On December 17th, the Boundless OER-based textbook startup issued a press release describing the settlement they had reached with Pearson, Cengage, and Macmillan in the lawsuit those three companies had filed against the company. (Full disclosure: Pearson has been a client of MindWires Consulting.) Actually, a lot of the press release wasn’t really about the lawsuit, and the description of the settlement consisted of the following:
Today, we’re excited to announce that we’ve settled the lawsuit. In agreeing to a confidential settlement agreement, along with a public judgment and injunction entered by the Court, the parties have resolved the dispute. The resolution allows the parties to move forward and focus on their mutually shared goal of helping students learn. Boundless now has a clear path for building and marketing its OER-driven textbook alternatives without treading upon the Plaintiffs’ rights, and it is confident that it is in compliance and will not have further legal issues with the Plaintiff publishers. In turn, Plaintiffs have reinforced the strong protection they have in and to their copyrighted works and the related goodwill that they and their authors have established, and look forward to Boundless operating its business within the agreed upon framework.
This seemed like a strangely muted ending to a strange story. It’s hard to tell from the press release what actually happened. But having read the consent decree and injunction, I have come to two conclusions. First, Boundless lost. Second, the suit and its outcome tell us very little about the future of OER but rather more about business strategy for ed tech startups.
Viewed at a distance, the lawsuit by the publishers looked preposterous. Boundless was publishing textbooks that competed with the publishers’ popular titles but were built using OER content. Everybody agreed that the words in Boundless’ books did not copy the words of the publishers’ products, and yet the publishers sued for copyright infringement. How could that be? Were they claiming that they owned copyright for the table of contents of, say, a standard calculus textbook? Aren’t these books structured by widely shared learning objectives? Were they claiming to own the very idea of a calculus course?
But the truth was rather revealed in the court document is more complex than that. First, Boundless wasn’t just marketing their products as competitive with those of the other publishers. They were marketing their books as, for example, “the Boundless version” of Mankiw’s Principles of Economics (published by Cengage). And they used a picture of the Mankiw book cover when advertising the “Boundless version.” The textbook publishers also alleged that Boundless “copied the selection, coordination and/or arrangement of these textbooks, including with respect to topics, sub-topics, sub-sub-topics and photos, figures, illustrations, and examples.” In other words, the Boundless products were being designed and marketed as meticulous paraphrases of entire books. The fact that they happened to use OER as raw materials was incidental, except insofar as it helped keep their product costs down. There was no talk, for example, of the remixing value that OER advocates tout. To the contrary, the whole point of the Boundless products was that they were exactly like the name-brand products they were genericizing. The company’s business strategy was never about capitalizing on the values of Openness; it was about capitalizing on the valuation of Chegg.
“It’s like Thelma and Louise, only with aliens!”
According to CrunchBase, Boundless received its seed funding in April 2012, a month after Chegg received $25 million in their F round and at a time when it was clear that the used textbook insurgent was preparing for an IPO. The VC pitch pretty much writes itself. “Imagine Chegg, but with no warehouse to maintain and no physical books to ship!” VCs tend to love this kind of pitch, for several reasons. First, in a complex industry where it’s often very difficult to recognize a good bet, a safe strategy is to copy something that is already a hit. Second, VCs tend to be deeply suspicious of any business plan that comes within 100 miles of a bureaucratic process (or a union representative). By marketing direct to students, Boundless planned to avoid having to deal with the complexities of faculty adoption (including having to an army of sales reps). This was a pure consumer play. And production costs were low. After all, they were taking content created by other people and fitting it into a detailed structure created by still other people. To be clear, I don’t have any problem at all with re-using openly licensed content in order to lower costs for students (and for the companies that distribute that content). My point is that Boundless was never intended to be a content company, so they weren’t burdened with high content creation costs.
So, to recap: Low product creation costs, no distribution costs and, because they are marketing directly to internet-savvy and price-sensitive students while drafting behind the textbook companies that were driving the faculty adoptions, low sales and marketing costs. Plus a sales model that’s based pretty heavily on one of the few education startup success stories of the time. Boundless was perfectly engineered to attract VC money. Unfortunately for the founders, it was less perfectly engineered to withstand a copyright suit from the publishers whose books they were openly imitating.
Live to fight another day (and way)?
The net result of the suit is the following:
- Boundless is enjoined from selling their products that are “aligned with” those of the plaintiffs and must destroy all copies of the books and the marketing materials.
- The company is enjoined from selling “aligned” products, using the images of their competitors’ products, or describing their own products as a “version,” “copy,” or “equivalent” to the plaintiffs’ products.
- Boundless will pay $200,000 to each of the plaintiffs.
That was the public part. There was a private settlement as well.
Boundless say they have “increased their usage and reach” to 3 million users of 21 titles (according to their press release), raise a total of $9.7 million in funding, and executed a pivot while all of this is going on. If you go to their website today, the headline on the home page reads, “Introducing Boundless for Educators.” Rather than doing an end run around faculty, they are now marketing directly to them. In fact, they look a lot like the current incarnation of FlatWorld Knowledge. With the cloud of the lawsuit removed, they can now focus on trying to drive that new strategy forward (and potentially raising more investment money). What they’ll be able to do with that start is not clear. But this is one “pivot” that was predictable, probably from the very beginning.
Like I said, I don’t think there’s much of a lesson here for the OER community, but there may very well be one for the VC community.
Here’s the full text of the settlement: