I should have quoted James Gibson's take on Google's settlement with the publishing industry when his article came out three weeks ago. But better late than never:
Google settled a controversial copyright case by agreeing to pay tens of millions in licensing fees to authors and publishers, with more to come….
[T]he settlement looks like a setback for Google. In the game of brinksmanship, Google blinked—losing its nerve like so many copyright defendants do. In reality, however, settling probably puts Google in a better position than it would have been if it had won its case in court.
Here's why: Google's concession has made it more difficult for anyone to invoke fair use for book searches. The settlement itself is proof that a company can pay licensing fees and still turn a profit. So now no one can convincingly argue that scanning a book requires no license. If Microsoft starts its own book search service and claims fair use, the courts will say, "Hey, Google manages to pay for this sort of thing. What makes you so special?"
By settling the case, Google has made it much more difficult for others to compete with its Book Search service. Of course, Google was already in a dominant position because few companies have the resources to scan all those millions of books. But even fewer have the additional funds needed to pay fees to all those copyright owners. The licenses are essentially a barrier to entry, and it's possible that only Google will be able to surmount that barrier.
Whether or not that's how the Google barons have been thinking about the subject, it's a fair description of the settlement's likely consequences. Once again, economic regulation—in this case copyright law—is serving as a barrier to entry, helping established companies at the expense of upstarts.
[Hat tip: Martin Morse Wooster.]