Microsoft Vs. Google Spat on Copyright

It’s generally good fun to see large companies have a go at each other in the press, but the latest one is not (yet) as gratifying as one might hope, mainly because neither player has landed a blow.

In yesterday’s Financial Times (oddly the salvo was not picked up in the US until today, relatively briefly in the Wall Street Journal), a first page story, “Microsoft attacks Google on copyright,” commented on Microsoft’s fierce criticism of Google’s cavalier attitude towards intellectual property:
Microsoft on Tuesday launches a fierce attack on Google over its “cavalier” approach to copyright, accusing the internet company of exploiting books, music, films and television programmes without permission.

Tom Rubin, associate general counsel for Microsoft, will say in a speech in New York that while authors and publishers find it hard to cover costs, “companies that create no content of their own, and make money solely on the back of other people’s content, are raking in billions through advertising and initial public offerings”.

Mr Rubin’s remarks, presaged in an article in Tuesday’s Financial Times, come as Google faces criticism and legal pressure from media companies over services allowing users to search online for books, films, television programmes and news. Viacom, the US media group, instructed YouTube, which Google owns, to remove 100,000 clips of copyright material.

The Authors Guild and a group of publishers backed by the Association of American Publishers have separately sued Google for making digital copies of copyrighted books from libraries without permission.

Mr Rubin will tell the AAP’s annual meeting that Google’s decision to take digital copies of all books in various library collections, unless publishers tell it not to, “systematically violates copyright, deprives authors and publishers of an important avenue for monetising their works and, in doing so, undermines incentives to create”.

Now it is truly odd for Microsoft to be mounting this attack. There aren’t any pending negotiations or lawsuits between the two companies that would make this a bone of contention. This is thus a PR effort.

But again, it is difficult to understand what Microsoft expects to accomplish from this initiative. Curry favor with makers of print and media content? Perhaps, but what will count to them is not speechifying, but the terms of any deals offered to them. Talk is cheap. And Microsoft’s record on patents isn’t great. For example, Microsoft was ordered in 2003 to pay a fine of $521 million to Eolias Technologies for unauthorized use of intellectual property. And Microsoft has just been ordered to pay $1.52 billion to Acatel-Lucent to infringement of patents related to MP3 compression.

Am I missing something here? Patents are intellectual property, just like copyrights. And because Microsoft is a fierce opponent in the courtroom, the scuttlebutt in tech circles is that there are many developers who have suffered from IP infringement at Microsoft’s hands, but lacked the resources and intestinal fortitude to take them on.

Eric Schmidt, Google’s CEO, took an interesting tactic by not dignifying Microsoft’s criticism with a direct reply. He took the line that his critics (e.g., Microsoft) were shills for big media companies (undercutting Microsoft’s aligning itself with the creative little guys). From the FT, “Google chief dismisses criticism from rivals,”

Eric Schmidt, chief executive of Google, yesterday shrugged off criticism being heaped on the internet company by rivals and some media companies over its approach to copyrighted content, dismissing it in barbed comments as a form of negotiation.

“The kinds of comments you’re referring to [criticising Google] are in the context of a business negotiation,” Mr Schmidt told investors at a Bear Stearns conference.

“I have learned that, as part of being a player in the media industry, the way one negotiates is everything is leaked and you’re sued to death. So the lawsuits . . . appear to be in the course of doing normal business,” he said, adding this might reflect the preponderance of lawyers in the media industry.

“It is not normal in the technology industry, I can assure you,” he added.

Mr Schmidt’s comments follow a fierce attack on Google by its rival Microsoft over its “cavalier” approach to copyright. Tom Rubin, associate general counsel for Microsoft, earlier accused Google of exploiting books, music, films and television programmes without permission.

A number of book publishers have sued Google for making digital copies of copyrighted books from libraries without permission. In addition, a number of media companies have stepped up pressure on Google to remove their video content from the popular video sharing site YouTube as negotiations to license the content and share advertising revenues have stalled.

Among the companies facing difficult negotiations with Google are Viacom, CBS and NBC Universal. The discussion started last year after Google paid $1.6bn to acquire YouTube, the most popular online video sharing site.

Google has unquestionable been aggressive about getting content on its servers. It’s a bit of a force majeur approach: let’s take a position first, and talk price later. That does give them quite a bit of leverage in any negotiation (if you can even call it that).

But Schmidt takes an interesting second strategm in positioning the criticism not as having a foundation, but as being media company negotiating tactics. The funny thing is while that may not play in the world at large, it actually has an element of truth.

Having worked on Wall Street, and having clients in a variety of industries, my experience is that, with perhaps the exception of top litigators, media industry types are hands down the most tenacious and skilled negotiators. And those skills are held broadly in the industry, not by a few individuals. It’s part of the air they breathe.

Professionals from other industries who think they are good negotiators are routinely bested by media types. Look how Microsoft was hosed by cable companies. It made a $1 billion investment in Comcast and a $5 billion investment in AT&T mainly to get them to use Microsoft software in their cable set-top boxes. That’s an awfully steep price to get a seat at the table, and it does not appear to have given Microsoft an iota of commercial benefit.

That’s a long-winded way of saying that tech companies haven’t fared too well in media-land, and Google paying $1.6 billion for YouTube and having its value severely diminished by having Viacom and other media companies insist Google remove copyrighted content says Google may be learning the hard way.

So the irony is that the big content owners may still do well against Google. Ironically, it’s the little guys that Microsoft is standing up for (but will not stand with) that are likely to get the short end of the stick.

But back to the spat. The FT felt it important enough to weigh in with an editorial, “The rights and wrong of Google content“:

Google now faces a backlash from publishers that make the professional “content” – from films to television programmes and books – on which it relies. They argue that Google is playing fast and loose with the intellectual property of others in order to attract users to its services. Viacom, the US media company, has told Google to remove 100,000 clips from its YouTube service which have been uploaded by users without Viacom’s permission.

Into this battle has stepped Microsoft, which is trying to catch up with Google’s strength in internet search….It must be fun for Microsoft, accustomed to defending its own dominance of personal computer software, to have a David-like dig at the internet’s Goliath. But what it says must be taken with a pinch of salt. Not only is it profiting from search-related advertising itself, but it is not clear that it has better technology for copyright enforcement than Google. It wants to be seen as the publishers’ friend but its commitment has yet to be fully tested.

But Microsoft is chiselling at Google’s weak spot. Too often, the latter has demonstrated insensitivity verging on technological arrogance towards owners of content. That is exemplified by its initiative to scan millions of books, both in and out of copyright, from libraries into its Book Search service. It displays snippets of copyrighted works to those who use the service unless the publishers of the works get in touch to ask it to desist.

Google is being sued by a group of publishers, including subsidiaries of Pearson, the owner of the FT, over Book Search. It claims that it is acting within legal provisions governing the fair use of copyrighted content. The issue will be decided by the US courts, but Google is making enemies by insisting it will scan copyrighted material unless publishers “opt out” of having their works treated in this way.

Blather about it being in the public interest for the world’s information to be made searchable is beside the point. The principle goes deeper than copyright law. Companies, especially powerful ones, cannot get away with riding roughshod over the wishes of smaller enterprises just because it suits them. Microsoft has discovered that painfully over the years. Now it is Google’s turn.

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