Legal Stuff

Texas judge orders $10 million set aside for ‘Fifty Shades’ settlement

27 August 2015

From Reuters:

An Australian woman who helped publish “Fifty Shades of Grey” was ordered by a Fort Worth judge on Wednesday to set aside $10 million for a Texas woman a jury said was defrauded out of her share of the royalty rights for the steamy best-selling novel.

Jennifer Pedroza of Arlington could be awarded about $10.7 million once attorneys for her and former business partner Amanda Hayward of Australia settle on the amount she is owed, including attorney fees, court officials said.

. . . .

Pedroza was part of The Writers Coffee Shop, a small independent publisher of ebooks that originally published the “Fifty Shades” trilogy as an e-book and print-on-demand book, according to court papers.

. . . .

The rights to the books written by British author E.L. James were sold to Random House and the deal led to the sale of more than 100 million copies worldwide. A film based on the first book, “Fifty Shades of Grey,” took in more $570 million in the United States and abroad, according to tracking site Box Office Mojo.

A Fort Worth jury decided in February that Pedroza was defrauded out of her share of royalties by Hayward, who tricked Pedroza into signing an agreement that cut her out of her share of the royalties after Hayward signed the deal with Random House.

The jury determined that Pedroza was one of the four original owners of The Writers Coffee Shop and Hayward fraudulently presented the restructuring arrangement so she could keep the Random House money for herself.

Link to the rest at Reuters and thanks to Adam for the tip.

PG says 99% of business contracts are put in a drawer and forgotten after they’re signed.

The other 1% are very minutely examined at some later time.

Author Solutions Case Ends With Settlement

26 August 2015

From Publishers Weekly:

A closely watched lawsuit that had accused self-publishing service provider Author Solutions of fraud appears to be over.

On August 12, Judge Denise Cote ordered the case discontinued without prejudice after being informed by the parties that a settlement had been reached, following a court-ordered conference held on August 11. A settlement was not unexpected, coming just weeks after Cote dealt the plaintiff authors’ case a presumably fatal blow by denying class action status.

The case was first filed in April, 2013, with a group of plaintiff authors pressing an array of claims against Author Solutions, and arguing that a common question augured for a class action: “Did Author Solutions engage in a fraudulent scheme to sell worthless marketing services?” In filings, the plaintiffs alleged that Author Solutions, as part of a company-wide policy, hid from consumers that “it is a telemarketing operation” based on upselling “worthless” services to unsuspecting authors.

. . . .

[T]he firm filed a second potential class action against Author Solutions this spring in the state of Indiana, with new representative author plaintiffs.

Link to the rest at Publishers Weekly and thanks to Jim and several others for the tip.

A quick translation is that the first lawsuit, filed in New York, ended up shooting blanks. The second suit was filed in Indiana, presumably because Indiana law is friendlier to particular elements the claims in this class action.

If defrauded authors were going to receive anything out of settlement of the New York suit, it’s difficult for PG to imagine that class counsel would not have announced it.

PG is not an expert on class actions, but each class must have one or more named plaintiffs. One of the elements of a successful class action claim is that there must be a substantial similarity between the claims of the named plaintiffs and the other class members’ claims. The similarity must be either in the factual settings or the legal questions.

Unless a large number of people were harmed in much the same way, a class action will not fly.

An example of an ideal class action is where a lot of people sign the same form contract that has some substantial defect that harms each of those people to a greater or lesser extent.

Is Amazon Creating a Cultural Monopoly?

25 August 2015

From The New Yorker:

For months, a group of writers calling themselves Authors United have campaigned, mostly unsuccessfully, against the business practices of On Thursday, they mounted their latest challenge, officially requesting that the Department of Justice investigate how Amazon exercises its “power over the book market.” (A spokesman for the Justice Department said it is reviewing the request.) The list of signatories fills twelve pages and reads like an unusually expansive long list for a prestigious writing award; the five hundred and seventy-five writers include Philip Roth, V. S. Naipaul, and Ursula K. Le Guin, along with many longtime contributors to this magazine.

These writers generally aren’t legal experts, however, and they freely acknowledge this near the beginning of their letter to the Justice Department, while asserting that their profession does afford them some degree of expertise: “We are not experts in antitrust law, and this letter is not a legal brief. But we are authors with a deep, collective experience in this field, and we agree with the authorities in economics and law who have asserted that Amazon’s dominant position makes it a monopoly as a seller of books and a monopsony as a buyer of books.”

. . . .

 It is perhaps the writers’ lack of legal expertise that has given them the freedom to put forth what antitrust experts described to me as a highly unorthodox argument: that, even though Amazon’s activities tend to reduce book prices, which is considered good for consumers, they ultimately hurt consumers.

. . . .

 Authors United’s specific argument—that Amazon’s actions are bad for consumers because they make our world less intellectually active and diverse—is unorthodox in its resort to cultural and artistic grounds.

. . . .

 None of this is to suggest, however, that the Department of Justice would have a strong case against Amazon if it were to sue the company and apply Authors United’s reasoning. One reason pricing has been such a popular method of measuring consumer welfare is that it’s easy to quantify: a three-dollar jar of peanut butter is objectively better for consumers than the exact same jar priced at five dollars—forty per cent better. While it may be attractive, on a philosophical level, to argue that Amazon is bad for us because it makes our culture poorer, measuring that effect would be difficult, if not impossible. How would one go about valuing an unpublished masterpiece by an unknown author? This is further complicated by the fact that Amazon makes it easy for authors to self-publish and have their work be seen, without having to go through such traditional gatekeepers as agents and publishers; Amazon might argue that this allows for more free flow of information and ideas.

. . . .

 I spoke with Douglas Preston about these points, mentioning that another antitrust expert I spoke with had supported them, as well. Preston acknowledged, “Not being a lawyer, maybe they’re right—maybe we’re barking up the wrong tree.” Indeed, it’s quite possible the Justice Department will read the Authors United letter and dismiss it as uninformed. But even if that happens, Preston said, it will have been worthwhile for the writers to have made their case. Last fall, Authors United appealed to Amazon’s board of directors to get the company to change its practices; the board seemed unmoved, but the authors’ request was written about in the press. That in itself served the writers’ goal, Preston told me, because it helped disseminate their message to regular people, including Amazon customers. Authors United’s larger mission, he told me, was this: “We hope to show the public that getting products faster and cheaper isn’t necessarily the greatest good. It comes at a human cost.”

Link to the rest at The New Yorker and thanks to Barry for the tip.

If you fail to achieve your original objective, change the objective and claim to have achieved the new one.

The Authors United Letter from an Antitrust Law Perspective

25 August 2015

From author Randall Morris:

Claim 1: Monopoly

AU’s first point is that “Amazon’s dominant position makes it a monopoly as a seller of books and a monopsony as a buyer of books.” The U.S. Supreme Court in U.S. v. Grinnell Corp. (U.S. v. Grinnell Corp.) held that the test for monopoly control under Section 2 of the Sherman Act has two requirements “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.”

Relevant Market

The first question is “what is the relevant market?” If we look to the AU letter, they allege that Amazon has “unprecedented power over America’s market for books.” They also claim that Amazon has become “the largest publisher and distributor of new books in the world.” I have no idea how they’re defining new books and the U.S. Supreme Court can’t grant relief for a market larger than the United States, so I’d rather focus on “America’s market for books.” They also note that “according to published figures, this one corporation now controls the sale of:
– More than 75 percent of the online sales of physical books.
– More than 65 percent of e-book sales.
– More than 40 percent of sales of new books.
– About 85 percent of e-book sales of self-published authors.”
In their list of figures, it seems that they are alleging that “America’s market for books” is made up of e-books and physical books. The other two figures they list would fall into those two categories. I don’t know if they’re trying to make the relevant market “America’s market for books” or if they maintain that Amazon has two separate monopolies (one in e-book sales and one in physical book sales). Justice Sotomayor (who was still a Circuit judge at this point) gave clarification to what the courts should look for in defining a relevant market. In Todd v. Exxon Corp. (Todd v. Exxon Corp.), she held that “to survive a Rule 12(b)(6) motion to dismiss, an alleged product market must bear a “rational relation to the methodology courts prescribe to define a market for antitrust purposes – analysis of the interchangeability of use or the cross-elasticity of demand,” Gianna Enters. v. Miss World (Jersey) Ltd., 551 F. Supp. 1348, 1354 (S.D.N.Y. 1982), and it must be “plausible.” Hack v. President & Fellows of Yale Coll., 237 F.3d 81, 86 (2d Cir. 2000).” She goes on to say that “cases in which dismissal on the pleadings is appropriate frequently involve either (1) failed attempts to limit a product market to a single brand, franchise, institution, or comparable entity that competes with potential substitutes or (2) failure even to attempt a plausible explanation as to why a market should be limited in a particular way.” In other words, in order to continue with your case and not have it dismissed, you must allege in your complaint a relevant market that plausibly doesn’t have interchangeability of use or cross-elasticity of demand with other products. In our case, e-books and physical books would have to be different enough that they couldn’t be seen as reasonable substitutes for one another. There’s some confusion as to what AU wants the relevant market to be. If they want to maintain that Amazon has a monopoly both in sales of e-books and sales of physical books (two distinct markets) then they would need to “attempt a plausible explanation as to why [the] market should be limited in [this] way.” I see no discussion in their letter of the differences between e-books and physical books and no reason why they should be seen as different markets. AU even admits that their concern is for “America’s market for books.”

Monopoly Power

Now that we have AU’s alleged relevant market, “America’s market for books,” we can look into whether Amazon has monopoly power in this market. A case that is perfectly on point is Bookhouse of Stuyvesant Plaza, Inc. v., Inc. (Bookhouse of Stuyvesant Plaza, Inc. v., Inc.). Bookhouse alleged in their complaint that Amazon controlled “60% of the U.S. e-book market.” They also made claims that Amazon’s market share of the print book market were similar. I’d like to go on a brief tangent related to the relevant market. The judge in Bookhouse also saw one of the problems I found with AU’s letter, they didn’t list enough differences to make it clear that these are two distinct markets. The judge noted that “without more detailed allegations or explanation, the Court cannot reasonably infer that these two markets simultaneously are so different that e-books and print books are not acceptable substitutes, and yet so similar that the Publishers’ market share is the same in both markets.” AU’s letter does allege a different market share for print book sales, but the two numbers seem to be close enough that it should at least be an open question as to whether we’re looking at a U.S. market for books or two markets – e-books and print books. AU has still not addressed the issue of whether e-books and print books are acceptable substitutes for one another.

When looking into Bookhouse’s complaint that Amazon controlled 60% of the e-book market, the judge held that “even if plaintiffs had alleged a cognizable market, plaintiffs’ only allegation suggesting that Amazon possesses monopoly power is that its market share is 60%. See First Am. Compl. ¶¶ 15, 20, 22. But the Second Circuit has held that “[a]bsent additional evidence, such as an ability to control prices or exclude competition,” even “a 64 percent market share is insufficient to infer monopoly power.” PepsiCo, 315 F.3d at 109.” Market share does seem to be AU’s main argument that Amazon is a monopoly. They allege that Amazon has 65% of the e-book market and 75% of the print book market. If these two figures make up “America’s market for books,” then Amazon controls 48.75% of American’s market for books. Absent “an ability to control prices or exclude competition,” this is not enough to establish monopoly control over the market. Even taking their separate figures, 65% of the e-book market would be inadequate to imply monopoly control on its own. I’ll address AU’s predatory pricing issue later on, but I doubt AU’s complaint would survive a 12(b)(6) motion to dismiss on the issue of monopoly control under the first requirement listed in Grinnell above. AU would have an even more difficult time proving the second requirement, that Amazon didn’t gain monopoly power “as a consequence of a superior product, business acumen, or historic accident.”

. . . .

Claim 2: Blocking Sales

AU’s next issue is that “Amazon, to pressure publishers over the past 11 years, has blocked and curtailed the sale of millions of books by thousands of authors.” Their next point seems to raise a similar issue “Amazon, during its dispute with Hachette in 2014, appears to have engaged in content control, selling some books but not others based on the author’s prominence or the book’s political leanings.” Now I question whether either statement is true, but for the purposes of a 12(b)(6) motion, we assume that the facts alleged by the Plaintiff are true. In response to a similar claim, the judge in Bookhouse said, “in essence, plaintiffs complain that Amazon has not allowed them to sell e-books on Amazon’s devices and apps. But no business has a “duty to aid competitors.”” The judge then cites the Supreme Court, noting that “[f]irms may acquire monopoly power by establishing an infrastructure that renders them uniquely suited to serve their customers. Compelling such firms to share the source of their advantage is in some tension with the underlying purpose of antitrust law, since it may lessen the incentive for the monopolist, the rival, or both to invest in those economically beneficial facilities.” That pretty much sounds like the situation between Amazon and AU (most of whom are authors published by the Big 5, Amazon’s rivals.)

. . . .

Claim 4: Predatory Pricing

AU’s next claim is that “Amazon routinely sells many types of books below cost in order to drive less well-capitalized retailers – like Borders – out of business. This practice, known as “loss-leading,” also harms readers by reducing the amount of revenue available for publishers to invest in new books.” Their first sentence is a claim of predatory pricing. Their second sentence, that readers are being harmed, seems to assume that new books can only reach readers via publisher investments and that when this amount is reduced, readers will have reduced selection. I don’t know why they’re alleging this because Amazon still pays the publishers the full amount when they price under their cost. There is no reduction of revenue as far as I understand.

The Supreme Court in Cargill, Inc. v. Monfort of Colorado, Inc. (Cargill, Inc. v. Monfort of Colorado, Inc.) defined predatory pricing as “pricing below an appropriate measure of cost for the purpose of eliminating competitors in the short run and reducing competition in the long run.” That’s what AU is alleging here. They say that Amazon is engaging in predatory pricing to drive competitors like Borders out of business. The Supreme Court later found predatory pricing to have two requirements in Brooke Group Ltd. v. Brown and Williamson Tobacco Corp. (Brooke Group Ltd. v. Brown and Williamson Tobacco Corp.) These requirements are “(1) the prices complained of are below an appropriate measure of its rival’s costs, and (2) that the competitor had a reasonable prospect or a “dangerous probability” of recouping its investment in the alleged scheme.”

I don’t think Amazon was targeting competitors with their below-cost pricing, but I think it could go either way. I agree that there is evidence that they priced below cost at some times, but I doubt they did it to drive Borders and Barnes and Noble out of business. Concerning his book pricing strategy, Jeff Bezos said in an interview (Business Insider Interview with Jeff Bezos), “Books are the competitive set for leisure time. It takes many hours to read a book. It’s a big commitment. If you narrow your field of view and only think about books competing against books, you make really bad decisions. What we really have to do, if we want a healthy culture of long-form reading, is to make books more accessible. Part of that is making them less expensive. Books, in my view, are too expensive. Thirty dollars for a book is too expensive. If I’m only competing against other $30 books, then you don’t get there. If you realize that you’re really competing against Candy Crush and everything else, then you start to say, “Gosh, maybe we should really work on reducing friction on long-form reading.” That’s what Kindle has been about from the very beginning.”

Let’s give AU the benefit of the doubt. Let’s say Amazon was targeting competitors with predatory pricing of books. Let’s say AU could prove that “the prices complained of are below an appropriate measure of its rival’s costs.” They then have to prove the second element which is where I think their argument fails. They would have to prove that Amazon “had a reasonable prospect or a “dangerous probability” of recouping its investment in the alleged scheme.” It is not enough to prove that a company engaged in predatory pricing. The Supreme Court noted in Brooke Group that “recoupment is the ultimate object of an unlawful predatory pricing scheme; it is the means by which a predator profits from predation. Without it, predatory pricing produces lower aggregate prices in the market, and consumer welfare is enhanced.” I don’t see how anyone can prove that Amazon plans on recouping profits when it engages in predatory pricing because Amazon as a company is willing to run on razor-thin margins. It reinvests what it makes in other acquisitions. Let’s give AU the benefit of the doubt on this one as well and say that they could somehow prove this.

Link to the rest at Randy Morris

Here’s a link to Randall Morris books. If you like an author’s post, you can show your appreciation by checking out their books.

Another Drama in Harper Lee’s Hometown

24 August 2015

From The New York Times:

It’s been just over a month since the release of “Go Set a Watchman,” the long-awaited second novel from Harper Lee. The book has been the publishing sensation of the year, but the literary world has largely moved on now, focused on new releases for the fall and winter.

But in Ms. Lee’s hometown here, the effects of publishing “Watchman” linger, like debris from a departing county fair. Even as life returns to its slow rhythms, many residents are adjusting to a new order of things when it comes to Ms. Lee, one firmly under the direction of Tonja B. Carter.

Ms. Carter is Ms. Lee’s lawyer, and over the last several years she has consolidated an unusual amount of control over the author’s affairs. In recent months she has extended her reach, sometimes to the most minute of details.

About seven weeks ago, for instance, on the day of a luncheon here to celebrate the imminent publication of “Watchman,” Ms. Carter learned about a recipe book, “To Fill a Mockingbird,” being sold by the small museum inside the old courthouse at the center of town. The courthouse had been the fictional setting for Ms. Lee’s 1960 classic, “To Kill a Mockingbird.”

Two years earlier, Ms. Lee had sued the museum for selling too many items that used her “Mockingbird” trademark. Ms. Carter thought the cookbook violated the settlement in that case.

So she complained to Greg Norris, a Monroe County probate judge and one of the most powerful officials in the county. That afternoon, Judge Norris went to the museum, collected all 282 copies in a cart and wheeled them over to her law office.

“I don’t want any more litigation,” Judge Norris, the president of the Monroe County Commission, later explained. “So, let’s remove them just in case.”

In ways big and small, Ms. Carter, 50, is shaping the legacy of one of the country’s most revered authors.

She is Ms. Lee’s lawyer, spokeswoman and the trustee of her estate. She holds power of attorney over Ms. Lee, who is 89 and infirm, and she has had a role in a trust that the author established around 2011. She says she is the one who rediscovered the long forgotten manuscript for “Watchman” and negotiated the deal with HarperCollins for publication rights. And lately, she’s taken the reins of a nonprofit organization that Ms. Lee created, and she gained control of the play based on “Mockingbird” that is performed each spring inside the courthouse.

“This level of involvement is highly unusual,” said Sallie Randolph, a lawyer who represents authors.

. . . .

 Ms. Carter’s restaurant, the Prop and Gavel, which she owns with her husband, Patrick, was shut down for a year in the midst of an informal boycott by residents upset that the museum was being sued. The restaurant, which said it closed because of renovations in the building next door, recently reopened.

. . . .

 Ms. Carter did not respond to questions or a request for an interview. State investigators have reviewed whether Ms. Lee was pressured into publishing “Watchman,” and decided she was not.

. . . .

She has acknowledged, though, that she has never prepared a detailed inventory of Ms. Lee’s archives. Some scholars were stunned by Ms. Carter’s statement last month in The Wall Street Journal that it wasn’t until this July, in at least her third trip to the safe deposit box, that she had located the original “Mockingbird” manuscript, a document likely worth more than $1 million. During that same visit, she said, she found pages of what could be a third novel by Ms. Lee.

“I don’t think that her literary estate is being professionally managed very well,” said Charles J. Shields, the author of “Mockingbird: A Portrait of Harper Lee.”

It is unclear how much money Ms. Carter earns working for Ms. Lee or in her wider capacity as a lawyer who has focused on estate and family law, and has handled some cases in other areas. Some lawyers who act as literary agents receive a 15 percent commission on a book’s advance.

Link to the rest at The New York Times

Here’s why the Authors Guild’s antitrust claim against Amazon is doomed

23 August 2015

From Fortune:

The ongoing battle that the Authors Guild has been waging against Amazon  escalated this week, as the group made a formal request to the Department of Justice that it investigate the company for monopolistic practices and anti-competitive behavior. The Guild has been pushing this case for some time, along with a number of other groups representing authors and publishers, arguing that Amazon controls a giant chunk of the e-book market, and that it has been using this power for evil instead of good.

In a letter that the Guild sent to the DoJ recentlysupporting its request, the group lays out the core of its argument, and the key point that its case will hinge on: It says that even if Amazon’s behavior leads to lower prices for books, this shouldn’t be the department’s only concern. Instead, the Guild says that the regulator should look at how Amazon’s anti-competitive tactics affect society as a whole.

. . . .

Whatever the court or the book industry might think about how it got there, one of the crucial questions for the case is whether Amazon actually has a monopoly in any real sense of the word, and whether—if it does have one—it is misusing that monopoly in anti-competitive ways.

At this point, according to the Guild’s numbers, Amazon has 75% of the market for online sales of physical books, 65% of the market for e-books, 40% of the market for the sales of new books, and 85% of the market for e-book sales by self-published authors. That last number sounds high—until you remember that Amazon effectively created the market for self-published e-books when it launched the Kindle Direct Publishing system, which allows anyone to upload and sell their writing.

But the more important point is that simply having a monopoly (in the sense of having a dominant share of a discrete market) isn’t a breach of U.S. antitrust law, although most people seem to believe that it is—or that it should be. What’s illegal is using that monopoly to stifle competition. And not just to stifle competition, but to do so in a way that makes things worse for consumers.

This is where the Guild’s argument falls apart, and it’s the reason why the group is trying to distract the Justice Department by talking about the impact Amazon has had on free expression, etc. Whether the Guild likes it or not, one of the main benchmarks for whether an antitrust offense has taken place iswhether consumers have been harmed—and all the available evidence shows that Amazon’s behavior in the e-book market in particular has helped consumers by keeping prices low.

And what about the argument that Amazon is just using prices to lure book-buyers into its ecosystem, at which point it will jack prices up and reap the benefits of its monopoly? That would be bad, if anyone could actually show that it was happening—but it isn’t, at least not in any sustained or obvious way.

As for the Guild’s case that free expression and the free flow of information are being harmed, even if the Justice Department did decide to take that into consideration as part of the case (which is unlikely at best), the evidence is overwhelming that with the Kindle platform, Amazon has done far more for the free flow of information and expression than the Guild or the Big Five publishers have. It may have delisted certain books during trade disputes with publishers, but that is a drop in the bucket. The reality is that authors have never had it so good—and neither have readers.

Link to the rest at Fortune and thanks to Stephen for the tip.

Why Amazon monopoly accusations deserve a closer look

25 July 2015

From Fortune:

It must be a sign of success—Amazon is being accused of monopoly behavior by its industry partners, in this case groups representing authors, agents and booksellers.

As with other one-time high-tech leaders (IBM, Microsoft, Google) Amazon’s dominant market share suddenly seems too much. In letters to the Justice Department, the authors’ and retailers’ groups claim that Amazon is squeezing publishers, punishing writers, driving bookstores out of business—and violating antitrust laws. They want Justice to investigate. Is there anything to their arguments?

. . . .

Isn’t that what business is supposed to do—compete to lower prices? Not necessarily, according to the Authors Guild, the American Booksellers Association, and several other groups. In multiple letters, the complainants contend that Amazon is “generating fear among many authors,” and that it has used its marketplace clout to “harm the interests of America’s readers, impoverish the book industry as a whole, and impede the free flow of ideas in our society.”

We’ll let the last bit pass; the fear that media concentration would shackle free expression was rife when the nightly news was controlled by the three television networks (remember them?) and it has been hurled at every big information distributor since. Digital communications, of which Amazon is a subset, may be accused of many things, but impeding the flow of ideas isn’t one of them.

As for sowing fear among authors, this is palpably true. I earn my living primarily from selling books, and I much preferred the landscape as it existed earlier in my career, when bookstores were (or seemed to be) healthier and more numerous. Although the casual impression that bookstores are disappearing en masse is incorrect – there are 2,227 bookstores in the U.S., more than at the end of the 2009 recession, and their share of the printed book market has held steady, according to the American Booksellers Association – the total is down from the 1990s. And Amazon, which sells more than a third of new physical books and an estimated two-thirds of e-books, dominates the market.

. . . .

Also, I would prefer that not so many people shopped at Walmart; come to think of it, I would prefer that the Internet shut down for two hours every evening during which interlude people’s only diversion would be listening to Mozart and reading books. Popular tastes, we’ll admit, are gauche. James Patterson will sell more volumes than James Baldwin. That said, publication of traditional books is close to an all-time high, and an awful lot of good ones find their way to readers.

We can argue about Amazon’s merits, but antitrust is not intended to protect some people’s cultural preferences, much less the lifestyles and professional habits of publishers and writers. Culture may be created in the loft, but it is underwritten in the marketplace. Antitrust answers to the welfare of consumers in that marketplace.

. . . .

The more intriguing case against Amazon concerns its behavior not as a seller but as a buyer, specifically in the e-book market. Amazon has driven very hard bargains with e-book publishers, mainly with the aim of depressing prices. During a long-running battle with Hachette, Amazon made it difficult for consumers to buy Hachette books. E-books of other publishers (including, for a while, mine) have also been blocked from Amazon’s site. The books were available on other venues, of course. Amazon’s position, in effect, is that just as a big retailer (say, a supermarket) is entitled to bargain hard with suppliers, so is Amazon. And just as the supermarket doesn’t have to carry goods it considers over-priced (or unappealing for any reason), Amazon is free to offer, or not, products as it chooses.

Link to the rest at Fortune and thanks to Dave for the tip.

PG notes how many people who are connected to the traditional book business have become experts on antitrust law lately.

Most are prime examples of the logical fallacy that expertise in one area does not automatically confer expertise in another. Understanding the book business does not mean that one understands the application of antitrust law to the book business.

PG suggests this is a legal veneer for I’m afraid and I want the government to protect me.

And people who hadn’t the slightest idea what monopsony meant a couple of years ago are suddenly certain it’s a horrible thing and the government should keep Amazon from committing monopsony or being monopsonious. Or something.

Is Amazon Liable For IP Violations By Its Marketplace Vendors?

24 July 2015

From Forbes Blogs:

Animal-shaped pillows are cute and fluffy, except when they spur litigation. Recently, the Milo & Gabby brand sued Amazon for IP infringement because merchants allegedly sold knockoffs of its “Cozy Companion Pillowcases.” Amazon has successfully avoided IP liability for its marketplace, and a recent ruling rejected most of Milo & Gabby’s claims. However, a key piece of Milo & Gabby’s claim survived Amazon’s dismissal attempt, leaving the possibility that Amazon could be liable for merchants’ IP violations.

. . . .

In 2013, Milo & Gabby sued Amazon in 2013 alleging a variety of intellectual property claims. In 2014, the judge dismissed several of those claims and narrowed the lawsuit to three claims:

* copyright infringement. Merchants allegedly used Milo & Gabby’s copyrighted marketing photos to advertise their knockoff goods. Even if true, the court says this isn’t Amazon’s direct responsibility because “the content of the detail pages and advertisements was supplied by third parties via an automated file upload system, and did not originate from Amazon.” In addition, Amazon qualified for the online safe harbor for user-caused copyright infringement (17 USC 512(c)) that Congress created in 1998 as part of the DMCA. On the key question of Amazon’s ability to control merchants’ infringing behavior, the court concluded that Amazon lacked “practical” control because it can’t “analyze every image it receives from third party sellers, compare the submitted image to all other copyrighted images that exist in the world, and determine whether each submitted image infringes someone’s copyright interest.”

* trademark infringement. Among other things, the court says Amazon wasn’t the seller of the allegedly infringing items because its “third-party sellers retain full title to and ownership of the inventory sold by the third party.” Thus, Amazon didn’t commit trademark infringement.

* design patents. Design patents protect non-functional “ornamental” product designs. In contrast to utility patents, which get lots of attention, most academics and practitioners routinely ignored design patents–until Apple scored a huge damage award in its fight against Samsung based on design patents. Now, lots of folks are keenly interested in design patents.

A design patentholder has an exclusive right to offer the patented item for sale. The court says a factfinder could conclude that Amazon offered the knock-offs for sale, even though the merchants posted the listings. The court explains:

While Amazon notes that the item is “sold” by a third-party vendor and “fulfilled” by Amazon, the fact that the item is displayed on the website and can be purchased through the same website, could be regarded as an offer for sale….Likewise, looking at the website, a potential purchaser may understand that his or her assent is all that is required to conclude the deal. Indeed, the website notes the price, allows the buyer to choose a quantity, and allows the buyer to then conclude the purchase.

As a result, the court sends the design patent issues to trial.

Link to the rest at Forbes Blogs and thanks to Dave for the tip.

LitChat: Is Amazon Guilty of Antitrust?

22 July 2015

As mentioned previously, @LitChat held a Twitter chat session inviting Authors United, the Authors Guild, the Association of Authors Representatives, the American Booksellers Association, and Amazon to participate in a discussion about whether Amazon is guilty of antitrust [violations].

Nobody from AU, AG, AAR, ABA or Amazon showed. A lot of TPV regulars did.

Here’s a link to the entire conversation.

PG had previously promised Mrs. PG a late lunch in the mountains, so he missed the whole thing.

He did see the following and kicked himself for only having his iPhone camera with him.

Stream-Oil Paint 2

With Lower Prices and 12X More Titles Per Year, Famous Authors Fear Amazon

22 July 2015

From The Observer:

Many authors are freaking out that Amazon is threatening their place at the top of publishing. They are circulating a letter that will go to the Federal Trade Commission that makes an extensive argument that the dominance of Amazon in the book business threatens democracy, free speech, God, country and apple pie (probably). The problem, though, is that while bestselling authors may not like 2015’s new normal, Jeff Bezos’ world is better for readers and writers en masse.

The group of writers behind the letter, which calls itself Authors United, is arguing, in short, that Amazon controls so much of the market that it’s becoming the main seller of books and using that clout to hinder their supply. Though, so far, Amazon has only curbed that supply of books when the company believes publishers are overcharging consumers.

There are also a few other facts that the authors leave out: that there are more titles getting published and more money being made by more publishers than ever before.

. . . .

In fact, when title volume grows a lot and revenue grows a little, it’s easy to see what’s really going on here: tiny presses and self-published authors are using the e-book format to cut into big publishers’ dominant position. Which connects well to a part deep in the letter where we start to get to the real meat of the authors’ objections. In the section headed, “Amazon’s Practices Affect the Quality of Books,” they write:

Amazon also uses its monopsony power in ways that weaken the economic system that has supported American writers and the publishing industry for more than two centuries, threatening the production of well-crafted, well-edited, accurate, and consequential books.

. . . .

The authors’ point (also argued in a shorter version of the letter) is that the traditional publishers do a better job of writing and publishing books than theses lumpen stealing their market share does. So, they argue, Amazon hurts consumers by temporarily denying readers access to volumes superior enough to sustain the whole enterprise of writing, despite these lackluster johnny-come-latelies. The argument becomes specious as it proceeds: “Common sense tells us that Amazon’s hinderance of books published by particular companies harms the interests of readers, as ‘consumers’ of books. Common sense also tells us that readers are harmed when Amazon’s actions cause a decline in the availability of well-crafted, carefully edited books.”

The scribes of this epistle notably fail to mention what Amazon got into its fight with Hachette over: the cover price of e-books. Amazon pushed big publishers to charge no more than $9.99 per e-book, a product whose only marginal cost for a publisher was the cut Amazon took, which it keeps as a percentage.

In other words, Amazon actually fought to make less per sale of e-books.

So who was on the consumers’ side?

. . . .

Amazon “carries” (after one fashion or another) almost every title ever, not a boast than a traditional bookstore could have ever made. Those stores were constantly making choices about what not to stock. Was that censorship or shelf space? Amazon, with infinite shelf space, has gotten very creative about finding ways to carry as many titles as possible, vastly more than any seller could carry before the Internet.

Link to the rest at The Observer and thanks to Paul for the tip.

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