Tag Archives: Google

Europe to accuse Google of illegally abusing its dominance

Financial Times
By Alex Barker, Christian Oliver and Anne-Sylvaine
April 14, 2015, 2:01pm ET

Google will on Wednesday be accused by Brussels of illegally abusing its dominance of search in Europe, a step that ultimately could force it to fundamentally change its business model and pay hefty fines.

Margrethe Vestager, the EU’s competition commissioner, is to say that the US group will soon be served with a formal charge sheet alleging that it breached antitrust rules by diverting traffic from rivals in order to favour its in-house services, according to two people familiar with the case.

Serving Google with a so-called statement of objections will be the opening salvo in one of the defining antitrust cases of the internet era. It could prove as epic as the decade-long battle with Microsoft that ultimately cost the company more than €2bn in fines.

The commission’s move comes after a torrid a five-year investigation that Google came close to settling without charges last year. The draft deal collapsed after fierce objections were raised by ministers in France and Germany, and by some of the continent’s most powerful telecoms and media groups.

The EU’s antitrust case comes against the backdrop of a growing European backlash against Silicon Valley and the economic disruption of the digital age. Once lauded for their innovative spirit, big US tech groups have come under mounting criticism in Europe over their market dominance and the way they handle personal data, especially in the wake of the US internet surveillance scandal.

A decision on charges is to be taken by the college of 28 EU commissioners on Wednesday. Some commissioners are concerned that Ms Vestager has, according to one source, restructured and narrowed the case she inherited from her predecessor Joaquín Almunia. As well as search issues, the investigation has looked at allegations that Google illegally scrapes content from rivals, locks in some publishers into using Google search ads, and makes it hard for advertisers to move campaigns to rival search engines.

Although Google has faced antitrust questions on three continents for several years, the EU move is the first time the company has been accused of formal wrongdoing. It will be given 10 weeks to respond to the allegations and will have the opportunity to call a hearing to make its defence.

Ultimately, the commission has the power to levy fines of up to 10 per cent of Google’s global turnover and can impose far-reaching curbs on its business practices. Almost 20 complainants against Google want the search engine to abide by strict rules that ensure its formula treats its own services — providing results for travel, shopping, and maps — no differently from rivals. Spokespeople for Google and the commission declined to comment.

If the charges are proven, it could take at least a year and probably significantly longer for the commission to make a final decision. Google would probably challenge any ruling that goes against it through the European courts, opening a legal war that could run for years.

The commission’s long attempt to settle the case with Google under Ms Vestager’s predecessor Mr Almunia made it one of the most fraught and politically charged antitrust cases to be dealt with by Brussels.

Google supporters feel the commission’s volte-face on a settlement reflected politics rather than an independent assessment. No EU antitrust case has ever been extended to three settlement offers, or been revived after complainants were formally warned that their case is about to be rejected.

On top of the pressure from Brussels, this week Google is also under scrutiny in France where lawmakers are considering an initiative that would force it to hand over its secret formula for ranking websites.

Revealing our algorithms — our intellectual property — would lead to the gaming of our results, which would be a bad experience for users
– Google

The French senate is likely to adopt a bill this week which would allow the country’s national telecoms regulator to monitor search engines’ algorithms, with sweeping powers to ensure its results are fair and non-discriminatory. The French initiative will become law only if it is adopted by the senate and the lower house of parliament and will also require government backing.

Critics complain that Google’s algorithm can be skewed to hurt rivals and want it published to ensure accountability. Google argues such transparency would make its search engine a target of spam and hand rivals its business secrets for free.

A spokesperson for Google in France said: “We’re transparent about what ranks well on Google, including when we make changes, but by definition, not everyone can come top. Revealing our algorithms — our intellectual property — would lead to the gaming of our results, which would be a bad experience for users.”

The amendment, proposed by centre-right lawmakers and attached to a broader economic reform bill assembled by economy minister Emmanuel Macron, has yet to secure the government backing needed to survive the legislative process and pass in the National Assembly.

But Catherine Morin-Desailly, chair of the Senate’s culture, education and communication committee, told the Financial Times that discussions with the government were encouraging.

“The government is well aware of the issues,” Ms Morin-Desailly said. “It’s a question of ensuring fairness. Too many businesses view search engines as bottlenecks. The net is tightening around [Google].”

If approved, the proposal would give Arcep, France’s telecoms regulator, oversight of any search engine that has sufficient power to “structure the functioning of the digital economy”. Google would be required to provide links to at least three rival search engines on its homepage, and disclose to users the “general principles of ranking”.

Additional reporting by Richard Waters in San Francisco

Kurt Sutter Attacks Google

Kurt Sutter Attacks Google: Stop Profiting from Piracy (Guest Column) in Variety

In a very frank article in Variety, Kurt Sutter, executive producer of the FX drama series “Sons Anarchy” talks about how Google is misrepresenting the truth about piracy and copyright laws.  He says they systematically destroying the future of artists by spending tens of millions of dollars each year on eroding creative copyright laws.

Read the entire article here.

PACA and other international trade associations have been actively involved in IComp, an industry initiative for organizations and businesses involved in Internet commerce, which is working to stop some of Google’s practices, but we need the support of our members and the U.S. Congress.  We applaud the EU and their ongoing efforts against Google.

 

EU May Revise Google’s Antitrust Settlement, Says Source

By Tom Fairless  from the Wall Street Journal

European Union antitrust regulators are preparing to step up their investigations into Google Inc. on several fronts, including revisiting a proposed settlement over its search-engine practices that has met with unprecedented opposition.

The European Commission is likely to revise some terms of the proposed settlement with Google that were announced in February.

BRUSSELS—European Union antitrust regulators are preparing to step up their investigations into Google Inc. on several fronts, including revisiting a proposed settlement over its search-engine practices that has met with unprecedented opposition.

The European Commission is likely to revise some terms of the proposed settlement announced in February, aimed at dealing with concerns that the company abuses its dominance of online searches in Europe, a person with knowledge of the situation said Tuesday.

A firm decision on whether to revise Google’s proposed commitments will be made in September, the person said.

The admission marks something of an about-face for EU competition chief Joaquín Almunia, who had previously insisted that the commitments agreed by Google were sufficient to meet the EU’s competition concerns.

A final decision on the case may now be taken by Mr. Almunia’s successor after he leaves office in November, the person said.

The European Commission is also deepening a second line of investigation into Google’s business practices relating to its Android operating system for mobile phones. The Commission recently sent out fresh requests for information from handset makers and other interested parties on their dealings with Android, a year after sending out a first batch of questionnaires, the person said.

The Android inquiry isn’t yet a formal investigation, but it is likely to become one, the person said.

The decision to deepen the investigation follows intense opposition to the Commission’s proposed search settlement with Google, both from top European politicians and the companies it was supposed to help. Some of the companies that lodged complaints against Google have said they would prefer no deal to the one negotiated by Mr. Almunia.

The Commission has decided that some concerns raised by complainants in response to letters explaining the EU’s settlement decision may be valid, the person said.

The concerns relate to the possible preferential treatment of Google’s services beyond their visibility on the search page, and the design of an auction mechanism aimed at allowing rivals to bid for better placement on the page. Some new complaints may also be integrated into the case that weren’t previously linked to it, the person said.

A spokesman for Google referred to previous comments that the company has made “significant changes to address the Commission’s concerns, greatly increasing the visibility of rival services and addressing other specific issues.”

 

“I Discipline Google”

In response to Mathias Döpfner’s letter in the Frankfurter Allgemeine Zeitung (http://blog.pacaoffice.org/?p=1904), Joaquin Almunia, Vice-President of the European Commission and Commissioner responsible for competition, retorts some of the allegations as the Google anti-trust investigation continues to heat up.

“It is not true that the European Commission lets Google continue its abusive business practices. Under the Commission’s pressure, Google has made concessions, which – should they become legally binding – will significantly hit the corporation’s monopolistic practice.”

By Joaquín Almunia

Dear Mr Döpfner,

In your open letter to Eric Schmidt, Google’s CEO, published on April 16 in the , you made some comments directed explicitly at the European Commission and myself. Basically, you accuse the Commission of not acting against Google’s abuse of its dominant position in the online search market. I do not agree with you and in the following, I will explain why.

Let me first remind you of the facts. In November 2010, the Commission decided, upon my suggestion, to initiate an anti-trust investigation against Google. After thorough examination, especially after having analyzed a great number of formal complaints, I expressed serious concerns with regard to several of Google’s business practices. One of them is Google’s prominent display of its own specialized (or “vertical”) online search services within its normal search results without the user being informed about this kind of privileged display. It is indeed true that such methods may serve to unlawfully redirect Internet traffic towards Google’s services and are capable of discriminating against services of competitors, which might be equally or even more relevant to the user.

In the interest of all users, the Commission questioned Google’s methods and asked the company’s executives to propose concrete solutions in order to prevent malpractice. After long and difficult negotiations, Google finally granted us substantial concessions. In a few months, the Commission has to decide if these propositions become legally binding or not. In case the Commission accepts Google’s proposal, effective competition will be restored and users can make qualified decisions when they use the company’s search engine.

Accepting the proposals would in fact result in three major changes. Firstly, users would be informed about which links exactly are marketed by Google and are not generated by the normal search. Secondly, a distinct separation between Google’s specialized services and the standard search results on Google’s website would be introduced. Thirdly, Google would, when presenting its own services, present the specialized services of three competitors in a way that makes them clearly visible for the user. These competing links would additionally be presented in a comparable visual format.

In your open letter you describe these concessions as if ‘a new window for advertisements was installed at the top of the search result list’, which allows Googles to make some ‘additional income’. This interpretation is completely wrong. The proposed measures provide for that the links of three competitors are presented whenever Google is marketing its own services. If merchants don’t have to pay for being displayed (e.g. restaurants in Google Local), then competitors wouldn’t have to pay for that either. The three competitors would simply be chosen on the basis of their ranking in the ‘normal’ search results. In other cases, Google asks merchants for fees in order to be displayed in the specialized services, e.g. the price-comparing service Google Shopping. According to the proposed measures, Google would in these cases be forced to give up a significant part of the space they’re currently using to market their own services. This means that whenever Google decides to offer a – as you would call it – ‘new window for advertisement’, they would be forced to share the space with their competitors and allocate a comparable space to them.

Since Google would normally be generating income by charging merchants for that space, competitors would now have to pay likewise to be displayed in that space, according to Google’s proposal. To be picked, Google’s competitors would have to bid against each other at an auction to which only providers of specialized services are admitted. Instead of selling the space to their customers, Google would have to offer it to competitors. This would therefore not generate any ‘additional income’ for Google.

Furthermore, you purport that users won’t always find the result ‘that’s the most important and best, but the most profitable for Google’. The proposed measures achieve exactly the opposite result. Whenever Google is marketing their own specialized services and is displaying them in an accentuated manner – as it is the case today – the proposal would oblige Google to display the links of three competitors clearly visible and in a comparable visual format. This would give users a real option of choosing between different alternatives. Today, the privileged commercialization of its own products by Google has as the consequence that consumers don’t necessarily perceive the competitors’ products, since they are not part of the best search results and not listed at those spots that costumers look at the most. The proposals would therefore give competitors a direct possibility of attracting online traffic and hence protecting incentives to innovation in specialized search. It would then be up to the users to decide which service he prefers.

On a general basis, there seems to be a fundamental misunderstanding that I am pleased to clear up. Article 102 of the contract forbids the misuse of dominant market positions. What is forbidden is the misuse – but not the simple existence – of a dominant market position. The Commission is not allowed to require from a company that it gives in to any requirement by his competitors only because the company has a dominant market position. It is our role to fight against misuse of market power in the interest of consumers, but not in the interest of the competitors. The discretionary power by the Commission in this field is not unlimited. If we require from a company that it changes its behavior, we do so on the basis of an investigation and well-founded concerns regarding competition law that have to comply with strict legal standard and are always subject to the control by the European Courts.

The Commission has analyzed all the claims that it has received. It is important to stress that when there are situations that can be considered as questionable from an antitrust point of view, the Commission cannot request remedial actions that go beyond the necessary steps to resolve the concerns. We cannot dictate Google how it has to design its website. If we would request that Google presents its own specialized services in the exact same way as the services of competitors, this would mean that depending on the algorithm, Google services would not even appear on their own page. This would represent a restriction by an antitrust authority that has never been seen before.

It is not our role to keep Google from introducing innovation and trying to meet the needs of customers by developing and offering new services. This would not be in the user’s best interest. Our role is to ensure that Google does not prevent competitors to do the same. In other words, the role of competition policy in this case is to prevent that Google’s competitors are being restricted from effectively participating in the competition because of the preference that Google gives to its own services. The reason for this is that less competition can negatively affect consumer choices and incentives for innovation by competitors. I would like to reiterate that once alternatives are being presented to users, competition should take place based on the quality of the different services available, and it is then up to the users to click on the option that they prefer. The appearance of competitors’ links in a similar visual format would give Google’s competitors a real opportunity to direct these users to their services.

Furthermore, you claim that “Google could elude any commitments” by simply redirecting users from an Internet address towards an app. I absolutely disagree with that, too. The proposals we have obtained from Google contain all the measures necessary to prevent this from happening. The obligations would not only apply to queries at Internet addresses but also for Google’s Android apps. Moreover, if the Commission decides to declare the proposals legally binding for Google, an independent trustee will ensure that Google duly implements its obligations. As you know, companies that do not comply with the Commission’s anti-trust decisions risk high monetary penalties. In the past few years, non-compliance with two of the Commission’s anti-trust decisions has cost Microsoft fines three times higher than those for the abuse of its dominant market position itself. By the way, one of those decisions was based on commitments the Commission has made legally binding.

In conclusion, please allow me to comment on the particular concerns expressed by news media. I can perfectly understand that the utilization of press articles by European editors within Google News gives rise to concerns. From an anti-trust perspective, the problem consists in Google’s ability to use its market power in the general online search for obtaining content created by others and for integrating this into its specialized search services, including Google News. This is why the commitments we have obtained would allow press editors to prevent Google from showing their content fully or partially in Google News, without such a prohibition having negative effects on their website’s ranking within Google’s general search results. However, copyright issues surfacing in this context need solutions that lie beyond the scope of competition law. The same holds true for questions regarding the protection of personal data. In both cases, rules sanctioning the abuse of a dominant market position cannot substitute appropriate guidelines or regulation measures. Finally, I would like to add that compliance with anti-trust rules is a necessary prerequisite but by far not the only instrument to ensure the well-being of Europe’s digital sector.

Regarding issues that do indeed fall in the realm of competition law, the European Commission will keep a watchful eye on Google’s business conduct. The complainants in the current case will soon get the possibility of laying out their points of view on Google’s settlement proposal as well as to our arguments why we consider these proposals sufficient for addressing our concerns regarding parts of Google’s business conduct in the online search and online advertising market. If the European Commission accepts the proposal at the end of this process, they will become legally binding for Google. It would mean that important aspects of Google’s activities would be effectively regulated for the coming years. Unrelated to the current proceedings, Google’s very high market share and its role as a de-facto gate keeper of the Internet will also mean that the European Commission will continue to keep a close eye on Google’s business practices. This oversight is crucial in a fast moving market, in which problems can arise in a short period of time. And in fact we are already in the process of investigating concerns regarding the Android operating system, even though this investigation is still in a preliminary phase.

There is no question that Google’s market dominance poses a number of challenges for our economy and our society. These challenges span from the way the Android ecosystem functions to the collection and use of enormous amounts of personal data to the usage of third-party content, to the respect for intellectual property, and to tax tactics, to name a few. All of these issues deserve to be looked at with the same intensity by the authorities, and each one of the issues should be addressed with the right political tools. The current competition case against Google is only a part of the puzzle. But it is a part which could solve the specific competition concerns as quickly as possible.

Kind regards,

Joaquìn Almunia

Alex Springer Afraid of Google?

The New York Times reported, “A trans-Atlantic war of words — and profits — over the future of the Internet heated up on Wednesday when the head of Germany’s largest publisher, Alex Springer,  admitted that ‘we are afraid of Google’ and suggested that European authorities were colluding with the American Internet giant to develop a ‘business model that in less honorable circles would be called extortion.’” 

Döpfner penned the piece in response to an article by Google Executive Chairman Eric Schmidt, who defended Google’s practices and pointed to “heavy-handed regulation” in some places. Döpfner wrote, “We are afraid of Google… I must say this so clearly and honestly since scarcely one of my colleagues dares to do this publicly. And as the biggest of the small fry, we must perhaps be the first to speak plainly in this debate.”

In the piece, he commented on the European Commission’s antitrust investigation into the company. The New York Times reported, “Attacking what Mr. Schmidt had characterized as Google’s willingness to forge a compromise with the European Commission over a four-year-old complaint about its practices, Mr. Döpfner starkly declared, ‘This is not a compromise.’” In the letter, he asked, “Will European politicians fold or wake up? Institutions in Brussels have never been as important as they are now.”

Google did not respond to a request for comment. For the full article, please see http://www.faz.net/aktuell/feuilleton/debatten/mathias-doepfner-s-open-letter-to-eric-schmidt-12900860.html

EU Google investigation: Adequate answers still not found. BEUC files complaint asserting consumer interest

The European Consumer Organisation has stepped up its involvement in the European Commission’s antitrust investigation into how Google Inc. puts its preferred services atop search results while demoting rivals, particularly in price comparison searches. Currently an ‘interested party’, essentially having observer status, BEUC has today applied to be a formal complainant.

The European Commission has recently signalled its willingness to settle on the basis of Google’s suggested remedies, but BEUC believes consumer concerns have not been suitably addressed.

Commenting, Monique Goyens, Director General of The European Consumer Organisation said:

“Adequate answers have not been found to the problem of Google stacking its search results as suits itself. Users are given the impression their searches are neutrally decided and this problem is exacerbated in price comparison searches. That is why we are becoming formally involved in this process. European consumers deserve a better outcome, the remedies currently proposed by Google do not meet users’ legitimate expectations.”

“The placement of three rival services beside Google’s preferred results is not yet merit-based and so they are not neutral. Such stacking will lead to broader problems for the market further down the line. This kind of online real estate does not come cheap, so affording Google too much discretion to decide who is a ‘rival service’ is weighted in favour of those with the greatest commercial clout. “

“Clearly the issue requires further examination. EU antitrust rules are there to protect fairness within the European Single Market. It is critical that a solution recognises a ‘non-discrimination principle’ and does its utmost to allow users to get back to searching, not being led.”

Google’s Almunia Deal Said to Be Criticized by EU Officials

It seems that several of the members of the European Commission are opposed to the EU’s decision to strike a deal with Google which would resolve their three-year-old dispute.  Two news articles have appeared today that show some strife within the Commission.  You can read the Bloomberg article here and the Reuters one here.

Is Google close to settling EU antitrust probe?

Googlelogo

Pursuant to an article today in Reuters, they suggest that the EU Commission and Google have reached an agreement to settle a 3 year European antitrust probe that allays concerns over blocking rivals from internet search results and avoids a potential fine of $5 billion dollars. A decision is expected in the next few days…READ THE ARTICLE HERE

Eye tracking study confirms that Google benefits most from its proposed ‘rival links’ solution to EU abuse concerns

PACA is pleased to be a new member of ICOMP

An eye tracking study, commissioned by ICOMP (Initiative for a Competitive Online Marketplace) has revealed that Google’s proposed commitments relating to the display of rival links, continue to weigh heavily in favour of Google’s own services and will not help rivals to compete against the company. The European Commission, following nearly five years of complaints from a wide range of European businesses and consumer groups, has expressed concern that Google is abusing its dominant position in Internet Search, to direct consumers to its own sites – rather than those which are the ‘best result’ for a search query.

In response to these charges Google has been asked to propose remedies that will stop this abuse and prevent it happening in future. However, Google’s second attempt at providing a workable, fair and effective solution (the first was rejected by the commission and online stakeholders in July) appears not only to fail in halting the abuse, but, as this research shows, actually makes the abuse worse.

The study, conducted by The Institute of Communication and Media Research (IKM) at the German Sports University Cologne (DSHS), examines where people look on the page of search results, how long they look at individual links and where they ‘click’ as a result. The search results pages used in the study were taken directly from Google’s proposals in its second round of commitments.

Key findings of the study are:

1.       Google’s ‘Sponsored’ results consistently attract the largest  amount  of  the users’ total  visual attention

2.       ‘Alternative  search sites’ do not draw enough visual attention to prompt the users to click on them

3.       Visual attention for organic links is negligible compared to the ‘image enhanced’ Google elements placed above them

For example; results for the search term ‘iPod’ reveal that thumbnail product pictures guide the visual attention of users to ‘Google  Shopping  Results’ with 56% of participants clicking into this area. While the ‘alternative search sites’ caught less visual attention and only clicked once, indicating little interest from users.

Similarly, examination of the ‘flight search’ results page revealed that most users clicked on the Google Flight Search ‘Sponsored links’ area (43%), with ‘alternative  search sites’ receiving little visual  attention  and  correspondingly, only  four clicks  (11%) indicating that the Google Flight Search area is the  most attractive on the search results page.

During a search for ‘Map London’, the Google Maps area and Google Images thumbnails receive more, earlier, and longer visual attention than all other page elements, including competing mapping providers, with 46% of participants clicking on the Google map and a further 36%  clicking ‘Google Images’, which is itself another Google service. Comparatively, the 1st organic link on the results page, ‘mylondonmap.com’, received only two clicks and the official ‘Transport for London’ , received no clicks.

ICOMP Legal Counsel, David Wood said: “These results give a clear signal  of  what  we can expect  from  Google’s  rival links proposal – an ineffective remedy and the potential for increased abusive behaviour by Google. Acceptance of these proposals by the Commission will serve to further and irrevocably entrench Google’s dominance. What is more, these new proposals give Google the power to further monetise its abusive behaviour by forcing small and large competitors to pay Google for the right to feature in these ‘rival links’ listings. The most relevant search results will be replaced by preferential slots either reserved for Google itself, or sold to the highest bidder. As ICOMP we maintain that the only workable solution to restore effective online competition and to give consumers what they are expecting is for all services to be given equal treatment in terms of search rankings placement. ICOMP urges the Commission to take note of these findings”

ICOMP Member and Managing Director of Hotmap.com, Michael Weber said: “The search results page layouts proposed to the Commission safeguard Google’s own paid product listings and other Google services such as Google Maps, giving Google the lion’s share of all views and clicks, and the proposed rival links next to none. In particular, this manipulation of search leaves mapping competitors with little traffic, in no way restores competition and is detrimental to the online economy.”

The value of eye tracking as a methodology is confirmed by Google’s own research methods. In its Official Blog of 6 February 2009, Google wrote “we use eye-tracking equipment in our usability labs. This lets us see how our study participants scan the search results page, and is the next best thing to actually being able to read their minds” The blog post confesses that “most users found what they were looking for among the first two results and they never needed to go further down the page”, demonstrating the company’s awareness of the power behind search results page positioning.

The ICOMP commissioned study was conducted by tracking the behaviour of 35 users when sat in front of a 46-inch  plasma screen  monitor, measuring  eye  movements  on search  engine result pages given as examples in the October 21, 2013 commitment  proposal  by Google, as well as an additional search results page depicting a mapping search. The study was conducted within time constraints, to allow for submission within the European Commission’s request for information deadline.

For further information, please contact the ICOMP Secretariat on Mary-Jane.Attafuah@bm.com or 0207 300 6205.

JUDGE CHIN RULES IN FAVOR OF GOOGLE IN AUTHORS GUILD CASE

By Nancy Wolff, Esq., PACA Counsel

CDASlogo

In 2004 Google entered into an agreement with a number of libraries to scan their book collections and in return provide them with digital copies of the scanned versions. Since then, Google has scanned over 20 million books and has made “snippets” of those still under copyright available to the public via search. This wholesale scanning of books resulted in a class action lawsuit brought in 2005 by The Authors Guild, and a few named authors, asserting that verbatim copying of books in their entirety by Google infringed the authors’ copyright in the books. The case was assigned to Judge Chin in the Southern District of New York. Google ‘s defense was fair use, an exception under the Copyright Act that permits certain uses of works in copyright without consent from the owners.

Initially the Authors Guild, and a group of publishers, who had also brought copyright claims against Google, and Google entered into a settlement agreement in 2008 that would create a registry and a way to monetize works as well as exploit orphan works, both from past scanning and on a going forward basis. Judge Chin refused to approve the settlement as unfair.

In 2012, Judge Chin did certify the class action, and Google appealed. The Second Circuit stayed the action and in 2013 denied class certification and directed that the issue of fair use be addressed by the district court before class certification. Judge Chin had since moved from the District Court to the Second Circuit but retained the case.  The publishers were no longer in the case, and Google brought a motion to dismiss the case based on fair use; the Authors Guild moved for summary judgment as to infringement.

On November 14, 2013, eight years after first being assigned this case, Judge Chin ruled in Google’s favor finding fair use and against the Authors Guild and authors, dismissing the copyright claim in its entirety.  The court listed all the benefits of the book-scanning project, including search, data mining, preservation, and making works easier to find for scholars and for users to purchase and find books. Judge Chin found that the use of the copyright works by Google served the purpose of copyright, by advancing the progress of the sciences and useful arts.

As fair use must be determined on a case by case basis, Judge Chin went through the traditional fair use analysis, weighing the four factors as outlined in Section 107 of the Copyright Act.

(1) The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

2) The nature of the copyrighted work;

(3) The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

(4) The effect of the use upon the potential market for or value of the copyrighted work.

Over the years, courts have placed greater emphasis on the first and fourth factors. In looking in at the first factor, the purpose and character of the use, courts ask whether the second use is transformative, even though that term does not appear in the statutory language. It derives from a 1990 Harvard Law Review article written by Judge Pierre Leval on the nature of fair use and has been instructing courts ever since. The courts looks at whether the new work merely “supersedes” or “supplants” the original creation, or whether it:  “instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether to what extent the new work is “transformative.”(Quoting Leval)

According to Judge Chin  “Google’s use of the copyrighted works is highly transformative.  Google Books digitizes books and transforms expressive text into a comprehensive word index that helps readers, scholars, researchers, and others find books.  Google Books has become an important tool for libraries and librarians and cite-checkers as it helps to identify and find books.  The use of book text to facilitate search through the display of snippets is transformative.”

Judge Chin relied in part on Bill Graham Archives v. Dorling Kindersley Ltd., which held that small-size reproductions of concert posters as part of a historic timeline in a book on the history of the Grateful Dead was transformative. “The display of snippets of text for search is similar to the display of thumbnail images of photographs for search or small images of concert posters for reference to past events, as the snippets help users locate books and determine whether they may be of interest.  Google Books thus uses words for a different purpose — it uses snippets of text to act as pointers directing users to a broad selection of books.

Further, Judge Chin found that the use was “transformative in the sense that it has transformed book text into data for purposes of substantive research, including data mining and text mining in new areas”.

Although Google is a for profit company which would disfavor fair use under the first factor, the fact that Google did not sell the copies to the libraries, no longer sells ads on book pages, nor sells the snippets or books, did not tip the balance against fair use on this factor.

The second factor, the nature of the work, which looks at whether the underlying work is factual and less deserving of fair use, or creative and favoring fair use, did not play a significant role in the analysis and in fact has not been given much weight by the courts. The court noted that 93% of the works were non- fiction.

The third factor, the amount and substantially of the portion used was also insignificant in the court’s analysis and only weighed slightly against fair use. Admittedly Google scanned the entire works but the court noted that full scanning was functionally necessary to provide search and that only snippets were made available of copyright works.

The fourth factor addresses market harm as a result of the unauthorized use. The Authors Guild argued that Google’s scanned works replaced the market for the books and users could obtain what they needed through numerous snippets searches of the same work. Judge Chin did not find this argument persuasive and stated  “To the contrary, a reasonable fact finder could only

find that Google Books enhances the sales of books to the benefit of copyright holders. ” He noted that it would be impossible to piece together an entire book by snippets as Google’s technology prohibits it and that the search tools and links to where you can purchase books assists in making online sales of books easier.

Overall Judge Chin found that the Google Book project provided a significant benefit to the public: “It advances the progress of the arts and sciences, while maintaining respectful consideration for the rights of authors and other creative individuals, and without adversely impacting the rights of copyright holders.”

In addition to dismissing the direct copyright claim, it dismissed the Authors Guild claim against Google for delivering the scans to libraries, citing the previous decision in the HathiTrust case finding that the libraries use of the works to be fair use, in part by assisting the visually impaired. If the library use was fair use, Google’s use was also fair use and it could not be liable for providing them with the digital scans.

This case is a significant win for Google and a substantial broadening of the fair use doctrine. It permits a for profit company to mass digitize works without permission and reap many benefits in terms of search advantage, driving traffic to its site and the fact that it possesses the corpus, copies of 20 million books. While this decision is still a district court decision and will likely be appealed, many will rely upon the language in this decision, regarding fair use. Having all works available is certainly a benefit to society but the Copyright Act is intended to balance this benefit with incentives to creators and to offer exclusive rights for a period of time with limited exceptions. The exceptions have been expanding and this case is such an example with a balance tipping in favor of users.

Associations representing visual artists were excluded from the Authors Guild case and they, led by ASMP, have a separate class action against Google for the use of images scanned in the book project. In particular, this action was commenced when the settlement created a registry that excluded any compensation for images.   PACA is one of the associations that joined the action. While there are clearly differences between the image case and the text based case (the search benefits, data mining and directing users to purchase books do not benefit visual artist in the same way), which will require a different fair use analysis, this expansive interpretation of fair use is troubling for this case as well as other matters.