Most Favored Nation Clause in Google Settlement

[richards1000@comcast.net]

Colleagues:

Listmembers may find of interest a development respecting the 
most favored nation (MFN) clause, section 3.8(a), of the proposed 
Google Books settlement agreement, that arose on July 31 at 
"Alternative Approaches to Open Digital Libraries in the Shadow 
of the Google Book Search Settlement: An Open Workshop at Harvard 
Law School," http://cyber.law.harvard.edu/googlebooks/Main_Page :

I watched the workshop via Webcast.  At the 11:00 a.m. panel, 
none of the presenters mentioned the MFN, not even Professor 
Grimmelmann, who in his Journal of Internet Law article earlier 
this year, http://bit.ly/7W3qG at page 15, called the MFN "[t]he 
most pressing problem" posed by the proposed settlement 
agreement.  Via the conference Twitter feed, 
http://twitter.com/#search?q=%23gbsworkshop09 , I asked the 
panelists why none of them had mentioned the MFN.  Several of 
them said they believed the MFN was not a pressing issue, since 
it would only become operative if Congress enacted orphan works 
legislation authorizing the Book Rights Registry (BRR) to grant 
rights in orphan works.  I then asked Professor Grimmelmann 
whether he had changed his mind respecting the views he had 
expressed in his Journal of Internet Law article, and he 
responded via Twitter: "Yes, I've been persuaded (for now) that 
the MFN clause has too few teeth to worry as much about as other 
things."

My understanding of the panelists' reasoning respecting the MFN 
is that in the absence of orphan works legislation, under the 
property law principle of "nemo dat" the BRR would lack the power 
to license any rights in orphan works to anyone.  The MFN would 
only become applicable if Congress granted the BRR that power. 
As things stand, then, if the proposed settlement agreement is 
approved as is, as long as Congress does not pass orphan works 
legislation, then the MFN clause will not apply to any license 
the BRR might grant to any competitor of Google in the ebook 
market, because any such license will not include rights to 
orphan works.  This suggests that the settlement in its present 
form would enable price competition respecting digital versions 
of copyrighted non-orphan works, as some of us had previously 
argued, by means of the BRR's discretion to license rights in 
such works to new market entrants.

Robert Richards

* The statements above are not legal advice or legal 
representation.

Robert C. Richards, Jr., J.D.*, M.S.L.I.S., M.A.
Law Librarian & Legal Information Consultant
Philadelphia, PA
E-mail: richards1000@comcast.net
* Member New York bar, retired status.