What’s up?

Is it just greed?  Is that what is behind the lawsuit over e-reserves and copyright infringement that publishers continue to pursue against Georgia State University?

Yesterday Publishers Weekly published a short item reporting that the Copyright Clearance Center, which is helping to bankroll the GSU lawsuit, paid out a record amount of royalty monies to rights holders in the 2013 fiscal year. Royalties paid by the CCC have increased by more than $35 million in the past three years alone.  So why the lawsuit? This news calls into question the motivations of Oxford University Press, Cambridge University Press and Sage Publishing, who continue to pursue a feckless and wholly unnecessary attack on higher education.

Usually one hears two different explanations for this lawsuit.  One is that publishers just want clarity about fair use.  The other is that permissions income is vital for the survival of academic publishing.

To start with the first claim, it seems to have gone out the window once the plaintiff publishers decided to appeal the decision by Judge Evans in the District Court.  In that decision, Judge Evans laid out very specific rules about fair use as it applies to e-reserves in a non-profit educational institution.  If clarity was what was being sought, the Judge’s 350 page decision provided it.  In fact, my own objection to that ruling is that it went too far in removing the flexibility of fair use, at least for the situation that was before the court.  On the other hand, the publishers did not like it because it was not rigid enough; they did not simply want clarity, they wanted fair use rendered toothless.  And since the Judge did not do that, but merely provided the kind of guidance the publisher claimed to be seeking, they chose to appeal her decision.

The second claim for why this lawsuit was needed does not fare any better.  In her trial court decision, the Judge held that revenue from permissions was not a significant part of the value of most of the academic books at issue, and the publishers complained loudly about that holding, saying that “publishers cannot sustain the creation of works of scholarship” without increasing revenue from licensing.  First of all, academic publishers do not “create” works of scholarship, nor do they pay those who do create them, most of the time.  So it is hard to see why that ever-increasing income stream is really so necessary.  But now we learn that that revenue stream is growing, at a very nice rate, thank you very much.  The picture painted by CCC’s announcement, as reported by Publishers Weekly, is of a system that is working quite well for publishers.  If the revenue from licensing must go up for academic publishing to survive, as publishers claim, well, it is.

So how much is enough?  I have always believed that behind this lawsuit is a belief that copyright exists so that rights holders, who most often are intermediaries and not the original creators, can extract every conceivable penny from every use of every copyrighted work.  From that perspective, fair use is a gigantic mistake and these revenue figures from the CCC are irrelevant.  But that is not the purpose of copyright law.  The copyright monopoly exists to give an incentive to authors and creators to continue writing and creating.  Since very little of the $188.7 million that the CCC distributed to rights holders in FY 13 actually goes to creators, it is deadweight loss, in economic terms, as far as the incentive purpose of copyright is concerned.  And it raises the question of how much income is enough; how much inefficiency in the system is required before these publishers will be satisfied?

I am looking forward to the oral arguments for this appeal on Nov. 19, and I hope the judges on the appellate panel are well-enough informed and savvy enough to ask that question of the lawyers for Oxford, Cambridge and Sage.  The Eleventh Circuit should demand, just as Judge Evans did, to see the books for these companies (including the CCC) and to make an independent and common sense decision, guided by public policy and sound economics, about what a sensible profit really is.  Because it is very clear that the plaintiffs will never admit that they have squeezed enough money out of higher education in the United States.

5 thoughts on “What’s up?”

  1. Because CCC is not a (federal, for tax purposes) non-profit and does not file a 990 form, we don’t have a very clear picture of its internal financials. However, CCC’s new annual report has some other interesting numbers, in addition to those you cite above: http://www.copyright.com/content/dam/cc3/marketing/documents/pdfs/annual-report.pdf

    The report indicates that CCC took in (revenue) of $272.9 million for 2013, and paid out royalties of $188.7 million. That means that $84.2 million remained with CCC.

    Assuming that almost all incoming revenue is from licensing fees,what’s more interesting is that it means that for every dollar of license fee, about $0.30 is kept by CCC. Not a bad margin.

    How does CCC use all of that remaining $84.2 million? Of course, CCC has to take a cut to run its business. But how much, and for how large or an organization? In that same report we see that CCC claims to collect $939,000 in revenue per FTE. Dividing that number into the total revenue for the year ($272.9 million), it appears that CCC has around 290 full time employees.

    If I’m reading any of this wrong, someone please correct me.

  2. Well said, as usual. For the past few years, I have been giving the copyright-owner industry some benefit of the doubt in trying to understand their occasional back-asswards actions, like filing tens of thousands of lawsuits against individuals for infringing downloads of songs and movies, or initially refusing to negotiate with libraries to “loan” e-books. I have repeatedly said, “They are scared by changing technology, and legitimately so; sometimes they have just gone about addressing those fears in non-productive ways.”

    However, it is becoming increasingly clear that, as Kevin posits, at least some segments of the copyright-owner industry are simply in it for GREED. It is the only thing that can explain continued pursuit of behavior like this lawsuit. The plaintiff’s position shows a complete disregard for the law and the very basis of the law, the Constitutional purpose served by and supporting the law, and the balance of owner rights & user rights embedded in the Constitution.

    And why is the library world being so quiet about the CCC’s role in this lawsuit?? Is it because the CCC is paying library associations to market to their members in various ways? Are we afraid to offend them? Or have we not spread the word widely and loudly enough?

  3. What percentage of Duke University Press’ revenue comes from licensing/permission fees? What has been the five year or ten year pattern of that revenue stream?

  4. You write that “very little of the $188.7 million that the CCC distributed to rights holders in FY 13 actually goes to creators” but how do you know that exactly? It’s pretty standard, I think, for scholarly book contracts to split income 50/50 for such subsidiary rights. For journals, it’s probably different, but there’s no way of knowing how pie is sliced up here — or is there?

    1. Of course there is; talk to scholarly authors, which is something I do all the time. Most have never seen a check for permission royalties, at least from article publications. And when they do, it is a matter of a few dollars. What it is not, ever, is an incentive to create more scholarly works.

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