Settlement strategy subtlety

I listened to a CD of a CLE today Policing and Protecting Copyrights on the Internet, offered by Strafford.  The participants were David Young and Andrew Bridges, both very experienced copyright litigators.  The discussion briefly touched on Google’s recent settlement with the book publishing industry concerning Google Book Search.

In a nutshell, Google had been scanning copies of books to provide search results of the full text of the books, as well as to provide images of the pages of the books.  Google was doing this without the permission of the authors or publishers of the books, and was claiming that it was fair use.  Eventually, Google settled with the authors and publishers, and the fair use question was never litigated to a conclusion.

It’s obvious that settlement often provides benefits to both parties: the dispute is resolved faster and less expensively, the risk of exposure to excessive damages can be lessened, etc.  During the CLE, though, one of the participants pointed out an additional benefit to Google of settling: whether or not this is fair use was not decided, but Google gets to continue doing it anyway.

Yes, Google could have litigated this to its conclusion, and possibly had this determined to be fair use.  In that case, Google would not have had to pay any royalties or damages in a settlement.  However, the world would now know that this activity was allowable.  By settling, Google keeps the question of whether it is fair use.  In a way, this creates a barrier of entry to those who might want to copy Google’s business model, as they would have to either come to similar terms with the authors and publishers, or they would have to spend their own money in court to litigate the fair use issue instead of free-riding on Google’s litigation efforts.

Thinking back to the Kindle case, this strategy could be another explanation for why Amazon didn’t bother fighting: sure, it could be fair use, but why litigate it when success would just lead to a zillion competitors doing the same thing?