Random Words of Ownership

Peter Brantley -- October 21st, 2012

readz0r by Flickr user termie
This past week, Michael Kelley, the Editor in Chief of Library Journal, called attention to statements from Random House that suggest that libraries own the books they acquire from distributors such as Overdrive or 3M. Evidently, as far as Random is concerned, distributors are not compelled to enforce license agreements with libraries for Random House titles. Michael quotes Skip Dye, head of library relations at Random, “Random House’s often repeated, and always consistent position is this: when libraries buy their RH, Inc. ebooks from authorized library wholesalers, it is our position that they own them.” Skip goes on to say, “This is our business model: we sell copies of our ebooks to an approved list of library wholesalers, and those wholesalers are supposed to resell them to libraries. In our view, this purchase constitutes ownership of the book by the library. It is not a license.”

These are startling words, and they suggest a wide series of consequences. If libraries truly own Random House titles, then the only legal restraints on their use beyond acknowledgement of the normal restrictions of copyright are the constraints that libraries have acquiesced to in their contracts with library e-book distributors. In line with the statement from RH, libraries should theoretically be able to sell e-books once they are done with them, donate them to other libraries, or engage in digital inter-library loan.

One caveat in Skip’s language is “approved list of library wholesalers” – if RH is selling only to wholesalers that it knows a priori will impose restrictions on e-book use and disposition, then it is being disingenuous. For example, if 3M contract language acknowledges that a library has a right to move its titles to another platform, does the license interfere with the ability of a library to donate or sell its ebook collection to another party? Could, in other words, the State of Kansas sell the Internet Archive a set of ebooks for the IA to make available through Open Library? Would Random object to that transfer? And, even more critically, just who is eligible to be an approved purchaser of books? Would Random House turn away the Internet Archive as a potential buyer of ebooks? As an Internet Archive director, I wrote to Skip Dye, offering to buy a bulk quantity of Random titles for Open Library’s lending service. I await word.

There are further interesting questions. If libraries own the books they purchase from an approved RH retailer, then do consumers own the e-books they buy from Amazon, Barnes & Noble, Kobo, and other online bookstores? Random House is partnering with Bookshout, a new service that permits readers to aggregate their e-books in a vendor-neutral bookshelf, regardless of which retailer the titles were acquired from originally. This would suggest that RH’s policy might well extend to consumers. If Bookshout is able to aggregate e-books from a range of retailers, then would it be possible for the Internet Archive to create a library bookshelf, in which individual consumers donate their used digital titles to the Open Library? If IA was able to verify that consumers own those titles, in a manner logically consistent with the approach that Bookshout is taking, would not IA be similarly supporting reader’s rights?

Random House could initiate large-scale e-book sales direct to consumers whenever it chose. Direct sales would force Amazon to acknowledge that its e-book provisions to consumers were truly sales, not licenses, and dramatically weaken Amazon’s market position to publishers’ advantage, as well as consumers’. E-book retailers would have to compete on services to a far greater extent than they do now, providing robust collection management facilities, annotation and social reading support, integration with external e-book services, and making available a robust set of APIs for individual or group-based collection management.

There’s also a side to this question that targets Random House particularly. RH moved to agency pricing in 2011, and was not named in the Department of Justice action against five other publishers that allegedly colluded to set retail prices. The Justice Department has made it clear that agency pricing, per se, is not inherently illegal, and Random is therefore free to continue its pricing strategy without antitrust entanglement. But, if Amazon and other ebook retailers are acting as agents for Random – contractually acknowledging Random’s price settings and collecting local sales taxes for the publisher – and if the contract language between Random House and e-book retailers presumes sales and not licensing, then it would appear that consumers should be free from the constraints that Amazon may be unnecessarily – perhaps even inappropriately – imposing on consumers.

There’s one final argument as to why Random would want to move towards ownership language for e-books. In online music sales, recent court decisions such as Eminem (FBT Productions v. Aftermath Records) clearly indicate that digital revenue booked as sales actually constitutes licensing per the contract agreements with the artists. The distinction is consequential because licensing affords far higher royalties – up to 50 percent – than straight sales. Significant class actions are being resolved in favor of recording artists, and these rulings put studios in arrears with many of their artists for considerable sums. This may provide further incentive, particularly for authors with older contracts, for publishers to book transactions as sales. And if RH is controlling pricing through retail price management, the financial exposure of e-book sales being evaluated as licenses by courts could be even greater.

Both individual readers and libraries need to start demanding clarification in what publishers mean when they say that consumers “own” e-books. There’s a striking disjunction between action and language. Words have meaning, and language has consequences. It’s time to hold corporations accountable, and re-assert ownership over our own bookshelves.

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