either 
frequently denied or made more difficult than it needs to be. 
Google is trying to change part of this, and I applaud them for 
it.
    Some of their competitors have stiff-armed us. We have 
talked to them, but they have ignored the reality that we 
represent a market for their products. We want the right to buy 
books, to pay for intellectual property. We understand that 
some people think of the blind as objects of charity who should 
be given only what they think we need. However, we want access 
to the commercial marketplace, and we want to pay for the 
access by buying the books we need. We want to spend the same 
number of dollars to get the same books at the same time and at 
the same price that other people pay to get them.
    Now the opponents of this settlement would like to close 
the market for us that Google is planning to make available. We 
regard this as reprehensible. We wholeheartedly support the 
Google settlement, and we urge you to join in this support.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Maurer follows:]
                   Prepared Statement of Marc Maurer

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                               __________

    Mr. Conyers. Thank you very much, Mr. President.
    Well, in every hearing, there has got to be a consumer 
watchdog. And, in this case, the consumer watchdog is a group 
called ``Consumer Watchdog,'' in the person of Mr. John 
Simpson. He started off as a nice fellow a long time ago as a 
journalist. Then he became a veteran journalist and held top 
editing positions at newspapers, international and national. 
And now he is where he is today.
    So we welcome you for your testimony, sir.

   TESTIMONY OF JOHN M. SIMPSON, CONSUMER ADVOCATE, CONSUMER 
                            WATCHDOG

    Mr. Simpson. Thank you, Mr. Chairman. I am delighted to be 
where I am today, which is here in front of your Committee. 
Good morning to you, sir, and to the Ranking Committee Member 
Smith and other Committee Members. Thank you for considering my 
testimony.
    Established in 1985, Consumer Watchdog is a nationally 
recognized, nonpartisan, nonprofit organization representing 
the interests of taxpayers and consumers. Over the past year, 
our Privacy Project focused on Google, funded by the Rose 
Foundation, a charitable, nonprofit organization. During that 
project, we became aware of the proposed book settlement. In 
April, we called upon the Department of Justice to intervene in 
the proposed settlement because of its antitrust concerns. And 
Justice has since announced it is investigating.
    Let me be absolutely clear: We do not oppose the concept of 
digital libraries. Done correctly, they would greatly enhance 
public access to books. Everyone should be in favor of that.
    The problem is Google's monopolistic digital library and 
how it would be implemented. The proposed class action 
settlement is monumentally overbroad and invites the court to 
overstep its legal jurisdiction to the detriment of consumers, 
the public. The proposed settlement would strip rights from 
millions of absent class members worldwide in violation of 
national and international copyright law for the sole benefit 
of Google. The deal simply furthers the relatively narrow 
agenda of Google, the Authors Guild, and the Association of 
American Publishers.
    The settlement provides a mechanism for Google to deal with 
orphan works. It protects Google from such potentially damaging 
exposure but provides no protection for others. This 
effectively is an insurmountable barrier for potential 
competitors who wish to enter the digital book business.
    In our brief, filed on our behalf by Kasowitz and Benson in 
U.S. District Court, we made four specific arguments against 
the settlement. It is not fair, adequate, or reasonable because 
it far exceeds the actual controversy before the court and 
abuses the class action process. It is an unauthorized attempt 
to revise the rights and remedies of U.S. copyright law, which 
are exclusively left to Congress. I would expect that this body 
would be very concerned about that usurpation. It conflicts 
with international law, specifically the Berne Convention for 
the Protection of Literary and Artistic Works. And finally, as 
I mentioned, it is an unlawful and anticompetitive monopoly. We 
are also very concerned about the privacy aspects.
    So, what is to be done? The unfair competitive advantage 
Google receives under the settlement comes from its attempt to 
pull an end-run around the appropriate legislative solution to 
the orphan books problem. This is not an issue for a court and 
certainly one that cannot be settled by solving the problem for 
one large corporation and no one else. Congress must resolve 
the orphan rights issue. It could also step in with legislation 
about what exactly constitutes fair use in the digital age. 
Privacy guarantees are another area appropriate for legislative 
action.
    Finally, Consumer Watchdog supports digitization and 
digital libraries in a robust, competitive market open to all 
organizations, both for-profit and nonprofit, that offer 
fundamental privacy guarantees to users. But a single entity 
cannot be allowed to build a digital library based on an 
unprecedented monopolistic advantage when its answer to serious 
questions from responsible critics boils down to, ``Trust us. 
Our motto is `Don't be evil.' ''
    Thank you very much. I look forward to your questions.
    [The prepared statement of Mr. Simpson follows:]
                 Prepared Statement of John M. Simpson

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                               __________

    Mr. Conyers. Thank you very much, sir. You didn't 
disappoint me.
    Mr. Simpson. Thank you.
    Mr. Conyers. Mr. Paul Aiken is the executive director of 
the Authors Guild, the largest society of published book 
authors and freelance journalists in the United States. He has 
testified before the White House Task Force on Copyright and 
the Internet and has testified before Congress.
    We are pleased to welcome you again to the Judiciary 
Committee.

   TESTIMONY OF PAUL AIKEN, EXECUTIVE DIRECTOR, AUTHORS GUILD

    Mr. Aiken. Good morning, Chairman Conyers, Ranking Member 
Smith, and the other distinguished Members of this Committee.
    Today we stand at the threshold of a landmark achievement, 
an achievement that promises to have a profound effect on the 
educational and cultural life of our country. I am deeply proud 
that the Authors Guild played a role in bringing us to this 
threshold.
    The point of copyright is to create markets for creative 
works. It has worked brilliantly. It has filled our homes and 
classrooms with countless informative and entertaining works. 
It has helped turn our great academic and public libraries into 
vast and valuable storehouses of intellectual and cultural 
capital.
    But in spite of the best efforts of our librarians and the 
fondest hopes of our Nation's authors, only a small part of 
that value is being realized. Books aren't getting to all the 
people who would like to read them because they have 
disappeared from the market. Those tens of millions of out-of-
print books represent a market failure, one of the oldest 
market failures in our economy.
    It is a market failure that my organization has tried to 
address in a small way for years, going back a quarter of a 
century to the initiative of our member, the late William F. 
Buckley. Mr. Buckley worked with us to develop a catalog of 
out-of-print books that authors were making available by mail 
order. That effort evolved into backinprint.com, which now 
offers more than 1,400 books in on-demand form, generating a 
modest but respectable $100,000 in annual royalties. 
Backinprint.com demonstrates on a small scale that out-of-print 
books have ongoing commercial value.
    In the course of negotiating a settlement with Google, we 
found a way to address that same market failure on a much 
larger scale, in a manner similar to the way copyright systems 
around the world have addressed other market failures. In 
Germany, for example, at this moment, works by U.S. and other 
authors are being copied without the authors' permission. 
Everything can be photocopied--in-print, out-of-print, even 
orphaned or unclaimed works. There is no getting out of it, I 
am told; there is no way to exclude your work from the system.
    Nearly every advanced economy has such a system, a license 
by default for photocopying. It is a practical solution to a 
knotty problem. The transaction costs of clearing photocopy 
rights often exceed the value of the copy itself. These systems 
address a market failure, and they abide by international 
copyright law.
    In our settlement, we are creating commercial markets where 
there are none. To get the necessary scale to create a viable 
market, out-of-print works will automatically be in the system, 
but, as in the photocopy systems of the U.K. and in Canada, 
rights holders will be able to exclude them.
    Our settlement, besides creating new markets, provides 
another important benefit: It will shrink the orphan works 
problem. The new Book Rights Registry will have as a duty the 
duty of finding authors for whom it has money.
    This is not nearly as daunting as many assume. The Authors' 
Licensing and Collecting Society in the U.K., for example, 
reports a success rate of upwards of 90 percent in finding 
authors of out-of-print books. We would still like to address 
the orphan work problem in the U.S., but we would like to cut 
it down to size, at least for books.
    In Brussels this week, there were hearings on this 
settlement. The copyright wars are playing out over there as 
they are here, so we heard the usual debating points. We also 
detected something new: a subplot of envy. Europeans are 
starting to size up what we have achieved, and they like it. 
They think we are getting a significant advantage, that we have 
found a way to more fully deploy the intellectual and cultural 
capital stored in our great libraries. They are right. No doubt 
they will be working hard to catch up.
    In the meantime, here, we are at the threshold. We can 
recognize what we have, the transformational result of a rare 
and productive truce in the copyright wars, negotiated by 
pragmatic representatives of the author, publisher, and library 
communities and a sophisticated technology partner, and we can 
cross the threshold. Or we can let the fight consume us. If 
that should happen, then perhaps someday when everyone is worn 
out we will arrive at another solution. I fear, however, that 
it may not be nearly as good for everyone as the deal before us 
and that it almost certainly won't be worth the wait.
    Thank you for inviting me to testify today. I look forward 
to your questions.
    [The prepared statement of Mr. Aiken follows:]
                    Prepared Statement of Paul Aiken

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                               __________
    Mr. Conyers. Thank you so very much.
    We are now happy to have with us again the leader of the 
United States Copyright Office, Ms. Marybeth Peters. She has 
been a frequent speaker and writer on this and other related 
subjects and is the author of the ``General Guide to the 
Copyright Act of 1976.''
    And we welcome you at this time, ma'am.

  TESTIMONY OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, U.S. 
                        COPYRIGHT OFFICE

    Ms. Peters. Thank you. Chairman Conyers, Ranking Member 
Smith, and Members of the Committee, I appreciate the 
opportunity to testify before you today about the potential 
impact of the proposed Google Books settlement on United States 
copyright law and policy.
    I am familiar with the terms of the settlement. Indeed, my 
office has thoroughly reviewed the entire settlement agreement. 
While aspects of the settlement have merit--for example, the 
creation of a registry which facilitates licensing of books for 
online uses and certain provisions to benefit the blind and 
visually impaired--key parts of the settlement are 
fundamentally at odds with the law. They impinge on exclusive 
rights granted to authors and other rights holders.
    My written testimony fully describes my concerns. And I 
apologize for not submitting the testimony within the time 
limits provided by the Committee, thereby basically making it 
not available for Members to read before this hearing.
    In my oral testimony I am going to focus on only two 
points. One is, the settlement agreement creates what is, in 
effect, a compulsory license that allows Google to continue to 
scan millions of books into the future and permits Google to 
engage in a number of activities that were not actually part of 
the lawsuit and that are indisputably acts of copyright 
infringement: for example, offering full-text displays and the 
sale of downloads.
    Compulsory licenses are the domain of Congress, not the 
courts. When such licenses are created, it is usually the 
result of marketplace failure. You have heard that there is 
marketplace failure from some today. But it is after full 
public debate. Moreover, they are narrowly tailored and apply 
to all users who meet the terms and conditions of the license.
    By permitting Google to engage in a wide array of new uses 
of most books in existence, the settlement would alter the 
landscape of copyright law--which is also the role of Congress 
and not the courts--for millions and millions of rights holders 
of out-of-print books. The out-of-print default rules would 
flip copyright on its head by allowing Google to engage in 
extensive new uses without the consent of the copyright owner, 
in my view making a mockery of Article 1 of the Constitution 
that anticipates that authors shall be granted exclusive 
rights.
    Moreover, the settlement would jeopardize the efforts of 
Congress to enact comprehensive orphan works legislation that 
would benefit all users. Courts have acknowledged that, when 
dealing with new technology, only Congress has the authority 
and the institutional ability to accommodate the competing 
interests that are implicated. This Committee has spent 
considerable time and given considerable thought as to how to 
resolve the orphan works problem. The settlement undermines 
Congress's ability to determine how to address this issue and 
is at odds with the approach that you have been considering up 
to now.
    The agreement also has serious international implications. 
Foreign governments, as well as many foreign authors and 
publishers, have objected to the settlement and suggested that 
the settlement may violate certain international obligations of 
the United States. It is troubling that many foreign works that 
have never been made available by their authors or publishers 
in the United States would be swept into a class action simply 
because one copy was located in a library and that library 
permitted Google to scan its books.
    In conclusion, Congress frames and defines the scope of the 
rights and the remedies of copyright owners. I do believe that 
the proposed settlement agreement seeks to usurp that role by 
addressing policy issues that go well beyond the case or 
controversy identified by the plaintiffs in litigation.
    I look forward to your questions. And, as always, the 
office stands ready to assist the Committee as it considers the 
issues posed by the settlement agreement. Thank you.
    [The prepared statement of Ms. Peters follows:]
                 Prepared Statement of Marybeth Peters

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                               __________
    Mr. Conyers. Thank you very much.
    We are now pleased to hear from Randal Picker, the Leffmann 
professor of commercial law at the University of Chicago. His 
expertise is in laws relating to intellectual property, 
competition policy, and regulated industries.
    We welcome you.

   TESTIMONY OF RANDAL C. PICKER, PAUL H. AND THEO LEFFMANN 
 PROFESSOR OF COMMERCIAL LAW, UNIVERSITY OF CHICAGO LAW SCHOOL

    Mr. Picker. Thank you, Mr. Chairman, Ranking Member Smith, 
and Members of the Committee.
    I am, Mr. Chairman, I think as you put it, the only 
professional mousetrap user on the panel. So, that is what I do 
for a living. My office at the law school is in the library. 
Faculty offices surround the library. I literally walk from my 
office into the stack, sometimes quite literally.
    So these kinds of tools are the things that make my job a 
wonderful job. And notwithstanding having access to one of the 
great university libraries, I regard Google Book Search as a 
wonder. It is a fabulous product. I have an unnatural liking 
for it. I am doing some research into some business practices 
in the early 1900's, and it is amazing what you can do with it. 
So, the points that Mr. Drummond makes and that Dr. Maurer 
makes about how it expands access--absolutely right. It is 
fabulous. And I applaud the product.
    Notwithstanding that, I think the role that I am trying to 
play here, and the paper I wrote is, is to figure out how to 
improve the product. The fact that it is a great product 
doesn't mean it might not have problems. The fact that it is a 
great product doesn't mean it might not engage in behavior 
which is anticompetitive. And it is the job of antitrust 
regulators to sort through that and to make improvements.
    Indeed, Google thinks of itself as a learning company. They 
are constantly running experiments to change their search 
algorithm to improve it. The agreement we were given is that it 
is a beta, and it is something we now need to take and turn 
into a full-blown product and figure out how to improve it. 
Indeed, to not do so--I don't see the clock running--to not do 
so would be almost positively--thank you--un-Googlish. So I 
hope that is what we will do today. I hope we will figure out 
how to improve the product.
    Okay. So I wrote a paper; that paper makes a number of 
points. I think those points are directed toward different 
government actors.
    I make a point about antitrust immunities, which is sort of 
a technical point. I think there is some risk that if the 
settlement is approved, that will make it hard for the 
Department of Justice to inquire into it afterwards. That is 
something called the Noerr-Pennington doctrine, antitrust 
immunity. It comes out of some Supreme Court cases. I don't 
think that would be the right analysis, but I think under the 
case law there is a risk of that. I think Judge Chin should 
address that if he approves the settlement. I think he should 
say, ``No, Noerr-Pennington immunity doesn't attach.'' So that 
is a point for Judge Chin. He should address that.
    I make a second point in the paper, and that is a point 
about the consumer purchase model. So there are sort of two 
core models for selling access to the work. One is the 
institutional subscriptions. My library will buy an 
institutional subscription, and I will use it every day. The 
other is individual sales and individual access to consumers.
    The consumer purchase model has a pricing rule that I find 
surprising, and it involves sort of putting Google in the 
middle and engaging in a centralized, coordinated pricing. I am 
surprised they did that. The Department of Justice, as has been 
mentioned, will be making a filing in the case by September 18. 
It is my expectation that they will either say something about 
that or not say something about it--I expect that they will--
and that Judge Chin will take that very seriously.
    I think the pricing mechanism, which we can talk about in 
greater detail in questions if you want--I think it is 
complicated. I don't think it is simple. When I say it is 
complicated, that is not a shock. The whole agreement is 
extraordinarily complicated. But the pricing mechanism is 
complicated, as well. But I do think there are some issues 
there, possible issues under section 1 of the Sherman Act. But, 
again, not an issue for Congress. Really an issue for, first 
and foremost, the Department of Justice and Judge Chin.
    Then I would make a third point, and the third point is 
about the orphan works. And the orphan works, obviously we have 
heard a lot of discussion of those, as well. Bringing those 
online is something to be greatly desired. And I will, as a 
mousetrap user, take full advantage of them when they are 
there. But the question is how to do that.
    And the critical thing to recognize on the orphan works is 
that only the government can create a license to use those 
works. That is where we are. No one else can do it. And so then 
the question is, how is the government going to do that? And is 
the government going to create a license in favor of only one 
company or create a broad license in favor of everyone? And I 
can't imagine, if someone came before this body and said, 
``Give only us a license,'' that you would do that. I just find 
that inconceivable. The orphan works legislation that you put 
on the table before obviously would apply broadly. The great 
problem with the settlement agreement is that it only applies, 
really, in favor of Google.
    So I would urge Judge Chin, as I do in paper, to expand the 
settlement agreement out, to expand licenses. And, obviously, I 
would urge this body to pass orphan works legislation. That is 
easy to say.
    Now, I think it is very important to recognize the critical 
differences between the settlement agreement and the orphan 
works legislation that emerged from the Copyright Office's 
orphan works report and then also the legislation that has been 
proposed in the past.
    One critical difference is this question of whether or not 
you need to engage in a reasonable search to use the material. 
That search, if you have to do that search, you are almost 
certainly taking lots of orphan works off the table. If you 
have to have a human being go look, go examine the copyright 
records, many of which are not online, it is pretty unlikely 
those are going to come on. The settlement agreement does not 
require Google to search.
    So the gap between past proposals of orphan works 
legislation and what is currently in the settlement agreement 
is quite dramatic. And if Congress moves forward on orphan 
works legislation to really bring meaningful competition in 
this space, to grant a broad license to everybody--and Google 
seems to support this, to their great credit--you are going to 
have to do something different than you have talked about doing 
in the past.
    Thank you.
    [The prepared statement of Mr. Picker follows:]
                 Prepared Statement of Randal C. Picker

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                               __________
    Mr. Conyers. Thank you very much, Mr. Picker.
    Well, we have had mousetrap builders, mousetrap users, and 
I think our last witness is a mousetrap watcher. Mr. Balto, 
senior fellow at the Center for American Progress, focusing on 
competition policy, intellectual property law, and health care. 
For more than two decades, he has had experience as an 
antitrust attorney: in the private sector, in the Antitrust 
Division of the Department of Justice, and in the Federal Trade 
Commission.
    So I think you have appropriately been placed in this 
position of eighth to present your views now. And we are happy 
to have you here.

           TESTIMONY OF DAVID BALTO, SENIOR FELLOW, 
                  CENTER FOR AMERICAN PROGRESS

    Mr. Balto. Thank you, Mr. Chairman, Ranking Member Smith, 
and other Members of the Committee, for giving me the privilege 
of testifying today. And it is a privilege.
    For the indigent student in a barrio in Los Angeles, for 
the child growing up on an Indian reservation in New Mexico, 
for the child living in a low-income area in Washington, DC, 
this settlement will potentially transform their lives.
    One of the great things that Google has done is democratize 
information and level the playing field to make information 
generally available to millions of consumers. And that is the 
promise of the Google Books project. And that is why I am 
pleased to be able to testify before you today and explain why 
the settlement is procompetitive.
    You know, it is easy, I know from my 25 years as a 
government enforcer, to use labels and to throw labels around, 
but labels can be deceptive. A monopolist is a firm that has 
the ability to exploit consumers by raising prices.
    Mr. Drummond, I know monopolists, I have sued monopolists, 
but I am sorry to tell you, Google is no monopolist.
    A monopolist has--when you determine whether or not a firm 
has the ability to exercise monopoly power, you have to look at 
its incentive and ability to exercise monopoly power. Look at 
what Google does in search. Google doesn't charge consumers. It 
would be foolish for it to do it because it would lose 
eyeballs, its search product would function less effectively, 
and it would be less attractive to advertisers. It also 
probably doesn't have the ability to because there are many 
rivals in the market. It lacks the incentive and ability to go 
and exploit consumers. And that is why it would lack the--for 
the same reason, it would lack the ability to harm consumers in 
its Google Books project.
    I understand the concerns that the professor has raised 
about the pricing model used, but I am an antitrust enforcer, 
and frequently you have to go and find a second best for a 
competitive market. And the algorithm in the consent decree is 
not all that unusual considering the kinds of models that 
government enforcers frequently have to use.
    Now, the paper I have submitted goes through each of the 
claims that Google somehow is going to exploit consumers in one 
fashion or another. The key question here is, does the 
settlement raise barriers to entry? Does it make it more 
difficult for somebody to step in Google's shoes? The answer is 
unequivocally ``no.''
    But you don't have to take my word for it. A group of 30 
antitrust professors filed an amicus brief, and this is what 
they said: ``The settlement overcomes barriers to entry for 
Google without raising them for any rival because every right 
of the settlement that is given to Google is expressly 
nonexclusive.'' ``Nonexclusive,'' anybody can step in the shoes 
of Google.
    There are two specific concerns the critics have raised. 
First, the question of orphan books. My paper goes and tries to 
discuss how limited the number of orphan books are, and I think 
they are limited, but let me make this simple. One is greater 
than zero. The problems that have been identified about orphan 
books would exist for anybody else. And only this solution goes 
to solve this problem.
    Mr. Aiken articulately pointed out to you the market 
failure that exists on more orphan books. And unless this 
problem is solved--and the settlement does go extensively to 
solving the problem--these orphan books are just generally 
going to be unavailable unless we give that poor child in Los 
Angeles a ticket to go visit Harvard.
    Second, the settlement goes and limits the problem of 
orphan books and helps solve the problem by clarifying these 
intellectual property rights. And for that Google should be 
applauded.
    Now, there is a lot of criticism about another clause, 
called the ``most favored nations clause.'' This clause is 
extremely limited, and it is appropriate for Google to make 
sure that people can't free-ride on its effort. Google went to 
tremendous expense and should be applauded for their efforts in 
going and trying to scan all these books.
    Judge Learned Hand said over a half century ago, ``The 
antitrust laws are not intended to punish superior skills, 
insight, and industry.'' That is Google, and that is what the 
settlement does. At its own risk, Google developed its own 
scanning technology, negotiated agreements, and navigated the 
uncertainty around complex copyright issues. People may not 
like where that line is drawn, but they deserve credit for 
trying to clarify this area, to the benefit of millions of us 
consumers.
    The purpose of the antitrust laws is to open access and 
opportunities--open access and opportunities. And that is 
precisely what Google has done and what the Book Rights 
Registry will do. The Google Books settlement is in the public 
interest, and I hope it is approved.
    [The prepared statement of Mr. Balto follows:]
                  Prepared Statement of David A. Balto

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               __________

    Mr. Conyers. This has been an extremely beneficial 
discussion among the eight of you.
    I want to do something--I won't say that I haven't ever 
done it before. But, Mr. Drummond, I would like to give you an 
opportunity to try to clarify any comments that you have heard 
from your other seven panelists before the more precise 
questioning begins. Is there anything you would like to clear 
up here?
    Mr. Drummond. Sure. Quite a few things, but I will limit 
myself with these comments to a couple.
    You know, this idea of the exclusivity that Google will 
have around orphan works, I think the orphan works problem, I 
think, is being exaggerated. I think one of the things that you 
have heard others say, we believe that the number of works that 
are truly orphaned will be small. The settlement goes a long 
way toward helping this by, A, clarifying rights issues between 
authors and publishers and, B, creating the financial 
incentive, for the first time really, for folks to come 
forward.
    So we think that this will actually be a small number of 
works. The registry will have the ability to license to all 
comers, and has every incentive to license to all comers, all 
of the works that have come forward. So we think this problem 
is going to be very limited.
    But let me just say this: We actually don't believe we are 
getting any competitive advantage here, but we want to make 
this very clear, and, quite frankly, we are willing to put our 
money where our mouth is. So here is something you are going to 
hear for the first time.
    We believe, Google, in an open books platform. We are 
entering the e-book market, and we want to do this in an open 
way. So this summer we announced a program where we are going 
to work with publishers to take their in-print books and sell 
them anywhere, through any book seller, on any device--totally 
open platform. We are prepared and willing to commit to 
extending this program to the out-of-print books that are 
covered by the settlement, whether they are claimed or whether 
they are unclaimed. And what this means is that any book 
seller--anybody, whether it is Amazon, whether it is Barnes and 
Noble, whether it is Microsoft, should they ever decide to get 
into this market--would be able to sell access to the books 
that are covered by the settlement.
    We have a--essentially, think of this as sort of a reseller 
program. We have a 37 percent revenue share that we get under 
the settlement. We will share that with any reseller who comes 
along----
    Mr. Conyers. Well, that is very generous of you. I 
appreciate that.
    Mr. Drummond. And, quite frankly, we will share the vast--
the significant majority of that. We don't have a number quite 
yet, but most of the revenue will go to the reseller, which 
seems like a pretty good deal----
    Mr. Conyers. Sure.
    Mr. Misener, don't you find that a thrilling new piece of 
information to come your way?
    Mr. Misener. The Internet has never been about 
intermediation. We are happy to work directly with rights 
holders without anyone else's help.
    Mr. Drummond. So, in any event, what we have here is--there 
have been complaints that people don't have access. We will 
provide access.
    Mr. Conyers. Mr. Misener is now going to review. Is there 
anything you heard here that you would like to clear the air on 
before I move on?
    Mr. Misener. Yes, sir. I really appreciate that 
opportunity. Thank you, Mr. Chairman.
    The settlement is an enormously complex document, this 
proposed settlement is. And the reason why, of course, is it is 
much more like a joint venture agreement than it is a 
settlement of past claims.
    But there have been a couple times when I have heard today 
that the settlement terms are nonexclusive, and that is just 
untrue. And I can point to exactly where it is. It says that, 
``The registry''--which would be the clearinghouse for 
competitors to Google to come and negotiate--``The registry 
will represent the interest of rights holders, both in 
connection with the settlement as well as in other commercial 
arrangements, including with companies other than Google, 
subject to the express approval of the rights holders of the 
books involved in such other commercial arrangements.''
    ``Express approval.'' Orphans can't get express approval.
    Mr. Conyers. Mr. Consumer Watchdog, are you feeling any 
better now that you have heard all of the fellow panelists here 
this morning?
    Mr. Simpson. I listened with concern to both of the 
representatives of the large corporate entities. And I am never 
quite sure what to make of what either of them are saying, and 
have to think about it just a little bit.
    I was intrigued by Google's offer, and I am not quite sure 
what it means. I would have to think about it quite a bit more. 
I guess, though, that it is another one of these, sort of, 
pledges that are made. It doesn't seem to be part of the 
agreement. I am not sure they could be held to it.
    It does seem to be indicative of the fact that they are 
finally coming around to the notion that there are serious 
people with serious questions that need to be taken into 
account. So I thank the Committee for providing that forum and 
some opportunity to get these issues on the table. But the 
process of the class action suit was the wrong place to 
negotiate what the other corporate colleague said was a joint 
venture.
    So I think there were things being done here to pull an 
end-run around the appropriate legislative process, and further 
discussion and study is needed. And I would commend the Members 
of the Committee for helping to foster that.
    Mr. Conyers. Uh-huh.
    Lamar Smith is coming up next. But let me just ask, would 
it be okay, Google, to expand the settlement to competitors 
through congressional action?
    Mr. Drummond. We have no problem whatsoever with Congress 
expanding or providing a similar structure legislatively that 
would apply to everyone, no problem at all.
    Mr. Conyers. Lamar Smith?
    Mr. Smith. Thank you, Mr. Chairman.
    My first question is for Mr. Drummond and Ms. Peters, and 
it is this: Much concern has been expressed about the possible 
impact of the settlement, if any, on the enactment of so-called 
orphan works legislation. Can you comment on whether there is 
anything in the proposed agreement that limits Congress's 
ability to enact as broad or as narrow an orphan works law as 
we determine appropriate?
    Mr. Drummond first.
    Mr. Drummond. Sure. There is absolutely nothing in the 
settlement that would impede orphan works legislation of any 
flavor that Congress ultimately deems is most appropriate.
    If anything, as Mr. Aiken and Mr. Balto pointed out, by 
providing a financial incentive for folks to come forward and 
have more people claiming these works, our sense is that the 
settlement will actually reduce the scope of the problem for 
books.
    But there is certainly nothing that prevents Congress----
    Mr. Smith. Okay. You would argue that it addresses some of 
the problem but not all of the problem.
    Mr. Drummond. But not all--again, this is only books. 
Orphan works----
    Mr. Smith. Right, goes far beyond books.
    Mr. Drummond [continuing]. Is more than just books.
    Mr. Smith. Ms. Peters?
    Ms. Peters. My concern, we almost got to orphan works, and 
everybody would be treated the same. I guess the question that 
I have with that legislation for orphan works, whatever it was, 
apply to Google as well. Or are you basically saying that there 
is no search, that everybody then basically can copy every 
work.
    And if you are saying that and you are going to put that in 
legislation, you do have concerns that you are creating a 
compulsory license and that you would have to go through 
international obligations and make sure that it met the treaty 
obligations that the United States has.
    So I can't really answer. It depends on what happens.
    Mr. Smith. Okay. Thank you.
    Mr. Misener, in your written testimony, you claim that, 
quote, ``It is nonsense to claim that potential Google 
competitors would have access to the same deal as Google.''
    Why couldn't Amazon use their registry to locate orphan 
works authors and then cherry-pick the most sought-after works 
to license for their own Web site? For that matter, why 
couldn't Amazon initiate Google's strategy of digitizing all 
books?
    Mr. Misener. Thank you very much.
    Mr. Smith. And you touched part of that in your oral 
testimony, that you had started the process, but----
    Mr. Misener. Yes, sir. Thank you, Mr. Smith.
    If the proposed settlement were approved, Google would be 
the only entity in the world that could treat copyright on an 
opt-out basis. They would be able to copy first, ask permission 
later. This is completely turning copyright law on its head. 
And competitors to Google, like Amazon, would still have to 
operate under current copyright law, where we would need 
permission in advance.
    Mr. Smith. Do you feel you have been disadvantaged by 
trying to play by the rules and get permission first?
    Mr. Misener. We have just complied with your laws.
    Mr. Smith. Yeah.
    Mr. Misener. These are the laws of Congress; we have 
complied. Three million works we have been able to copy, 
complying with the law.
    Mr. Smith. Okay. Thank you.
    Mr. Aiken, let me address my last question to you. Some 
have suggested that the Book Rights Registry will enable 
authors and publishers to collude to set the price of books 
that are charged not just to Google but to all book retailers.
    A couple of questions. What safety mechanisms does the 
settlement have built in, if any, to ensure that this does not 
happen? And, second, would the Authors Guild be open to ongoing 
court or Department of Justice oversight to guarantee that the 
Book Rights Registry is not misused and used for price-setting?
    Mr. Aiken. Thank you, Ranking Member Smith.
    The agreement, really, is about out-of-print books. So I 
think a lot of the confusion that has been played out in the 
press and elsewhere is the thought that somehow this involves 
in-print books. For the most part, we don't expect in-print 
books to be actively used through the settlement, for several 
good reasons.
    First, for an in-print book, you don't want to license it 
en masse with 10 million or 20 million out-of-print books. It 
is just not the way to maximize revenues.
    Second, there is an attachment to the settlement called 
Attachment A. One of the reasons this thing took 30 months to 
negotiate was that we weren't just negotiating with Google. It 
was authors negotiating with publishers, and we rarely see eye 
to eye. So we had months and months and months of negotiations, 
trying to work out our differences.
    In the course of that, we were able to build in all sorts 
of protections for authors that authors don't usually get--
rights to arbitration, inexpensive arbitration; rights to an 
expedited reversion-of-rights process within the confines of 
the settlement--all sorts of good things for authors that we 
have a feeling publishers are not going to want to avail 
themselves of, so they are going to take every opportunity not 
to be covered by the settlement and to have things work outside 
of the settlement, to work through the Google partner program 
and through Amazon's program to make their in-print books 
available and leave this for the out-of-print books.
    So we are talking about a small part of the market. Out-of-
print books are always--always--going to be a tiny part of the 
market compared to in-print books. There is a good reason that 
many out-of-print books are out of print.
    Mr. Smith. Okay. Thank you, Mr. Aiken.
    Thank you, Mr. Chairman.
    Mr. Conyers. Thank you very much.
    Senior Member Mel Watt of North Carolina is now recognized.
    Mr. Watt. Thank you, Mr. Chairman.
    Let me say first how informative and instructive I think 
this hearing has been. And I thank the Chair for convening the 
hearing. Having said that, there is always a catch. I want to 
raise questions about the prematurity of the hearing.
    And this is an amazing system in which we operate. We have 
an executive branch, a legislative branch, and a judicial 
branch. And, in this case, we have a case obviously before the 
courts. Quite often--at least the Supreme Court quite often, 
maybe not the lower courts--but quite often the Supreme Court 
will say to us, ``We invite you to legislate in this area, and 
there is really nothing that I can do here.'' And that right is 
also available. It seems to me that a lot of what we are 
talking about today is appropriately before the judicial branch 
of our government.
    And I never second-guess the Chair about having a hearing. 
We can have a hearing about anything that we want to have a 
hearing about. And one of those things always is to protect the 
prerogatives of the legislative branch. But the best protection 
to the prerogatives of the legislative branch is for us to 
legislate. Since we haven't done very aggressively and 
effectively the legislation on orphan works, it is kind of hard 
for me to condemn the courts for having a case before it that 
questions what can be done and what can't be done with orphan 
works.
    We have an existing law, which, obviously, all of us agree 
needs to be updated. But until we update it, the court is going 
to apply the law as it is currently written. But the court 
needs to do that, it seems to me, unless we are prepared to 
come before the court makes a decision and pass legislation 
updating the orphan works or updating the copyright laws or 
updating whatever is in our prerogative.
    Now, I feel a lot more informed about this issue when we 
get to it, if we ever get to it. But at the same time, I am a 
great respecter of this division of powers that we have here. 
And I feel a little awkward being in a position of having a 
hearing on a case that is before the judicial branch, awaiting 
some disposition by the court, crying out, as at least one or 
two of the witnesses has said, for intervention and expression 
of opinion by the Justice Department, which is in the executive 
branch, who has a role to protect our legislative product and 
prerogatives.
    So we are dibbling and dabbling in all three branches of 
government today. And, I mean, am I missing something here?
    Okay. All right. I didn't want anybody to think that I was 
just imagining this. And Mr. Picker said it pretty well.
    Is there anything other than updating the copyright law or 
updating the orphan works law that we ought to be doing right 
now with respect to this particular case? I guess that is my 
general question. If somebody can tell me that, then----
    Mr. Picker. No, I think that is exactly right. I think you 
have hit it exactly right. I think we have a number of things 
going on here simultaneously.
    I will say I think what is tricky about the situation is 
precisely--I will go back to what I said, which is, only the 
government can create a license to use the orphan works.
    Mr. Watt. But won't the court say that to us or say it to 
Google? And if they say it, if the court says that, or if the 
court says otherwise, it doesn't change our constitutional 
prerogative, does it?
    Mr. Picker. No, I don't think it changes your 
constitutional prerogative. I think, as a matter of how you 
make policy, I think that the discussion in the two different 
settings would be quite different.
    As I tried to say before, I think it is inconceivable that 
someone would come before Congress and say, one firm should be 
granted this sole license. I think that is inconceivable. 
Google wouldn't do that. Google has been very good about this. 
Google has said everyone should have a license.
    Mr. Watt. As I have read the general parts of the proposed 
settlement, it doesn't even propose to do that, does it?
    Mr. Picker. No, no. Right now the only firm that will get a 
license in the settlement is Google.
    Mr. Watt. Isn't that because they are the only firm out 
there that is trying to get a license?
    Let me just ask one informational question, Mr. Chairman. 
Amazon has licensed 3 million books. How many is it estimated 
that are out there that haven't been licensed by Amazon?
    Mr. Misener. Oh, goodness. There is a factor of four, five 
more?
    Mr. Watt. And so your argument is that we should somehow 
deprive all of those other folks of the opportunity to--or 
deprive the public of the opportunity to get access to that 
information, waiting on Amazon to go out and find that 3 
million, multiplied times five? Is that the essence of your 
argument?
    Mr. Misener. We are following the law, Mr. Watt. We are 
going out and getting the opt-in permission from the rights 
holders.
    Mr. Watt. And I take it, the corollary to that is that 
Google is not following the law.
    Mr. Misener. We think it was an extremely risky and 
irresponsible thing for Google to do.
    Mr. Watt. I didn't ask that. People do extremely risky and 
irresponsible and cost-ineffective and costly things all the 
time that don't necessarily violate the law. Are you saying 
that Google has done something that violates the law?
    Mr. Misener. Sir, we looked at this very carefully. As I 
mentioned, we have been scanning----
    Mr. Watt. Don't rope-a-dope me, Mr. Misener. Just answer 
the question. You are saying that they did something that 
violates the law?
    Mr. Misener. That was the consensus. The Authors Guild said 
it was ``massive copyright infringement.'' This is the Authors 
Guild, now the partner of Google. ``Massive copyright 
infringement'' is what they said.
    Mr. Watt. And the court, I take it, has the jurisdiction to 
determine that, too, right?
    Mr. Misener. Yes, sir.
    Mr. Watt. Okay. All right. I am back to where I started 
then. The court can resolve this, and, in the meantime, 
hopefully we will do something on orphan works and whatever 
else we need to do in the copyright area, and maybe we will 
clarify the role of the court here.
    Mr. Simpson. Mr. Scott, may I respond to that, as well?
    Mr. Watt. I am not Mr. Scott. And----
    Mr. Simpson. I mean Mr. Watt.
    Mr. Watt [continuing]. Actually, we have been called for 
votes, and my time has long since expired. And I know Zoe wants 
to go before we go to a vote. So I am going to stop.
    Mr. Conyers. But I would like to get a brief response.
    Mr. Simpson. My answer is simply to the question of whether 
Google broke the law. We would simply say the settlement 
violates the law. We have faith that the judge will reach that 
conclusion and the settlement will not go through.
    Mr. Watt. But we can't reach that conclusion, can we? That 
is the question. I mean, Congress can't reach that conclusion.
    Mr. Simpson. I am suggesting that you will be faced with 
the orphan works issue, and we would hope you would take it up, 
and this is the appropriate place for it to come up.
    Thank you.
    Mr. Conyers. Howard Coble, senior Member from--wait a 
minute. Wait a minute. We have Bob Goodlatte, more senior 
Member.
    Okay. All right. Now that we have resolved that, Howard 
Coble, senior Member of the----
    Mr. Coble. Mr. Goodlatte, the gentleman from Virginia, is 
yielding to advanced age, I think, Mr. Chairman.
    Mr. Chairman, thank you, and thank the very well-informed 
panel.
    Mr. Aiken, what alternatives exist for copyright holders 
who opt out of the settlement, A? And, B, are they 
disadvantaged in any way?
    Mr. Aiken. The copyright holders who opt out of the 
settlement are free to do whatever they want. They can make 
agreements with Amazon, with--they can make their independent 
agreement with Google, with anyone. In fact, people who stay in 
the settlement can make independent agreements with Amazon and 
with Google. They are free to do so.
    If I may, just because I think there has been a fundamental 
misconception here about the role of the Book Rights Registry. 
The Book Rights Registry, unlike ASCAP and unlike BMI, works on 
a completely nonexclusive basis. So if you are in the Book 
Rights Registry, you are still free to license elsewhere.
    The Book Rights Registry has every incentive to find as 
many outlets as possible for these works. So it is the 
intention of those who were negotiating--the registry would be 
licensing to Amazon, to Microsoft, to all comers. We want as 
much competition out there. We want the works out there broadly 
in the public. We want to facilitate commerce and competition 
in the industry.
    Mr. Coble. Thank you, Mr. Aiken.
    Madam Register, good to see you again.
    Ms. Peters. Good to see you.
    Mr. Coble. Two questions. And I think the answer to the 
first one is ``yes.'' Is this settlement the equivalent of 
creating compulsory license, A? And, B, will your office have 
any role overseeing the settlement if it is approved?
    Ms. Peters. I think the answer to the first one is that we 
do perceive that this is compulsory license like, and the 
problem is that it only applies to one organization and that 
there has been no public debate.
    And then I pointed out that with regard to new technology, 
because of the various pros and cons and so many players, that 
courts have said that Congress should be the one who is 
basically--if you are going to have a statutory license, that 
that is the way to deal with it, not through--not class action. 
No, the Copyright Office would have no role with regard to 
overseeing the settlement.
    Mr. Coble. Professor, if the settlement is approved and 
copyright holders do not opt out, will they have any control 
over Google's use of their work or their rights? And could they 
be assigned to third parties or other entities?
    Mr. Picker. Well, I heard what Mr. Aiken just said; and I 
guess I am a little confused. I think the agreement is not 
clear on what rights the Book Registry will have to license the 
work to use others. So we start with the orphan works. I assume 
they will have no rights to license the orphan works. And as to 
the nonorphan works I think the answer to that is, if the 
rights holder gives them rights, then they will have rights.
    Mr. Aiken can address that directly, obviously.
    Mr. Aiken. I would like the opportunity to do that.
    Mr. Coble. All right. I still have time.
    Mr. Aiken. This sort of thing works in the music industry 
all the time. You never hear about orphan works in the music 
industry for good reason. There are well-established collection 
societies. People come forward and licenses happen.
    What you do is when people come forward or you find them--
and it is going to be the Registry's obligation to go out and 
find rights holders--when you find them, you ask them if the 
Registry can have permission to cut similar deals with other 
entities. You get this sort of blanket approval to cut new 
deals.
    Then you have a body of work that you can then go to third 
parties. You go to Amazon and you say, look, we have the 
100,000 most-used books, out-of-print books. We have got the 
rights here. Would you like to make use of them? We have the 
prior approval of these rights holders.
    Then you cut the deal. You inform the rights holders. You 
tell them, this is how it is going to work. You have 60 days to 
tell us whether or not you are going to exclude yourself from 
it, but then you have another competitor in the field.
    Mr. Picker. But not the orphan works which are at the heart 
of the institutional subscriptions.
    Mr. Aiken. No, they are not at the heart of institutional 
subscriptions, because the orphan works problem is greatly 
exaggerated for books. For books, you always have a rights 
holder identified in the book. It is not photographs, which is 
the classic orphan works problem. The problem with photographs 
is the photograph gets separated from the rights holder 
information. With books there is always an author and a 
publisher listed right in the book. That is why in the real 
world people looking for rights holders find 90 percent of 
them. We can solve this problem for books. It is a different 
problem for photographs and other things.
    Mr. Coble. I had a photographer question, but I think I 
need to yield back. I will do that for another day, Mr. 
Chairman. I yield back.
    Mr. Conyers. That is extremely generous of you.
    Zoe Lofgren.
    Ms. Lofgren. Thank you, Mr. Chairman.
    I think Mr. Watt is right. We really at this point don't 
have a role to play, but this has been a useful hearing in 
outlining what the issues are. I remember back a number of 
years ago trying to get ahead of this program legislatively, 
and we just utterly failed. And what I look at in the 
settlement is really the private sector achieving what we 
failed to achieve.
    I mean, when I look at the book registry proposal it is 
like ASCAP and BMI for books, except it is not exclusive. 
Rights holders could use somebody else.
    I remember in the copyright report back in 2006, the 
Copyright Office pointed out that privately operated registries 
would be much more efficient and nimble, able to change. And 
one of the frustrations we had--and it wasn't just the 
Congress; I think it was the Copyright Office itself--you don't 
have the technology to do this, and you are never going to get 
the technology to do this. And so it was always going to have 
to be a private-sector effort to do this search in this 
registry, and now we have one.
    I will just say I own a Kindle, and I use it all the time. 
But one of the things that we are going to see here is for the 
first time some competition to Amazon. Because if we have an 
open-source effort and a clearance of rights, you are going to 
have for the first time some real heavy duty competition which 
I know is sometimes a mixed blessing. But competition is good 
for us and for all technology companies so I think in the end 
it is going to make you a stronger company as well.
    Finally, I want to say that we could solve the orphan works 
problem by repealing the Sonny Bono Copyright Extension Act. I 
don't think that is going to happen because then Mickey Mouse 
would then be in the public domain. But we helped create this 
problem, and now we have seen a solution to some of these 
problems.
    I tried in vain for many years to put together an orphan 
works bill and even outside of this, Stanford University in my 
county. I worked with Stanford and the publishers association 
to see if they could work something out at the very early 
beginnings. I don't think Google even knew that. But it wasn't 
possible because it was too complicated to do.
    So I think we ought to respect the fact, as Mr. Watt said, 
that we value our roles to play. And certainly the judicial 
branch has a role to play in--there is a way to settle rights 
and to directly attack Rule 23, that somehow the notice that is 
good enough for every other class action lawsuit is deficient 
here, I don't welcome that type of rhetoric without any 
evidence to that effect. And to say that somehow it is 
impermissible to use litigation and the settlement of 
litigation to settle rights and to distrust the judiciary for 
sorting through, that is not appropriate--for us as Members of 
Congress or I think for citizens who have to have confidence in 
our judicial system, which I do.
    So I would just like to say--I mean, the one thing that 
would make this exclusive would be if Google had arranged with 
the libraries who possess these old books an exclusive 
arrangement. And I know I was thinking I grew up in the Bay 
area and I remember I use to be able to go to what was then the 
graduate business school and check out books. And when I was in 
high school, they were old books I would read. And they are not 
available.
    Now, did Stanford do an exclusive deal with Google? Because 
if they did that, then Amazon or Microsoft or anybody else 
would not be able to replicate what Google has done.
    Can you let us know what the answer is to that, Mr. 
Drummond?
    Mr. Drummond. All of our deals with library partners are 
nonexclusive. They can and, in many cases, are actively 
digitizing their materials with other partners.
    Ms. Lofgren. I just think--I know we have votes--but this 
is a major step forward for literacy and for the culture. I am 
glad to see it.
    And sometimes I am sure that the library--I haven't had a 
chance to read the testimony. I am sure there is some regret 
that we failed. But we should instead take satisfaction that we 
have advanced. The goal that we hoped to achieve has been 
achieved here. So I appreciate this hearing, Mr. Chairman; and 
I thank you for allowing me to speak.
    Mr. Conyers. Thank you Ms. Lofgren.
    We stand in recess for two quick votes.
    [Recess.]
    Mr. Conyers. The Committee will come to order.
    Before recognizing Bob Goodlatte from Virginia, senior 
Member of Judiciary, I would like to allow Mr. Misener 60 
seconds.
    Mr. Misener. Thank you, Mr. Chairman.
    Just before we broke, there were some statements made about 
Amazon's willingness to have competition in the e-book or the 
book selling market. And we certainly welcome it. That is not 
the problem. We certainly--I think it is probably a 
misconception about the size of Amazon. We actually sell only 
less than 10 percent of the books sold in the United States, 
and so it already a highly competitive market.
    We would welcome Google as a competitor. We just want to be 
able to compete on a level playing field where we have the same 
access to orphan works and other works of rights holders who do 
not choose to participate in the process. If we had that same 
access, we would be fine to compete with Google.
    Thank you.
    Mr. Conyers. The Chair recognizes Bob Goodlatte from 
Virginia, a senior Member of the House Judiciary Committee.
    Mr. Goodlatte. Mr. Chairman, thank you; and thank you for 
holding this excellent hearing. All of these witnesses are very 
well qualified to speak on various aspects of this subject, and 
it has been a very enlightening hearing.
    I, like others, would say that the effort to digitize books 
is a very, very important thing; and I commend Google and 
Amazon and others who are about the business of doing that. But 
I do have some questions about this process and this lawsuit.
    I agree with the gentleman from North Carolina, Mr. Watt, 
that most of the questions we have here today need to be 
addressed and hopefully will be addressed in the legal 
proceeding; and it would be inappropriate for the Congress to 
consider any action until we see what action the courts are 
going to do on this. But I would like to direct to Ms. Peters 
and then to Mr. Drummond and Mr. Misener a question about the 
nature of this lawsuit and settlement.
    The suit was originally filed by rights holders who had 
been harmed. Their books had been scanned by Google. Yet the 
settlement is much broader and includes authors whose books 
have never been scanned. As I understand it, approximately 10 
million books have been scanned by Google; and there are 
approximately 30 million books in the United States.
    Is it fair for the court to approve a settlement that will 
limit all authors' exclusive rights to their intellectual 
property when one could argue that two-thirds of the authors 
included in the settlement have not even been harmed by Google 
yet and when these authors are presumed to be part of the class 
only due to the special opt-out procedures in class action 
cases?
    Ms. Peters, would you like to comment on that.
    Ms. Peters. I am not an expert in class action lawsuits, 
but I do understand--I think I understand that the scanning was 
a piece of the alleged infringement and that I think in our 
testimony we basically say that it may be appropriate in a 
settlement to allow some continued scanning. But we do make a 
point of the fact that to allow scanning to go on with no 
deadline, no cutoff date, we believe that that goes too far.
    Mr. Goodlatte. Mr. Drummond, yesterday you and I had a good 
conversation about this; and you indicated, because injunctive 
relief was sought and can be awarded in these actions, that it 
was appropriate to include authors whose books have never been 
scanned. And I would note that, while that is certainly the 
case, ordinarily, injunctive relief would be offered to 
somebody under quite different circumstances than this; and 
essentially it brings into this lawsuit people who really have 
had no rights taken away from them.
    Is that a basis for granting some of the exclusive rights 
that are, as Ms. Peters and others have called it, effectively 
a compulsory license that has not been granted by Congress but 
is sought as a part of a settlement of a lawsuit?
    Mr. Drummond. Well, I would love to address the compulsory 
license part of your question in a second, but the meat of your 
question regarding sort of folks whose works haven't been 
scanned being included, it is absolutely appropriate. The 
settlement is co-extensive with the remedy that was actually 
sought by the plaintiffs in the class action. They asked the 
court to stop us from scanning. And the class always included 
not just folks whose works had been scanned but folks whose 
works could be scanned. And the law on this is pretty clear.
    If you look at the Second Circuit law as to when a judge 
can adjudicate this question----
    Mr. Goodlatte. I understand that. But, jumping ahead, the 
settlement doesn't stop you from scanning, does it?
    Mr. Drummond. No, it doesn't. But the question is whether 
or not it is appropriate for the court in the context of the 
settlement to allow the settlement to cover the entire class, 
which was the class that sued us in the first place; and, in 
fact, it is. So you treat people whose works have been scanned 
and people whose works haven't been scanned differently, but 
you can include all of them in the settlement.
    Mr. Goodlatte. Let me ask Mr. Misener and Mr. Picker to 
address that, and we will come back to your compulsory license 
comment.
    Mr. Misener. First of all, I would note that Google 
contested the class from the start. So their initial gambit was 
that the Authors Guild didn't represent the class.
    But the real problem here is the going-forward nature of 
the release given to Google. This is not only covering the past 
acts of alleged infringement but also future acts, ones that--
business models that Google has not yet participated in. And it 
has given Google this exclusive liability free monopoly over 
the orphan works because of the opt-out provisions that apply 
only to Google and the opt-in that would apply to everyone 
else.
    Mr. Goodlatte. Mr. Picker, do you have any comments? Mr. 
Picker?
    Mr. Picker. My paper really doesn't address the class 
action issue, so I can say I have looked at those in some 
contexts, and we often use class actions to do extremely broad 
remedies. I am not sure that this particular one is different 
in style and size than many we have seen.
    Mr. Goodlatte. Are you familiar with class actions in 
general?
    Mr. Picker. Yes. But not an expert, so I'd be very careful.
    Mr. Goodlatte. Why is the opt-out process for class actions 
appropriate in most cases and why do you believe that that is 
not the case in this particular class action?
    Mr. Picker. Well, I think the idea behind the opt-out 
nature of the class action is precisely the ability to deal 
with the rights of people that you can't get at very easily. 
And then the question is, are you better off suited to, as it 
were, leave those people out? And if you leave those people 
out, then they don't get any of the benefits of the agreement 
at all; and they are left with their original rights, which is 
the right to bring a lawsuit against Google. And I think that 
is the judgment that the class action law is making in 
embracing the opt-out idea.
    Mr. Goodlatte. Mr. Chairman, my time has expired, but I did 
tell Mr. Drummond that he could come back and address the 
compulsory license.
    Mr. Drummond. I just wanted to address this notion that 
this is a compulsory license. The problem with that is that a 
compulsory license, in order to be one, has to be compulsory. 
That is simply not the case here. So not only can the rights 
holder opt out of the class action which they could do up to 
the deadline, at any time in the future any rights holder can 
say to Google, we don't want you to sell this product or we 
want you to sell it at our price or we want to take it out of 
the settlement and sell it with Google through some other 
model. So it is completely nonexclusive and not compulsory.
    Mr. Goodlatte. Thank you, Mr. Chairman. I have many more 
questions, but this has been a good hearing.
    Mr. Conyers. Thanks so much, Mr. Goodlatte.
    Sheila Jackson Lee, Houston, Texas, senior Member of the 
Committee.
    Ms. Jackson Lee. Mr. Chairman, thank you very much; and I 
add my accolades that other Members have know given. This has 
been instructive and informative.
    And there is no doubt that I want to acknowledge that the 
presence of the National Federation of the Blind both impact 
and impress me primarily because I have worked with visually 
impaired soldiers. But I also see their presence here as an 
overall statement, if you will, about access that is so crucial 
in this discussion.
    And I take a different perspective. We may have acted too 
slowly, but I think going forward I hope that, gentleman and 
lady, that we don't view this hearing as a hearing for 
hearing's sake. I think there are some opportunities here and 
some opportunities to be both proactive and responsive. So let 
me try to pose some snippet questions. Because I see there are 
some snippets here. Let me try to be snippet with you as well.
    Mr. Drummond, I look forward to some more extended 
conversations, if we might be able to do that. I have interest 
in the digital divide, as many of us do--when I say 
``interest'', interest in closing it--and will be holding a 
summit on that question for some of our inner-city youth and 
rural youth.
    But what can you say about the settlement that you believe 
responds to the concerns--public settlement now--of the other 
side? What do you think--how do you think Google has come 
halfway? What do you think is in this settlement that responds 
to the other side?
    Mr. Drummond. When you say the ``other side'', do you mean 
the plaintiffs who sued us or----
    Ms. Jackson Lee. Yes.
    Mr. Drummond. Well, I think the settlement reflects 
absolutely a compromise and a middle ground.
    Ms. Jackson Lee. Give me the chief components of that.
    Mr. Drummond. I think at issue was that we were digitizing 
books but not making them available, and the plaintiffs didn't 
want us to do that. What we settled--we wound up settling those 
differences and actually creating something that works better 
for all the parties, which is that we continue to scan, make 
these books searchable but also make them available for 
purchase so that we reinvigorate the market for these out-of-
print works and also provide broad access.
    So I think if you look at the concerns--so one of the 
concerns of the rights holders here, publishers and authors, 
was that these books be made accessible.
    Another one of the concerns is that there be some security 
in the digital copies that we had and that the library--our 
library partners had, and we negotiated a full set of sort of 
security protections to address those concerns.
    So I think, on a whole range of issues, the settlement 
reflects a compromise and, quite frankly, a landmark compromise 
that I think ought to be a model for the future between 
technology companies and the Internet companies and rights 
holders.
    Ms. Jackson Lee. But it also lays the opportunity for to 
you to go forward and continue the work of expanding this type 
of access to books; is that correct?
    Mr. Drummond. That is right.
    Ms. Jackson Lee. But it provides security, and it provides 
some framework.
    Let me ask Mr. Maurer very briefly, who heads the 
Federation of the Blind, is this a question for you for access 
and a level playing field for your constituency?
    Mr. Maurer. The Google book settlement is the first and so 
far the only settlement that puts millions of books into 
accessible format. The largest collection of books that is 
accessible readily now is in the Library of Congress, and it 
depends how you look at it. Those are not available for 
purchase but only to be borrowed. And those books, 70,000 of 
them, circulate on a regular basis. From the time of the 
beginning of the program in 1931, the program has put together 
about half a million books. It has been a great effort. We 
applaud the effort, but this is vastly better.
    Ms. Jackson Lee. Thank you. It is a question of access.
    Ms. Peters and Mr. Misener, if you could, I am still 
troubled by the people not reaching the offering holders or 
book owners who couldn't found. What are we doing about the 
value of someone's copyright? We are in the midst of copyright 
discussion now on one of our H.R. 848 issues that we have been 
dealing with.
    And comment on the idea of a public interest fee that 
addresses the question of closing the digital divide. Google 
might want to comment on this. In terms of giving you this 
privilege of accessing all of these books, we still have a 
digital divide. What about helping with that as you help those 
who are now challenged?
    But if you would go ahead, Ms. Peters, on this question of 
who is left out.
    Ms. Peters. Let me start by saying that the Constitution 
anticipates exclusive rights and the law grants exclusive 
rights. You are talking about crafting exceptions, and those 
are usually what Congress does. And things like there are a 
variety of exceptions that deal with education, including on-
line education. It would be appropriate, if you wanted to, to 
revisit those to see if where we are today we have the 
appropriate balance.
    In fact, that is sort of my theme here. Congress has a role 
with regard to setting what the rights are and what the 
limitations are, including a compulsory license. But it is you 
who listen to all parties and then crafts what you believe is 
the appropriate balance.
    Ms. Jackson Lee. Both of you, Mr. Misener and Mr. Drummond.
    Mr. Misener. Yes, ma'am.
    We believe that a competitive market is the best way to 
achieve that accessibility. Our principal concern here today in 
this discussion is that under the proposed settlement Google 
would be the only entity that could treat copyright as an opt-
out mechanism. Everyone else would have to treat it as an opt-
in. If we all had a level playing field on which to play, that 
kind of competition could drive accessibility out to the 
market.
    We are very proud of the e-mails we consistently get from 
our customers about the accessibility of Kindle. That device 
has changed the lives literally of millions of our customers 
who write us and tell us how now they are able to adjust the 
font size of books. They are able to have, through text-to-
speech, have books read to them. This kind of text-to-speech 
function is a real life changer, and the Authors Guild has 
actually opposed the use of text-to-speech. We are very proud 
of what we have done, but we have a long way to go. We 
acknowledge that.
    Ms. Jackson Lee. Repeat that one sentence again. Google can 
opt----
    Mr. Misener. Google would be the only entity in the world 
that could approach copyright as an opt-out mechanism where 
rights holders would opt out of Google's use of copyrighted 
works. Everyone else would face the current legal regime, which 
is opt-in.
    Ms. Jackson Lee. I have got you.
    Mr. Drummond, on this issue of closing the digital device 
and public interest assessment fee, that would even enhance 
your equal playing field.
    Mr. Drummond. I think that is an interesting idea to 
explore should Congress legislate in this area making some 
clear rules for everybody around digitization and the copyright 
issues associated with it. I think it would be a very good idea 
to perhaps impose some obligations to do some things to close 
the digital divide and create accessibility.
    We tried to--in the settlement, we tried to do some of 
those things. I think you are aware we have a free terminal for 
every public library in the United States. Well, it could be 
the case in some communities where libraries are closing and 
don't have the same capability. I think there is a lot of ways 
that could be refined and this concept built into legislation 
to make sure that the providers--both content owners and 
booksellers--are doing something to provide more access.
    Ms. Jackson Lee. I thank you.
    The gentleman from the Federation of the Blind wanted to 
comment?
    Mr. Maurer. I was startled to hear that access is Amazon's 
mode of operation, for the blind can't use its books. That is 
one of the things that has brought me to this support for the 
settlement. We have been trying to get other companies to take 
a lead from this book, and we intend to pursue it. And for the 
man who sits here to tell me that this is an access issue is 
startling to me who has tried to use it without success. I am 
glad to hear that Amazon is planning to change its method.
    Ms. Jackson Lee. Mr. Chairman, I think we have got the crux 
of some very ticklish issues that I think this Committee has 
the talent and the leadership to really look at.
    There is a settlement, of course, and all parties did the 
best they could with the settlement, but I am hearing a lot of 
voices that we might add to this by clarifying how everybody 
could work in this arena. And particularly, Mr. Chairman, 
though I know that there are some other Committees that will be 
listening to my voice, I do think that Judiciary has as much 
concern about the digital divide as any other Committee; and I 
think some aspects of our work here could encourage us to 
participate in that effort.
    So I thank the Chairman for I know he will not comment, but 
I hope we will get into the cross hairs, if you will, because I 
think our insight will be very helpful in this arena. And I 
yield back to the Chairman.
    Mr. Conyers. Thank the gentlelady.
    Judge Charles Gonzalez of Texas.
    Mr. Aiken. Mr. Conyers, I apologize. Paul Aiken from the 
Authors Guild.
    An allegation was just made about the Authors Guild which I 
would like to respond to from Amazon. If this is inappropriate, 
my apologies. I don't know the rules.
    Mr. Conyers. You may.
    Mr. Aiken. The position of the Authors Guild with respect 
to text-to-speech with Amazon's Kindle was that we wanted to 
make it available to all the visually impaired. We thought 
there was a rule and copyright law in contracts that authors 
sign where we give away the rights all the time for blind 
people to be able to use text-to-speech and Braille and other 
things. We thought we could use that exception in copyright law 
to make text-to-speech available for every blind person in 
America, and that was our position.
    Mr. Misener always says that Amazon has a small market 
share. It has a huge market share of the on-line market. It has 
75 percent of the trade book market on-line and 90 percent of 
the book market--of the e-book market on-line. It has genuine 
market power. And to have Amazon throw allegations about 
monopoly when they are the ones we fear in this market seems a 
little crazy to us.
    Thank you for the time.
    Mr. Conyers. Judge Gonzalez.
    Mr. Gonzalez. Thank you, Mr. Chairman.
    First, an observation. I was a big proponent of mediation 
when I was a trial judge in Texas, and we had this incredibly 
successful mediator, and I asked him what is the secret? What 
is the secret of getting warring parties that argue in court 
and you get settlements? And he said, Charlie, it is simple. If 
I can devise a way that all parties make money, the case is 
settled.
    I think we have a situation today where all parties make 
money. But Ms. Peters has observed that it is just not the 
parties who are involved here. There is public interest. And 
there is ongoing--Professor Picker--certain principles that we 
recognize. Mr. Balto, we even--copyright, antitrust. That is 
why we are having this hearing. It is not just about parties 
getting together and saying, can we reach some agreement where 
we all have some advantage? We know how that works. But it is 
bigger, bigger than Google, bigger than the parties.
    So what I want to ask Mr. Drummond, the genesis of this 
whole lawsuit, which is very interesting, it was doing 
something good for mankind. And that was to make books 
available to the children in the school yards and those who are 
vision impaired and so on. And that is noble and wonderful. But 
you are also a business, so I suspect that there has to be some 
sort of business model associated with this. You are going to 
go ahead and scan the entire books, but under fair use you only 
use snippets, which is a lot like being little bit pregnant 
when it comes to copyright law.
    My question to you is this: When you envisioned Google 
Books and the business model and before this lawsuit, did you 
entertain the following: that you would have and be part of and 
be central to institutional subscriptions? Just yes or no.
    Mr. Drummond. When we originally started the scanning?
    Mr. Gonzalez. Before you were made party to a lawsuit, was 
it your intention to have some sort of rights conferred--I will 
just go over the list that has been provided to the Committee 
as part of a memo. The memo doesn't take any sides. It is just 
very thorough, and I commend staff.
    Listed below are various potential revenue streams for 
Google as identified within the settlement stemming from Google 
print: institutional subscriptions, consumer purchases, 
advertising uses, public access service, print on demand, 
custom publishing, PDF downloads, consumer subscription models, 
summary abstracts, compilations of books.
    That is what you are going to end up with, at a minimum. I 
am sure you guys are saying, thank God we got sued, because I 
don't think you would end up with any of this under what your 
original concern was.
    So my point is--and I know the benefits of Google, and I 
have to be with Professor Picker. We have to have this 
disclaimer. We love you guys and everything, and then we come 
and ask this. We use you. We love you. You are the best at it. 
But that doesn't mean that you can act in a way that, in fact, 
may impact competition.
    This reminds me of Microsoft a few years ago. Remember, 
because of technology, the laws not keeping up with it, forget 
about these legal principles, can't make the adjustments timely 
and so on. Let's just have temporary monopolies.
    Don't you remember that argument? It is a great argument, 
and I think we are always going to have it.
    I am not real sure this is really the model to be used as 
technology moves forward and maybe Congress doesn't act quick 
enough and the courts move in. What I am saying to you, Mr. 
Drummond, does this in fact place Google at such a tremendous 
advantage in disregard of what has been historically copyright 
law, prospectively you don't have to do anything on orphan 
works? I don't think you have to try to find anybody and get 
permission. We understand that. But, also, from a business 
model and the antitrust concerns that this Committee should 
have in mind, how do you respond to those concerns?
    Mr. Drummond. No, we don't think it puts us in a huge 
advantage. Again, you have to step back and remember what this 
market is. Electronic books, out-of-print books, which is what 
the settlement is largely covering, are not driving the 
electronic book market. It is in-print books.
    As of today, we have zero market share in any sort of 
books. So we are a new entrant to the market. So far from being 
someone who is controlling the market, we are not even in it 
yet; and we are trying to get in there and compete with some of 
the existing players. It is an emerging market, and we think it 
will be very competitive, and there will be lots of players and 
lots of different models.
    What we have is a settlement of a particular lawsuit that 
was brought against us being settled under a pretty well-
established set of rules governing class actions with lots and 
lots of opt-out ability and flexibility for the rights holders 
and complete ability for them to go deal with others. And to 
the extent that there is a concern that truly orphan works that 
are going to be available to Google won't be available to 
others, certainly we support Congress going and legislating 
around that. And as I've announced here today, we are going to 
allow anybody to resell those orphaned works that we have 
access to, including all of our competitors.
    Mr. Gonzalez. But you would still be the gatekeeper. You 
still get a cut.
    Mr. Drummond. We would get a cut, but we would give more of 
the money to someone else.
    Mr. Gonzalez. Would you mind if other people were 
gatekeepers and you got the cut?
    Mr. Drummond. Excuse me?
    Mr. Gonzalez. Would you mind if there was another 
gatekeeper and you got a cut?
    Mr. Drummond. That happens in our business all the time. We 
have revenue shares and we work with partners and through other 
partners. That is pretty common practice on the Internet.
    Mr. Gonzalez. On this scale as it comes to copyrighted 
material I don't believe that exists. I guess what I am saying 
is this lawsuit went beyond what is the real issue here. And I 
understand there were financial advantages to some, and thank 
God for the writers and everybody else out there. But I think 
this goes way beyond what was intended. If you had gotten 
permission to scan books and use snippets as part of searches 
and such, that should have settled the entire case, I would 
imagine. But we are way beyond that now.
    Thank you very much for your indulgence, Mr. Chairman.
    Mr. Conyers. Thank you very much.
    From California, Mr. Brad Sherman.
    Mr. Sherman. Thank you, Mr. Chairman.
    I think we need to take a step back and just think of how 
wonderful it is that we are going to see 100 million books 
available in every village on this planet. Chiefly the private 
sector developed the Internet, and we need to make sure that 
this additional and huge chunk of information is available on 
the Internet. We ought to give a high priority to moving 
legislation in this area. It has been suggested that we provide 
to other firms the rights that Google has under this 
settlement. Surprisingly, Google seems to be the chief advocate 
of this.
    Mr. Misener, would you object to legislation that codified 
this agreement and allowed other responsible parties to do 
exactly what Google is doing on their own?
    Mr. Misener. Instead of the settlement?
    Mr. Sherman. I don't know if it would be instead or in 
addition to or superseding.
    Mr. Misener. Certainly not in addition to. Because this 
would give them a temporary--how long is it--a few months, 
advantage at the very best. But there are plenty----
    Mr. Sherman. If everybody at the table agreed on the 
legislation, that is why we have suspension bills.
    Mr. Misener. I am happy to support legislation, as we have 
for years. We would be happy to support orphan works 
legislation to get at this problem. But we will not agree to a 
circumstance in which one company gets an exclusive opt-out 
copyright regime while everyone else waits for legislation. 
There are other problems with this proposed settlement, Mr. 
Sherman.
    Mr. Sherman. You could probably move the legislation pretty 
quickly and delay the settlement. You have got some lawyers.
    Moving along, you are focusing on the orphan works. What is 
Amazon doing and planning to do with respect to making orphan 
works available? What effort is Amazon making to scan out-of-
print books?
    Mr. Misener. We are complying with the law.
    Mr. Sherman. Well, so am I, but I haven't done a damn thing 
to make orphan books available.
    Mr. Misener. That is pretty funny. We have scanned 3 
million books. So we have been at the scanning business longer 
than Google has, and we are very pleased with our efforts, but 
in each case we have gone out one by one and done what the law 
says.
    Mr. Sherman. You are scanning the very popular books that 
have not become orphaned. As to orphaned books, what are you 
doing?
    Mr. Misener. We are not scanning books that the rights 
holders cannot be found and negotiated with in advance. That is 
what the law requires, and that is what we are doing.
    Mr. Sherman. The law in my State and most States has an 
unclaimed property provision that says if there is any other 
property right where you can't find the owner it is unclaimed 
property. I think the principles of that law, if not directly 
applicable to copyright, but the general principle of law in my 
State is that we want unused property and unclaimed property 
made use of, and we want the ultimate owner to be compensated 
when that owner can be found.
    To say that all the knowledge and learning of all the 
authors that cannot be found should be locked up and 
unavailable to humankind doesn't seem to be in the interest of 
knowledge.
    What is--other than they seem to have a few months head 
start on you, what is stopping other companies from going down 
the exact same route, doing what Google did, getting sued by 
the same people that sued Google and entering into the same 
settlement? This assumes that Congress abdicates its 
responsibility in this area, which I hope we don't.
    Mr. Misener. It would be incredibly irresponsible for a 
company to do this. To actually seek out a class action lawsuit 
against us? Mr. Balto actually proposed that that could be a 
good way for an Amazon or a competitor to Google to go about 
doing this. To actually seek a class action is extraordinarily 
irresponsible. It is hard to imagine----
    Mr. Sherman. I think the only thing irresponsible is to 
tell the people of the world they are not going to have access 
to all the knowledge in all the books for which authors cannot 
be found. That is what is irresponsible.
    Now if Congress doesn't act, maybe that is irresponsible. 
If you try to prevent others from acting, that may be 
irresponsible. If you choose not to act yourself, that is 
irresponsible.
    The overriding message here is this knowledge needs to be 
made available, and I hope that we do that as quickly as 
possible.
    My time has expired.
    Mr. Balto. Mr. Chairman, I would just like to briefly 
reply.
    I don't think I suggested that. Even though I am a class 
action attorney and would love more cases, I don't think I 
actually made that suggestion.
    But, look, what we have here is a potential--what Google is 
offering is not only good for consumers but also good for the 
competitors who are there perhaps ready to compete against 
Amazon. And, like any other competitor, Amazon doesn't like 
competition. Google may make these books available for other 
electronic rivals which can come up with other products which 
will compete with Amazon's products.
    Mr. Conyers. Thank you.
    The Chair now recognizes former magistrate Hank Johnson, 
who is also a Subcommittee Chairman in the Judiciary.
    Mr. Johnson. Thank you, Mr. Chairman; and I want to commend 
you for holding this hearing on this very important issue right 
now.
    Who were the parties to the settlement agreement? In other 
words, who sued whom?
    Mr. Aiken. We sued him down there.
    Mr. Johnson. All right.
    Mr. Drummond. Us, Google.
    Mr. Johnson. Who sued whom?
    Mr. Aiken. The Authors Guild brought the first lawsuit, the 
class action lawsuit in September of 2005. Five publishers then 
filed suit a month later in a nonclass action lawsuit also 
against Google basically over the same set of facts.
    Mr. Johnson. Was there any entity with the interests of the 
orphan works owners a party to the legislation--excuse me, a 
party to the litigation?
    Mr. Aiken. Orphan works are works for which you can't 
find----
    Mr. Johnson. I understand. I understand. It is totally 
impossible to have a group that represents the orphan works 
owners. But perhaps there could be some entity set up that 
would be like a fiduciary, a guardian ad litem, if you will, 
for the orphan works owners. And that was not done in this 
litigation.
    What troubles me about the settlement is what gets included 
within the scope of the agreement. Of course, settlements are a 
part of ordinary litigation. I love settlements myself. They 
must be fair, of course; and they generally only apply to the 
parties.
    This settlement agreement it seems that it is going to bind 
orphan rights holders. It is not clear to me that copyright 
owners of orphan works were adequately represented. In fact, it 
appears that they were not represented in the plaintiff's 
class.
    As Chairman of the Courts and Competition Policy 
Subcommittee, I am also particularly sensitive to the antitrust 
implications of the settlement. That is why I am troubled by 
the exclusive access Google will have to orphan works. It will 
be like the gatekeeper. Why should Google be the only entity 
permitted to sell access to orphan works? And I guess I will 
ask Mr. Balto that question.
    Mr. Balto. Thank you.
    I think it is important to recognize a couple of things.
    First, the number of orphan works is extremely limited.
    Mr. Johnson. Well, I mean, does it matter whether or not it 
is one or 10,000? And I would submit to you that there is 
probably almost an infinite number of orphan works out there.
    Mr. Balto. My testimony and my paper cites different things 
that suggests that it is relatively modest, less than a million 
works.
    Second, the problem with orphan works--I mean, I think it 
is really important--one is more than none. The problems that 
people are posing on orphan works would just prevent orphan 
works from ever being accessible, and you need to overcome 
them, and I think this is one sound approach for being able to 
overcome them.
    Mr. Johnson. To set up this process where Google is the 
gatekeeper you think is the way do settle this universally? 
When I say ``universally''--in terms of U.S. law?
    Mr. Balto. Representative, I put myself in the shoes of--I 
used to be an antitrust enforcer. I did this for over 15 years. 
And I asked myself, how would I solve this problem? And I have 
found these people have gotten really sound antitrust advice. 
This is a sound approach for dealing with this issue. So there 
is not some kind of critical gatekeeper role. They have tried 
to permit in as many fashions as possible for these orphan 
works to be accessible. And, again, I just don't--I tend to 
think it is not that significant an advantage.
    Mr. Johnson. Well, there are those who would thoroughly 
disagree with you, and I would be one of those.
    Mr. Balto. By the way, there is a great brief by 30 
antitrust law professors--and 30 is more than two--and they 
went and analyzed the settlement at length and found that the 
exclusivity, it is really nonexclusive. And I commend that 
analysis to you.
    Mr. Johnson. Well, let me ask Professor Picker for his 
response. Why should Google be the only entity permitted to 
sell access to orphan works?
    Mr. Picker. I guess I would start where you started, which 
was the question of how were the orphan works represented in 
the case. In many class actions or bankruptcy settings, for 
example, in tort situations, you have current tort victims and 
the possibility of future tort victims. It is pretty routine to 
appoint a separate representative, just as you said, as 
guardian ad litem for those future claimants.
    So a very natural approach here would have been to appoint 
an independent representative as a guardian ad litem for the 
orphan works. Had that been done, God only knows what kind of 
licensing scheme would have emerged and whether it would have 
involved an exclusive license or a broad license.
    To go back to what Google has said--Google is good on this; 
they are very clear--they favor broad licensing access to the 
orphan works, and I agree with them.
    Mr. Johnson. Where would they get the license from?
    Mr. Picker. Only from the government. Only from you or the 
court.
    Mr. Johnson. You are going to bind the United States 
Government, the legislative branch, to the terms of a 
settlement that is in the judicial branch?
    Mr. Picker. I actually think that is a tricky question. 
That goes back a little bit to Congressman Sherman's question 
he posed to Mr. Drummond, which is the interrelationship 
between the settlement and a subsequent legislation and the 
terms to when you can overturn that settlement in the 
legislation.
    I don't know the answer to that. I love to write about that 
kind of question, so I am excited. I think it is hard.
    Mr. Johnson. I would pose to you that the legislative 
branch of government is responsible for policy.
    Mr. Picker. I agree.
    Mr. Johnson. You hear a lot of people talk about 
legislating from the bench. This would be a classic case. And 
that is why I am happy that you are holding this hearing, 
today, Chairman Conyers, because I think that it does give the 
parties to the litigation and others kind of a bird's eye view 
of the various issues that are involved here.
    And also I doubt whether or not Judge Chin watches C-SPAN, 
but perhaps in a moment of pleasure he might. And I know judges 
are not supposed to look at outside information in making their 
decisions. But their decisions are based on their experience, 
their living, their experience. And so perhaps this hearing 
could be of some interest to the judge. I am not saying 
somebody here should pull his coattail and tell him to watch 
this later on at night on C-SPAN.
    But the sweeping scope of this settlement and the 
significant limitations it places on rights holders who did not 
opt out it seems to me that the settlement is coming very close 
to whittling away the powers of the United States Congress. The 
treatment of orphan works rights holders who did not opt out is 
a matter that should be decided by Congress, not a group of 
plaintiffs in a private litigation format.
    I would like to know, if I were to purchase a book through 
Google's service, what would I be getting exactly? Would I be 
getting actual--I could produce a hard copy and keep it 
forever? Or would I just be renting or leasing the book for a 
certain period of time? How does that work?
    Mr. Drummond. Two different ways. Many of the books we have 
are public domain books, and we will allow you to download 
those and do what you want with them, the digital bits. The in-
copyright books will be in the cloud. Think of it as a cloud 
structure. I think amazon knows a lot about this as well. But 
you will get access to them. They will be streamed to you. They 
will not be downloaded onto your computer, but you will get 
access. Once you purchase them, you will have indefinite access 
to the books.
    Mr. Misener. Mr. Johnson, if I may, one of the future 
business models reserved to Google and the proposed settlement 
is for print on demand, which is the way the publishing 
industry is going. It is a highly efficient way to make 
physical books available to consumers. Google has reserved that 
to themselves as well. Imagine also these electronic books 
encompassing print-on-demand books, which would be a physical 
paper book that you would keep forever.
    Mr. Drummond. Just to complete the thought, you will be 
able to print out pages from the books as well. If you want to 
print out and have a hard copy, you can do that as well.
    Mr. Johnson. Are books that are reduced to audio format 
covered under this litigation?
    Mr. Drummond. I am not sure what you mean.
    Mr. Johnson. I mean, when you say purchase the rights to a 
particular book----
    Mr. Drummond. Oh, I see. The only thing that is covered in 
here is the ability to make books under the settlement 
available for the visually impaired. Beyond that, there is 
nothing.
    Mr. Johnson. So this does not have any implication to those 
who produce books that have been----
    Mr. Drummond. Books on Tape, you mean? No, it is not 
covered.
    Mr. Johnson. Why not?
    Mr. Drummond. We just didn't cover it.
    Mr. Johnson. Okay. All right.
    My last concern, and I would say also that this panel--the 
scope of the intelligence of the people on this panel is just 
breathtaking. And someone mentioned about the mousetrap. This 
would have to be--in order to match you all's intellect and 
knowledge on this issue, the mousetrap would have to be 
inconceivable in its largeness, in its scope; and the animal 
that it was seeking to capture would have to be a real, real 
beast.
    To be clear, I don't think that this settlement will 
withstand a separation of powers review on the issue of its 
applicability to anyone other than the parties to the 
settlement. Could you talk about that, Mr. Simpson?
    Mr. Simpson. Yes, thank you very much.
    I think one of the tremendous problems here is that the 
settlement goes so far beyond the original complaint, and I 
find it particularly ironic that I would put myself in the camp 
with Google from the beginning of the suit, which is to say 
that, in the digital age, to scan things into a database and 
offer up snippets is a perfectly appropriate fair use.
    What has happened here is that, instead of settling that 
issue, which was what the litigation was all about, we have 
created a tremendous new business model and gone off to areas 
that I think usurp, as you correctly have pointed out, 
Congressman Johnson, that go way, way beyond the powers that 
the party should have.
    So I think that is a huge, huge problem. And were this 
simply about whether serving up snippets in a search is 
appropriate, I think that is what the settlement should have 
been about. And this is so far beyond that that it is, frankly, 
incomprehensible to me.
    Mr. Johnson. Well, I tell you, I am really in awe of the 
technology that Google possesses to be able to carry out the 
terms of this settlement. And certainly to my friends who are 
visually impaired, you know, I am glad that relief is on the 
way.
    But I will tell you, if it is only one entity involved, how 
can you--it is kind of like health care, health insurance. How 
can you create a competitive environment where you, as 
consumers, get the best price? I am concerned about that 
consumer protection angle.
    And, with that, I do want to say that I am personally 
sensitive to the visually impaired, and I certainly appreciate 
you all coming to express your views on this important topic. 
And, at the same time, there is a larger picture out there that 
we, as legislators, have to be concerned about. And so we mean 
no disrespect to you as we oppose this type of settlement 
agreement.
    Thank you. I will yield back.
    Mr. Conyers. The Chair would advise our Members that we 
will have 5 days to submit any additional questions and 5 more 
days for the submission of any other additional materials.
    I think the importance of this hearing has been thoroughly 
restated, and I am deeply grateful to all eight of the members 
that comprised the panel for this afternoon.
    And the Committee is adjourned.
    [Whereupon, at 1:18 p.m., the Committee was adjourned.]
                            A P P E N D I X

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               Material Submitted for the Hearing Record

 Prepared Statement of the Honorable Darrell Issa, a Representative in 
  Congress from the State of California, and Member, Committee on the 
                               Judiciary
    Thank you, Mr. Chairman. I appreciate this opportunity to hear from 
our panel on such an interesting and unsettled area of copyright law.
    The settlement between Google and copyright owners presents us with 
an opportunity to examine yet another area of evolving law involving 
copyright and the internet. Questions remain regarding several aspects 
of the deal between Google and content owners, both within the 
settlement and without. For example, what can Google do with a book 
online without paying for that use--i.e. what is fair use and what is 
not? Will giving Google so much blanket access to works grant them too 
much of an advantage over competitors? Can the marketplace advantages 
afforded Google under the settlement realistically be replicated by its 
competitors? Is the court, by accepting the settlement, bypassing the 
role of Congress to set public policy in the areas of copyright law, 
competition and the role of class action litigation? If the settlement 
is a byproduct of Google's having infringed on book copyrights, would 
the court's approval of the settlement encourage others to infringe 
copyright in other forms of digitized intellectual property, including 
musical works, sound recordings, and motion pictures? These are all 
significant questions of importance to this Committee.
    It is important that any class action settlement not benefit one 
interest such as Google, at the expense of Google's competitors. Such a 
result would be completely inappropriate and unfair. I understand that 
the Department of Justice is currently examining this issue, and I look 
forward to reviewing their findings, as well as those of the U.S. 
Register of Copyrights Marybeth Peters, who provided testimony on 
behalf of the U.S. Copyright Office.
    Thank you, Mr. Chairman. I look forward to working with you, 
Ranking Member Smith, and our other colleagues in reviewing the policy 
issues raised by this proposed settlement, and I yield back.

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