Last month in our newsletter to members (join here so you don’t miss future news!), we shared a call to sign on to an open letter, organized by Fight for the Future, on behalf of authors in support of libraries. We’re really pleased to announce that this letter is now posted online and open for more signatures here. We encourage you to read it and sign if you support its message.

We’ve written quite a bit recently about the challenges libraries face today – from the lawsuit filed against the Internet Archive over controlled digital lending, to efforts to restrict libraries from preserving and lending ebooks. Just this week we saw one publisher, John Wiley & Sons, unilaterally yank 1,379 educational titles from library ebook collections (as far as we can tell, with no author input), refusing to sell electronic copies to libraries and forcing teachers and students to scramble for access just as the academic term begins.

From our perspective, libraries are critically important partners in making sure that authors’ works are read and preserved. As the letter explains, “Libraries are a fundamental collective good.” The letter’s signatories “are disheartened by the recent attacks against libraries being made in our name by trade associations such as the Association of American Publishers and the Publishers Association: undermining the traditional rights of libraries to own and preserve books, intimidating libraries with lawsuits, and smearing librarians.” 

Unfortunately, and predictably, the letter has received almost instant condemnation from the Authors Guild, the AAP (which, you might recall, has asserted that it has acted as legal counsel for the publishers who brought the Hachette v. Internet Archive lawsuit), and other related groups. They assert: 1) that authors don’t really understand what the Internet Archive controlled digital lending lawsuit is about, and if they did they wouldn’t support it,  and 2) that “real libraries” don’t engage in activities like the controlled digital lending that is the subject of the Internet Archive lawsuit. 

Neither argument holds weight. As part of our own efforts to support controlled digital lending in this case, Authors Alliance conducted a survey of our members and other authors. Responses showed that many authors do support CDL, and support it strongly. Additionally, many libraries across the country practice CDL: it is far from a practice unique to the Internet Archive.

Today, Authors Alliance joined 20 public interest, civil society, and other like-minded organizations in signing on to a letter opposing the latest iteration of the Journalism Competition and Preservation Act (“JCPA”). The full text of the letter can be found here. Last year, Authors Alliance signed on to an earlier letter voicing opposition to the JCPA when it was initially proposed. A new version of the bill was recently released in the Senate, prompting the bill’s opponents to reiterate our concerns. 

In brief, the JCPA would enable collective bargaining by news organizations with large online platforms by creating a “safe harbor” from antitrust law to allow media organizations to band together and negotiate with these platforms. This blog post will explain our concerns about the bill and provide an update on how the legislation has evolved in the months since it was first proposed. 

Problems with the JCPA

Touted as bipartisan legislation intended to protect journalism from unfair encroachment by large tech companies, the legislation has received support from groups such as the Authors Guild and some news publications. But civil society organizations have drawn attention to serious problems with the legislation for those who care about robust fair use rights and access to knowledge. 

The JCPA would force platforms to negotiate with news publications for “access” to their content to engage in basic activities such as linking to the news publication’s website. By creating what some have dubbed a “link tax,” the JCPA could lead organizations and individuals to link less to other sources out of fear of copyright liability, creating a chilling effect on online speech and making knowledge less accessible. The JCPA could also expand the scope of copyright by covering the aggregation of snippets or headlines from press publications—information that is in many cases not entitled to copyright protection. The JCPA may also work to entrench the largest press publishers while disadvantaging smaller publishers, who lack the sophistication or resources to participate in this collective bargaining. 

Changes to Legislative Language

The latest revised bill represents the third round of revisions to the JCPA (Public Knowledge has published comprehensive discussions of the first and second rounds of revisions in recent months for readers interested in learning more). Unfortunately, the latest changes to the JCPA does little to address the concerns voiced by Authors Alliance and our co-signatories last year. 

There is some evidence that the bill’s sponsors heard the concerns voiced by Authors Alliance and others, but the changes do not go nearly far enough towards ameliorating our concerns. For example, the latest version of the bill includes a provision stating that it does modify, expand, or alter the rights guaranteed under copyright. But the legislation could also cover activities that are considered to be fair uses (such as aggregating “snippets” from articles and linking), creating uncertainty as to how the fair use doctrine interacts with this proposed legislation. 

The revised bill also includes an “employee cap” which would bar news organizations with over 1,500 employees from participating in the anticipated collective bargaining to help address concerns about entrenching the largest players. But this would exclude just three of the country’s largest news publications, making it ineffective at addressing monopoly concerns. As today’s letter points out, the legislation as currently envisioned could “cement and stimulate consolidation in the industry and create new barriers to entry for new and innovative models of truly independent, local journalism.”  To make matters worse, the JCPA does nothing to ensure that arbitration that any gains to news organizations will actually go to the journalists actually writing the articles. The legislation establishes “collective bargaining” rights for publications, many of which do not allow their employees to collectively bargain. By prioritizing publications over the authors who make these publications possible, the bill does little to address the difficulties faced by journalists and other authors. 

Finally, other changes in the legislation create new problems. New language in the bill would force  platforms to carry content of digital journalism organizations that participate in collective negotiations, which could lead to platforms being required to aggregate content containing extreme views or misinformation. This raises serious free expression concerns.

Authors Alliance cares deeply about a vibrant and diverse publishing ecosystem where smaller publishers are not disadvantaged, and the legislation as envisioned would do just the opposite.

Yesterday, Authors Alliance submitted an amicus brief in Sicre de Fontbrune v. Wofsy, joined by the Electronic Frontier Foundation, The Project Gutenberg Literary Archive Foundation, and Public Knowledge. We have been covering this case on our blog over the past few weeks, and are delighted we could share our perspective with the Ninth Circuit Court of Appeals as it considers whether to grant Wofsy’s request for a rehearing. You can read our full brief below.

Our brief makes two principal arguments for why the Ninth Circuit should re-hear the case. First, we explain that the case has serious First Amendment implications which could affect the free speech rights of countless U.S. authors and members of the public. Next, we argue that the errors the original panel of Ninth Circuit judges made in its fair use analysis are serious enough that the Ninth Circuit should reconsider whether Wofsy has a viable fair use defense to Sicre de Fontbrune’s infringement claim.

In our fair use argument, we drilled down further on the various errors the panel made as well as the serious ramifications its decision could have on authors’ ability to rely on fair use to create new works of authorship. We argue that the panel failed to consider the First Amendment limitations on copyright protection: the photographs in question exhibited minimal creativity, which the court should have considered as part of its analysis of the nature of the works at issue. We also argue that the court erred by disagreeing with the lower court’s finding that Wofsy’s use was aligned with scholarship and research—prototypical examples of fair use set forth in the Copyright Act. Finally, we explain that fair use is a crucial First Amendment safeguard, which the panel should also have given more weight to in its decision. 

Authors Alliance extends our thanks to Kathryn Thornton at Ropes & Gray for providing support on this brief, as well as our fellow amici for their feedback and support. 

Earlier this month, we wrote about the recent Ninth Circuit decision in Sicre de Fontbrune v. Wofsy—a case about whether U.S. Courts should enforce foreign copyright judgments when the challenged use would likely be a fair use if the case were brought in the United States. 

The good news from Sicre de Fontbrune (at least for U.S. authors) was that the Ninth Circuit seemed to agree that fair use is an important enough matter of public policy to at least deserve further assessment before enforcing a foreign judgment, though it didn’t answer the issue definitively. Although the U.S. is not totally unique in how it approaches fair use, fair use is a distinctive and important part of U.S. public policy, and courts have repeatedly emphasized how it supports core free speech rights as embodied in the First Amendment. So, we think it makes sense that courts should give special attention to fair use and conduct a thorough analysis when U.S. authors have relied on that right. 

But unfortunately, when the Ninth Circuit conducted its own fair use assessment, it gave Wofsy’s fair use assertion anything but special attention, conducting a more cursory analysis than the doctrine requires. We see two grave errors in the Ninth Circuit’s decision. 

So what did the Ninth Circuit get wrong?  

First, some basic facts from the case: Wofsy (the defendant) got permission from the Picasso estate to publish what has now become a standard Picasso reference work, The Picasso Project. The Picasso Project documents Picasso’s greatest works and incorporates substantial reference information. Wofsy reused a number of images of Picasso paintings from an earlier, larger work known as the Zervos Catalogue, in which Sicre De Fontbrune bought rights to in the late 1970s. The Zervos Catalogue is a 33-volume work with over 16,000 images of Picasso’s art, produced with cooperation from Picasso and his estate from 1932-1979. The Zervos Catalogue, which does not contain the same reference information as The Picasso Project, is now out of print and selling on the used market for upwards of $20,000 for all 33 volumes. The Picasso Project is 28 volumes, each of which can be purchased individually for $150 directly from Wofsy (or $4,200 for the whole set).

Sicre de Fontbrune originally sued Wofsy in French court in the mid-1990s when he discovered copies of The Picasso Project for sale in a French bookstore. According to the Ninth Circuit Court’s retelling of the French case, The Picasso Project reused some 1,400 images from the Zervos Catalogue. The court explained that Sicre de Fontbrune’s claim was not that Wofsy infringed Picasso’s copyrights (remember, he had permission from the Picasso estate), but that Wofsy had infringed Sicre de Fontbrune’s rights in the photographs that it had procured of Picasso’s art and published in the Zervos Catalogue.

The district court, in its own abbreviated fair use analysis, concluded that the use was fair, but the Ninth Circuit reversed. You can read the Ninth Circuit’s fair use reasoning here.

The most significant and concerning error in the Ninth Circuit’s opinion is that it didn’t actually evaluate any of the individual photographs in which Sicre de Fontbrune claimed his rights were infringed. The second factor in fair use analysis requires courts to assess the “nature and character” of the underlying photographs. In the words of another Ninth Circuit opinion, the second fair use factor “recognizes that creative works are ‘closer to the core of intended copyright protection’ than informational and functional works, ‘with the consequence that fair use is more difficult to establish when the former works are copied.’” 

This factor is particularly important in this case because limits on the scope of copyright protection are one of the other ways that copyright law avoids restricting First Amendment protected speech. As the Supreme Court has explained, “First Amendment protections [are] . . . embodied in the Copyright Act’s distinction between copyrightable expression and uncopyrightable facts and ideas, and the latitude for scholarship and comment traditionally afforded by fair use.” Those limits provide breathing room for the public to freely use underlying ideas and concepts in copyrighted works, while preventing others from locking up that underlying expression from further reuse without adding anything creative or new.

In this case, the defendants didn’t argue (and the court didn’t consider) that the photographs may not be protectable under U.S. law, but the court should have considered the creativity of these photographs more thoroughly as part of its fair use assessment. Instead, the panel merely recited the adage that “photos are generally viewed as creative” and then accepted without question the judgment of the French court regarding whether the photographs could be protected by copyright, using French legal standards to judge creativity, that the photos have “creative elements.” There is nothing to suggest that the panel (or the district court) ever even looked at a copy of the pictures.

While it is true that some photographs can be highly original and creative, the photos in this case are mere photographic representations of other works, exhibiting almost no creativity (a “modicum” of which is required for a work to be protected by copyright in the U.S.). Unfortunately, given the sparse briefing on the fair use issue below and lack of argument from the plaintiffs on fair use, the court never had the opportunity to really look into the creativity issue. At a minimum, the Ninth Circuit should have sent this issue back down to the district court for it to make a judgment for itself. If either court had looked at these photos, it seems obvious to us that the minimal creativity they exhibit would have resulted in the second fair use factor strongly favoring Wofsy’s use.  

The other major mistake the court made was to not meaningfully evaluate the “purpose and character” and transformative nature of Wofsy’s use under the first fair use factor, one of the most important factors in fair use analysis. The Ninth Circuit rejected the lower court’s finding that Wofy’s use “aligned with criticism, comment, news reporting, teaching . .  . , scholarship, or research,” and instead construed the use in the most simplistic terms: “The ‘use’ at issue is . . . the reproduction of copyrighted photographs in a book offered for sale.” So, the Ninth Circuit said, the use was both commercial and non-transformative. 

That kind of superficial analysis of the purpose and character of Wofsy’s use is not sufficient in fair use analysis. While it is true that Wofsy copied the photographs for use in a book offered for sale, at that high level of abstraction, virtually any unauthorized use of images in a book offered for sale would fail this version of the factor one analysis. Such an approach would radically alter commonly accepted understandings of how fair use applies to nonfiction publishing and would upend the market, which relies heavily on fair use to incorporate images in “books offered sale.”  

As the Supreme Court recently stated, “in determining whether a use is ‘transformative,’ [a court] must go further and examine the copying’s more specifically described ‘purpose[s]’ and ‘character.” In this case, Wofsy’s purpose in using the images was to create a “systematic and comprehensive illustrated record of Picasso’s paintings,” far more complete than the Zervos Catalogue and with substantial reference information on with substantial cross-reference information to aid scholars in finding other catalogs that include each image, and where each underlying original Picasso may be found. These uses are new and different from the original photographs, enabling scholarship and research, and making them consistent with the Copyright Act’s prototypical examples of fair uses. Had the court interrogated the purpose and character of Wofsy’s use more thoroughly, it would have reached the same conclusion as the district court and found this factor too weighed in favor of fair use. 

What comes next? 

Given the importance of fair use and free speech to U.S. public policy, and these significant errors in the Ninth Circuit’s decision, last week, Wofsy filed a petition with the Ninth Circuit for rehearing and rehearing en banc. Authors Alliance intends to submit a brief supporting their petition, which we hope will help the court address these errors. 

Last week, attorneys for photographer Lynn Goldsmith filed a reply brief in The Andy Warhol Foundation v. Goldsmith, a case headed to the Supreme Court this fall. In June, Authors Alliance submitted an amicus brief in this case in support of appellant the Warhol Foundation (“AWF”) after they submitted their own brief, and we have been covering this case on our blog since the Second Circuit’s opinion was handed down last year.

The lawsuit concerns a series of Andy Warhol screen prints and sketches depicting the late musician Prince, known as the Prince Series and inspired by a photograph taken by Goldsmith. The images in the case were created after a first image was commissioned by Vanity Fair based on the photograph taken by Goldsmith, authorized pursuant to separate agreements between Vanity Fair and Goldsmith and Vanity Fair and Warhol. The authorized Warhol image appeared in the magazine in 1984 and included credit for both Goldsmith and Warhol. However, Warhol went on to create fifteen additional works of the image in the same style, which are the subject of the litigation.

After learning of the additional images after Prince’s death, Goldsmith sued AWF for copyright infringement, alleging that the Prince Series infringed her copyright in the photograph of Prince. The district court for the Southern District of New York had found for AWF on the fair use grounds, as the Prince Series “transformed Prince from a vulnerable, uncomfortable person” as seen in Goldsmith’s photograph “to an iconic larger-than-life-figure.” Yet the Second Circuit went on to reverse the district court’s decision, holding that since comparing the Goldsmith photograph and the Prince series side-by-side, they appeared visually similar, Warhol’s use was not transformative. Then, AWF appealed the decision to the U.S. Supreme Court, who agreed to hear the case this upcoming term. 

Goldsmith makes two primary arguments in her brief: first, that Warhol’s use of Goldsmith’s photograph was not transformative. Second, Goldsmith argues that the test for transformativeness proposed by AWF is not workable. 

Regarding the question of whether Warhol’s use was transformative, Goldsmith argues that a secondary use is transformative “only if that use must necessarily copy from the original without ‘supersed[ing] the use of the original work, and substitut[ing] … for it.’ “ According to Goldsmith’s view, because Warhol did not have to copy Goldsmith’s photograph in order to create a silk screen depiction of Prince (presumably, other pictures of Prince could have worked just as well), the use is not a transformative one. Goldsmith draws on principles governing parody fair uses, which by definition must draw from the original work in order to function as effective parodies, to argue that it is always the case that a transformative use is one in which the copying was “necessary.” The brief also argues that a finding of transformative use requires that the secondary work does not “usurp the market” for the first one. While it is true that when a use is transformative, it is generally less likely that it will usurp the market for the original work, the question of the market effects is a separate consideration in fair use analysis than the transformativeness inquiry. 

Goldsmith also defends the Second Circuit’s novel test for transformativeness, arguing that the Second Circuit reached the correct outcome because the two works shared the same “purposes”: being works of art and depictions of Prince. As Authors Alliance explained in our amicus brief, this argument misunderstands the “purpose and character” inquiry: a work might have the purpose of being a parody, as in Campbell, or serve the purpose of news reporting, as in many other fair use cases, but the form of a work (a work of art) is not a purpose. Campbell concerned a parodic song, but the Court in that case did not state that the work’s purpose was serving as a song. 

Goldsmith rejected AWF’s argument that the “new meaning or message” test, derived from the seminal Supreme Court decision, Campbell v. Acuff-Rose Music, is the proper one to apply in this case, going so far as to say that AWF’s formulation of the Campbell test would “upend copyright.” Goldsmith argues that the “new meaning or message” test is improper because the words of the test are absent from the statute that codifies fair use. The brief further argues that it is improper for courts to consider “meaning,” because the meaning of an expressive work is highly subjective. Yet this argument relies on an oversimplified version of Campbell’s test for transformativeness. That decision directs courts to consider a secondary work’s “new meaning or message” as part of its analysis of the purpose and character of a work. Considerations such as commerciality and how well the use fits within the prototypical fair uses listed in the Copyright Act (such as criticism, news reporting, and teaching) are also relevant. 

While Authors Alliance disagrees with much of the argument in Goldsmith’s brief, we appreciate the concerns it raises about striking the proper balance between protecting copyright holders’ exclusive rights and ensuring that socially beneficial onward creation can flourish. While we believe that Goldsmith argues for a balance of rights that tips too far in favor of a rightsholder’s ability to control secondary uses, it is clear that authors need clear guidance about that balance to continue to rely on fair use, and this case asks the Supreme Court to provide just that. We will keep our readers apprised of updates as this case moves forward.

On July 13, the Ninth Circuit handed down an interesting opinion in Sicre de Fontbrune v. Wofsy, a case addressing whether U.S. courts should enforce foreign copyright judgements when a fair use defense (which is available in the United States but not in many other jurisdictions) would have applied in the United States.  

Fair use is incredibly important for authors—it supports all kinds of creative work, allowing authors to copy the work of others for quotation, comment , or criticism; to create a parody; or even to create research tools that make it easier to learn and discover or gain new insights. For U.S. authors who publish online and aim for an international audience, applying fair use can be a challenge because the doctrine only applies in the United States. Most other countries have no direct analog to fair use, which raises uncertainty: will authors be liable for copyright infringement in other jurisdictions when they exercise fair use online, and if so, how might a negative outcome in another jurisdiction affect their ability to write in the United States? Sicre de Fontbrune begins to address some of these questions.  

Background

This facts of this case goes back several decades, to the early 1990s when Alan Wofsy—a San Francisco based art publisher and antiquarian book dealer—obtained permission from the Picasso estate to publish what has now become a standard Picasso reference work, The Picasso Project. The Picasso Project documents Picasso’s greatest works with substantial reference information. Wofsy reused a number of images of Picasso paintings from an earlier, larger work known as the Zervos Catalogue, in which Sicre De Fontbrune asserts copyright. The Zervos Catalogue is a 33-volume work with over 16,000 images of Picasso’s art, produced with cooperation from Picasso and his estate from 1932-1979. The Zervos Catalogue is now out of print and selling on the used market for upwards of $20,000 for all 33 volumes. The Picasso Project is 28 volumes, each of which can be purchased individually for $150 directly from Wofsy (or, $4200 for the whole set).

Sicre de Fontbrune originally sued in the French courts in the mid 1990s when Wofsy offered a small number of copies of The Picasso Project for sale in France. According to the Ninth Circuit Court’s retelling of the French case, The Picasso Project reused some 1,400 images from the Zervos Catalogue. The court explained, Sicre de Fontbrune’s claim was not that Wofsy infringed Picasso’s copyrights (remember, he had permission from the Picasso estate), but that Wofsy had infringed Sicre de Fontbrune’s rights in the photographs that it had procured of Picasso’s art and published in the Zervos Catalogue. 

France—a jurisdiction with no equivalent to the U.S. doctrine of fair use—concluded that Wofsy’s use infringed Sicre de Fontrbrune’s copyright and so handed down a judgment against Wofsy in 2001. A decade later, Sicre de Fontbrune discovered some copies of The Picasso Project in a French bookstore, and so Sicre de Fontbrune sued again to enforce its judgment in France and won. Because the judgment was from a French court, and Wofsy (and his assets) were in the United States, Sicre de Fontbrune then took its judgment to California, where Wofsy is located, in order to actually collect on its French legal victory. Sicre de Fontbrune then asked California courts to enforce the judgment against Wofsy so Sicre de Fontbrune could recover money damages.

Wofsy raised a number of defenses in the U.S. proceeding, including that the California courts are not permitted to enforce a foreign court’s judgment when it is “repugnant to the public policy of this state or the United States” (most states’ laws include identical provisions).  Wofsy argued that because it is the public policy of the United States to support free expression under the First Amendment, and because fair use has been recognized by courts as one of the primary ways that copyright law accommodates the First Amendment, Wofsy should prevail because his use qualifies as fair use under U.S. law.  

The First Amendment and the Public Policy Exception to Enforcement of Foreign Judgments

Courts are hesitant to use the public policy exception to avoid enforcement of judgments from foreign courts. For example, the Second Circuit, interpreting New York’s version of the same act, explained that “[a] judgment is unenforceable as against public policy to the extent that it is repugnant to fundamental notions of what is decent and just in the State where enforcement is sought. The standard is high, and infrequently met.” Yet, free speech has been one area where courts have been willing to apply the exception, typically in libel cases. Even Congress has intervened with the SPEECH Act, which prohibits any domestic court from enforcing a foreign defamation judgment unless the foreign court “provided at least as much protection for freedom of speech and press in that case as would be provided by the first amendment to the Constitution of the United States and by the constitution and law of the State in which the domestic court is located.”

Fair Use and Foreign Judgments

There are very few cases, however, addressing whether the public policy exception applies in cases where a user would have had a viable fair use defense in the United States. The Supreme Court has explained that fair use is tightly connected with free speech rights, describing it as a “built-in free speech safeguard,” and the Second Circuit has explained that “First Amendment concerns are protected by and coextensive with the fair use doctrine.” Consequently, fair use should be an important part of the “public policy exception” analysis. 

But, as far as we are aware, only two courts have considered whether a viable fair use defense under U.S. law should shield a defendant from enforcement of a foreign judgment.  The first is a Second Circuit case from 2007, Sarl Louis Feraud Intern. v. Viewfinder, Inc., interpreting New York’s version of the California law discussed above. This was also a case involving a French judgment. The other is Sicre de Fontbrune.  In both cases, these courts concluded that, in order to resolve the question of whether the public policy exception applies to avoid enforcement of a foreign copyright judgment, it must first assess whether fair use applied because fair use is so entwined with free speech rights. Though there are only these two cases on point so far, this is a positive trend for U.S. creators who rely on fair use to promote speech that may not be permissible in other jurisdictions. 

U.S. authors are still left with some uncertainty, however, about whether they are protected from foreign judgments at home in the United States. In both Viewfinder and in Sicre de Fontbrune, the courts left several significant questions unresolved. In Sicre de Fontbrune, the court found that Wofsy’s use was ultimately not fair use, and so the court never addressed what a positive fair use ruling would mean, namely: would a positive fair use ruling always be sufficient to trigger the public policy exception, or are some fair uses not sufficiently connected to First Amendment protections to trigger the public policy exception? In addition, the court failed to consider how the scope of copyright protection in the U.S. should factor into the analysis, given that (at least in our opinion) it is questionable whether the images in the Zervos Catalogue would be independently protected under U.S. copyright law to begin with.

This is a long post, so that’s all for now. Stay tuned next week for a discussion of the Sicre de Fontbrune court’s fair use analysis, and why we think the court made some missteps.  

In November 2021, Authors Alliance published a blog post about antitrust and the publishing industry, focusing on a recent antitrust investigation intended to block the merger of two of the largest publishers in the country: Penguin Random House (“PRH”) and Simon & Schuster. The case is currently the subject of antitrust proceedings, with the Department of Justice (“DOJ”) on one side, and PRH, who is the party that would be purchasing Simon & Schuster, on the other. On August 1st, 2022, this case is scheduled for oral argument in the District Court for the D.C. circuit before Judge Florence Pan. In today’s post, we will provide an update on the case and share some thoughts about what it might mean for authors.

Witness Lists

Last week, the lists of witnesses for each side were announced. Both PRH and the DOJ included many prominent authors and publishing industry professionals on their witness lists. Literary agents and publishers will testify for both sides. Perhaps surprisingly, each party’s witness list also includes well-known authors. Bestselling author Stephen King will testify on behalf of the government, for example, whereas Andrew Solomon will testify on behalf of Penguin Random House. Penguin Random House also plans to call an economist to testify, likely as to potential economic effects of the merger. 

Parties’ Final Briefs

Then, earlier this week, both PRH and the DOJ submitted their final briefs in the case before it proceeds to oral argument. In its brief, the DOJ argues that a merger between PRH and S&S would violate antitrust laws based on the huge market share of bestsellers that the new firm would have, which it estimates will be nearly 50%. The DOJ also postulates that this would result in lower advances for authors, as there would be fewer publishers to “bid” on anticipated bestsellers, and ultimately, that the merger would lessen creative output and mean fewer authors could make a living from their writing. 

The DOJ’s brief also contextualized the merger within the longstanding pattern of publishing houses merging and consolidating, arguing that the industry as a whole is an “oligopoly” dominated by five major publishers, which cumulatively control 90% of the market for anticipated bestsellers (aside from Simon & Schuster and Penguin Random House, Hachette Book Group, Macmillan, and HarperCollins make up the rest of the so-called “Big Five”). Smaller publishers, which lack the resources of these major players, are generally unable to compete with the Big Five when it comes to anticipated bestsellers, as they often cannot offer the large advances bestselling authors come to expect. The DOJ concludes that because the planned merger would substantially lessen competition in the anticipated bestsellers market, it is presumptively illegal, a presumption which it states cannot be overcome by PRH’s arguments. The DOJ’s argument is also notable because it focuses on the harm to authors, not consumers. By including diminished creative output in the negative effects that might result from the merger, the DOJ’s brief signals that incentivizing authorship and supporting authors are important interests to be weighed when considering reorganization within the publishing ecosystem. 

PRH, for its part, argues that the relevant “market” in the case should not be the market for anticipated bestselling books, but market for books published overall. It further alleges that the “anticipated bestsellers” market (which the DOJ defines as books with advanances over $250,000) the DOJ discusses in its filings has no basis in industry classifications, and would only include approximately 85 books out of the more than 55,000 books published each year. PRH also challenges the government’s “presumption” of illegality, arguing that its prediction model is not adequate to show a likelihood of competitive harm. PRH argues that the merger would actually enhance competition by enabling the new firm to offer more attractive offers and incentivizing other large publishers to do the same in order to compete. It also states that the DOJ government misunderstands the publishing industry and book auctions, and that the DOJ’s predictions about competition within the publishing industry rest on false assumptions. For example, the brief explains that there is substantial uncertainty about how well a book will perform once it is published, making book auctions highly subjective and meaning that no “market price” can be set for book advances. Additionally, because authors have other priorities aside from maximizing financial gain, such as establishing strong relationships with their editors and ensuring that the publisher is a good fit for their work, it is not unheard of for authors to accept a bid that is not the highest offered due to these other factors. 

Overall, the parties’ final briefs in this case show that the book publishing industry is one beset by unusual characteristics and conditions: the offer and auction processes are not straightforward, sales predictions are unreliable, and the role of literary agents in book sales can obfuscate things further. And while publishing houses have steadily consolidated over time, antitrust efforts to make the industry less of an “oligopoly” have so far not been successful. 

As a general matter,  Author Alliance believes that more competition among publishers, and less consolidation of market power, will benefit authors. The trend that the DOJ observes about consolidation is true across the industry, including tradebook publishers but also academic publishers, textbook publishers and others, and substantially and negatively impacts all types of authors. It’s also true that more competition across the publishing ecosystem is needed, as shown by the pending ebook pricing fixing lawsuit against the Big Five publishers and Amazon. 

What’s Next?

Multiple sealed documents have been filed in the case, which makes it difficult to say with certainty what next steps are already in the works. Reports are that after initial oral arguments, trial will begin and is expected to last three weeks. The court has set a post-trial briefing schedule, suggesting that the upcoming hearing will not be the end of the story in this case. Authors Alliance will keep our readers informed about any updates as this antitrust case moves forward.