Yesterday, the Association of American Publishers (“AAP”) announced it had filed a lawsuit in federal district court against the state of Maryland seeking to block the state’s new e-book lending law from taking effect on January 1st, 2022. This year, Maryland was the first of several states to pass a bill requiring publishers to license e-books to libraries on “reasonable terms,” and is the only state in which such a law is set to go into effect. Authors Alliance has written about this type of state legislation in the past, and we have been following these developments closely throughout the year.

State E-Book Lending Legislation

In 2021, multiple states proposed—and in some cases, passed—state legislation requiring publishers to license e-books to libraries on reasonable terms. The legislation responds in part to publishers’ trend in recent years of charging libraries higher prices for e-book licenses than they do consumers: in some cases, libraries must pay up to five times as much as an individual consumer for an e-book license. Moreover, these licenses often come with restrictive terms, such as limits on the number of times an e-book can be checked out before the license is terminated. The issue gained particular salience during the COVID-19 pandemic, as libraries across the country shuttered in-person operations, and patrons were forced to turn to e-books and other digital services in order to access library resources.

The Maryland Legislation

In March of this year, the Maryland state legislature unanimously passed the Maryland library e-book lending bill. Before the bill could become law, it faced last-minute opposition by the AAP, which claimed the bill was unconstitutional. Nevertheless, Governor Larry Hogan announced that the bill had become law in May, and would go into effect in January of next year. Described by its proponents as “fairly mild,” the Maryland legislation requires “a publisher who offers to license an electronic literary product to the public to also offer to license the product to public libraries in the State on reasonable terms that would enable public libraries to provide library users with access to the electronic literary product.” “Reasonable terms” are not explicitly defined in the statute, leaving Maryland libraries and publishers to negotiate these terms.

Constitutionality of State E-Book Lending Legislation

Following the Maryland law’s passage, the AAP maintained that it viewed the legislation as unconstitutional, arguing that the legislation interferes with the federal copyright scheme and is thus “preempted” by federal law. Then, in August, the Copyright Office weighed in on the matter in response to a letter from Senator Thom Tillis expressing concerns about these legislative efforts. The Office stated that, in its view, the legislation was likely preempted by the federal copyright scheme under a legal theory known as “conflict preemption,” which applies when a state law and federal law conflict such that it is not possible to comply with both. However, it is important to note that determining the constitutionality of a particular state law is the providence of the courts, not Congress (of which the Copyright Office is a part), so this opinion is merely an advisory one. Moreover, the Office noted that the specific legal question at issue has not been addressed by any U.S. court, creating additional uncertainty about whether the laws might be preempted.

The AAP’s Lawsuit

In its complaint, the AAP reiterates its position that Congress, and not state legislatures, has the power to create laws governing copyright and uses of copyrighted works, calling the Maryland legislation “a frontal attack on these federal rights.” It also argues that “the vitality of the publishing industry” depends on publishers’ ability to make business decisions—including whether to license their e-books to libraries and on what terms. The AAP also sent a letter to New York governor, Kathy Hochul, urging her to veto the New York analogue to the Maryland law on similar grounds. Overall, the AAP takes the position that it is possible for state governments to support libraries without this type of legislation. Yet the fact remains that libraries have consistently had difficulties meeting their patrons’ needs with regards to digital lending: until last year, one of the major publishers even had an embargo in place, preventing libraries from obtaining many copies of new books. Without legislation addressing the issue—such as the Maryland law now under attack—there is no guarantee that publishers will offer libraries e-book licenses on terms they can afford and which meet the changing needs of patrons.

Earlier this month, Authors Alliance released a brand new guide—the Authors Alliance guide to Third-Party Permissions and How to Clear Them. In today’s post, we will share some of our favorite tips and tricks from our guide on how authors might approach the permissions process and troubleshoot when they encounter difficulties. If you’d like to learn more, check out our new guide, available under a CC-BY license for you to download and share.  

• Start early, but not too early. Because getting permission from rightsholders to use third-party materials in your work can take some time, it is prudent to start early, as the process can take anywhere from days to months. But clearing permissions too early in your writing process can pose its own risks: in some cases, third-party materials end up being edited out of a book during the publisher’s editing process, and if authors have already cleared and paid for these permissions, they have assumed financial burdens that turned out to be unnecessary. For this reason, it is prudent to coordinate with publishers to ensure authors understand their permissions timeline.

• You have allies. Authors tasked with clearing permissions may find the process daunting, as it is intimately related to the legal aspects of publishing, but often the responsibility of the author, who may understandably lack the legal sophistication of publishers. But it is important to keep in mind that publishers share an author’s goal of seeing their work published and successful. While a publisher may not be able to undertake the permissions process on an author’s behalf, they may be able to provide suggestions, form permission letters and logs, and other helpful information if you find yourself stuck. Similarly, academic scholarly communications offices and authors groups like Authors Alliance exist to support scholars and authors, and can sometimes provide general guidance or field questions.

• Don’t be afraid to negotiate. Like a publication contract, a permissions agreement is a legally binding contract that can be enforced in court if it is breached. This means that the terms of the permission agreement are quite important, and it is prudent for authors to take care to understand these terms in order to avoid exposing themselves to liability. It also means that like publication contracts, permissions agreements can be negotiated. Authors should feel empowered to negotiate with rightsholders on fees and other terms, and in fact, authors who come to the table prepared to explain their position may be more likely to convince a rightsholder to compromise. 

• Remember fair use. As we discuss in our guide, the doctrine of fair use permits authors to use third-party materials in their own work without permission in some circumstances. For authors who think they may be able to rely on fair use, our permissions guide provides an overview of how an author might think through these issues. Authors who want to learn more about fair use can also check out our guide to Fair Use for Nonfiction Authors for a more in depth discussion of the doctrine.

• Consider creative workarounds. When an author is not able to obtain the permission they need to make use of a particular third-party work, they may have other options that can still enable them to reach their goals for their works. Publicly licensed works, works that are in the public domain, and original commissioned works can serve as adequate substitutes in some cases. 

Last week, the Department of Justice announced that it was filing an antitrust lawsuit to block Penguin Random House, the largest major trade publisher in the country, from acquiring Simon & Schuster, itself one of the so-called “Big Five” publishers (formerly the Big Six, until another major acquisition of Penguin Books by Random House in 2013). And this is not the first time the publishing world has been shaken up by antitrust: in recent years, the government has also initiated major antitrust lawsuits against Apple and Amazon for how these companies price e-books they sell. In the wake of these developments, authors may be asking themselves how these antitrust cases affect the publishing ecosystem and why antitrust litigation in publishing is becoming a more common occurrence. In today’s post, we will survey the landscape of antitrust publishing litigation and explain how the proposed merger of Random House and Simon & Schuster, as well as the antitrust lawsuit intended to stop it, might affect authors. 

Antitrust and Publishing

Broadly speaking, antitrust law aims to protect market competition, ensuring that no one company wields too much market power. Antitrust laws have existed in the U.S. since the late 19th century, and have the goal of protecting consumer interests by ensuring that there are “strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.” In the 21st century, the consolidation of publishing houses and book distributors over time into fewer and fewer companies with larger and larger market shares has begun to raise antitrust concerns. In this way, antitrust law seems a natural fit for publishing: over the past 50 years, publishers have steadily merged, resulting in a market dominated by only five major players.

Antitrust and E-Book Price Fixing

In recent years, the government has used antitrust law to mount challenges to various companies’ e-book pricing practices. The most prominent case was U.S. v. Apple, in which a judge found Apple had conspired with several large trade publishers to fix e-book pricing in its iBooks store, hampering retail price competition from other e-book sellers. These publishers were also implicated in the lawsuit, but elected to settle out of court. Ultimately, Apple was required to pay more than $140 million in consumer refunds in addition to other fees. More recently, a group of e-book purchasers brought a class action lawsuit against Amazon, alleging that by keeping its pricing for e-commerce lower than its competitors under a company policy, it engaged in anticompetitive behavior with regards to e-books and other products, harming purchasers of these products.

Antitrust and Authors’ Interests: United States v. Bertelsmann 

The latest antitrust lawsuit in the publishing world, U.S. v. Bertelsmann (Bertelsmann is the German company that owns Penguin Random House), proceeds on a new theory of market competition. Rather than focusing on harm to consumers of books that might result from anticompetitive behavior, the Department of Justice emphasizes the harms to authors that would be likely to occur following the proposed merger. With just four major trade publishers to choose from, authors of trade books could be at a substantial disadvantage in negotiating for the best contract terms and highest advances. This is because rather than five competitors bidding for books, there would be just four, meaning less competition and less advantageous terms for authors who publish with the Big Five.

The government explains in its complaint that a Penguin Random House and Simon & Schuster merger would give that megapublisher revenues “twice that of their next closest competitor.” The new firm would wield tremendous market power, which could in turn disadvantage smaller publishing houses that lack the resources of the Big Five. Interestingly, the complaint does not discuss the fact that the 2013 merger of Penguin Books and Random House was already an unprecedented consolidation of power in the industry, as those publishers were the two largest trade publishers at the time. While this undoubtedly reduced competition between the publishers and likely harmed authors’ incomes in the same way as the new complaint alleges, no antitrust case was brought at the time. This change in the application of antitrust law to the publishing industry may be a consequence of a change in presidential administrations or the evolution of antitrust law generally.

Other authors groups have sounded the alarm about the proposed Penguin Random House and Simon & Schuster merger, emphasizing the harm that could occur to authors’ livelihoods if the merger goes through. By grounding its antitrust case in the interests of authors, the government has echoed these concerns and signaled that purchasers of books are not the only ones who matter when it comes to ensuring fairness in the book market. 

Today, Authors Alliance is thrilled to announce that the Librarian of Congress granted our request for a new exemption to section 1201 of the Digital Millennium Copyright Act (“DMCA”) that will enable text data mining research on e-books and films. Following our petition, testimony, and follow-up meeting with the Copyright Office to discuss the concerns of opponents of the exemption, the Register of Copyrights recommended granting our exemption and the Librarian of Congress agreed to grant it, albeit with some important limitations.

Background

Section 1201 prohibits the circumvention of technical protection measures (“TPMs”) used by rightsholders to control access to their works. In other words, section 1201 prevents individuals from breaking digital locks on copyrighted works, even when they seek to make a fair use of those copyrighted works or engage in other non-infringing activities. But because section 1201’s prohibitions can interfere with fair and socially beneficial uses of copyrighted works, the DMCA also provides for a triennial rulemaking process to grant temporary exemptions to these prohibitions. Authors Alliance has participated in each 1201 rulemaking cycle since our founding, petitioning for exemptions and their renewals to help authors both enjoy their rights and see their creations reach wide audiences. In the latest rulemaking, we submitted a comment petitioning for a new exemption that would allow researchers to bypass TPMs on literary works distributed electronically and films for the purpose of conducting text and data mining (“TDM”) research, joined by the Library Copyright Alliance and the American Association of University Professors. Our petition was accompanied by 14 letters of support from researchers engaging in TDM research on e-books and films who found themselves hampered by 1201’s prohibitions.

TDM refers to automated analytical techniques aimed at analyzing digital text and data in order to generate information that reveals patterns, trends, and correlations in that text or data. TDM has great potential to enable groundbreaking research and contribute to the commons of knowledge. But the prohibition on bypassing TPMs in section 1201 made TDM research on texts and films time consuming and inefficient—and in some cases, impossible—working against the promotion of the progress of knowledge and the useful arts that copyright law is intended to incentivize. Authors Alliance and the other exemption proponents consider TDM research to fall squarely within the ambit of fair use, though the petition’s opponents disagreed with this position.

The Exemption and its Limitations

The new exemption—which will go into effect tomorrow—allows researchers affiliated with academic institutions to circumvent TPMs for the purposes of conducting TDM research on e-books and films. In announcing her recommendation to grant the exemption, Register of Copyrights Shira Perlmutter stated the Copyright Office “recognizes the academic and societal benefits that could result from TDM research and concludes that properly tailored exemptions meet the statutory requirements for adoption.” Because existing alternatives to circumventing TDMs were not adequate to meet the researchers’ needs, the Copyright Office recognized the importance of the exemption for those researchers.

Register Perlmutter’s recommendation was also accompanied by a lengthy discussion of whether TDM research is fair use, resolving the disagreement between the proponents and opponents of the petition to some extent. She stated that TDM research, as described in our petition and with certain limitations, was likely to be a fair use, in large part because it is non-commercial and likely to be transformative. While Authors Alliance is thrilled that our proposed exemption has been granted, enabling socially beneficial TDM research on copyrighted works which was formerly prohibited under 1201, the aforementioned limitations may limit the usability of the exemption for some TDM researchers.

Security Measures

During the hearing and the post-hearing meeting, Authors Alliance participated in lengthy discussions about how the corpora of works should be secured. In the Librarian of Congress’s view, the most important limitation to this exception is a requirement that the academic institution “storing or hosting a corpus of copyrighted works . . . implement either security measures that have been agreed upon by copyright owners and institutions of higher education, or, in the absence of such measures, those measures that the institution uses to keep its own highly confidential information secure.” This seems to represent a compromise position between Authors Alliance’s argument that measures for securing these corpora, while important, should be flexible and tailored to the capabilities of the particular institution and opponents’ argument that the utmost security controls were needed to prevent unauthorized dissemination of the works in the corpora. Authors Alliance had pointed out that prescribing specific security controls, as the exemption’s opponents argued for, could render the exemption unusable for researchers at institutions that were not able to meet these high security standards. Instead, we suggested that the exemption require “reasonable security measures” to secure the corpora. By allowing academic institutions to secure corpora using their own security measures for storing highly confidential information, the recommendation did provide for some flexibility, while still indicating that very strong security controls were needed.

Access to Corpora for Verification Purposes

Register Perlmutter recommended that the researchers should be permitted to “view or listen to the contents of the copyrighted works in the corpus solely for the purpose of verification of the research findings, not for the works’ expressive purposes.” Authors Alliance agreed to this limitation in our post-hearing meeting, pointing out that the requirement that the copyrighted works be lawfully obtained meant that researchers would already have access to the copyrighted works for expressive purposes, and would not need access to the corpora to read or watch the works, but simply to verify their research findings.

Licenses and Ownership

In the recommendation, Register Perlmutter also recommended adding a limitation that “circumvention be permitted only on copies of the copyrighted works that were lawfully acquired and that the institution owns or for which it has a non-time-limited license,” and should not be permitted on works the institution had “rented or borrowed.” This limitation has the potential to complicate the usability of the exemption with regards to TDM research on e-books: because e-books are generally licensed rather than owned, whether the exemption will permit TDM research on a certain e-book will depend on the terms of the license for that e-book.

The Exemption Going Forward

It remains to be seen how the limitations in the exemption will affect researchers’ ability to make use of it. This being said, Authors Alliance views the recommendation as a huge victory for TDM researchers and authors who care about the broad dissemination of their work and contributing to the progress of knowledge. We will continue to update our readers and members as the exemption is implemented and received by the TDM researchers who need it.

Authors Alliance is deeply indebted to the clinical team at the Samuelson Law Technology & Public Policy Clinic at UC Berkeley for their tireless work on our behalf petitioning for this exemption. We applaud their efforts and the dedication of our co-petitioners in making this exemption a reality.