fair use and (in)efficient bundling

Randy Picker has an interesting post More Google Print: Fair Use and Inefficient Bundling . He suggests that fair use will, in some cases, force inefficient bundling of rights in the sense that consumers get access and use rights, some of which may be licensed by the copyright holder and some of which are privileged by fair use. According to Randy, “Fair use is a form of bundling: one right necessarily comes with some other right. Not all consumers will want the “extra” bundled rights. Copyright holders will take into account in their initial pricing decisions for a work the full uses being conveyed, including those conveyed as a result of fair use.” This argument should be familiar, as it has been made by many in arguing that fair use ought to exist only where transaction costs are so high as to preclude efficient licensing (and thus pricing) of uses; if fair use is narrowly confined to such conditions, then the inefficient bundling of use rights would vanish.

Funny thing is, I am currently writing an article in which I argue that fair use in broader form efficiently “bundles”, at least in some cases (e.g., where consumers’ willingness to pay for access and (fair) use rights may understate social demand for their access and use). I will not hammer out the argument in a blog post. A short version of the article will be published soon in the Review of Law and Economics.

My point here is just to draw attention to the existence of an ongoing debate in copyright. Whether fair use efficiently or inefficiently bundles depends on one’s measure of efficiency and on context. Randy clearly acknowledges this and suggests that we need a more detailed description and evaluation of the Google Print context. So we are basically on the same page but leaning perhaps in different directions.

Randy, Doug, Mike, Siva, and many others are correct in suggesting that the Google Print case is worth paying attention to. It brings to the fore deep tensions in copyright and the recurring need to evaluate copyright’s scope in the face of technological change — or as Doug Lichtman asked the question “how should we decide when a copyright holder is entitled to earn revenue from a new technology.” That said, I have not seen a very convincing argument that copyright holders’ ought to be entitled to revenues derived from the search capability that Google delivers. I understand that Google must make a database of copies to enable the search and that this presents doctrinal issues, but as Tim Wu points out in his Slate piece, which I linked to in a previous post, Google is not supplying a substitute product at all, just a search. Plus, I think there are social benefits derived from the search capacity that cannot be fully internalized / captured within market transactions.

Finally, one last minor point regarding the last paragraph in Randy’s post, which reads:

Google Print makes it much less likely that consumers will buy digital copies from, say, Amazon. The Amazon Upgrade program (see my post on this) is exactly buy paper, get a digital searchable version, and it is hard to see how you sell the digital copies if they are freely available on Google Print. Sure, sometimes free can compete with fee, but it is odd to think that there aren’t spillovers of exactly the sort that we see in this example

As far as I understand the Google Print service, digital copies are not made freely available. So how does Google Print “make[] it much less likely that consumers will buy digital copies from, say, Amazon?”