Pearson sues edtech rival Chegg for copyright infringement – Financial Times

Pearson sues edtech rival Chegg for copyright infringement  Financial Times

Pearson PLC updates

Education technology company Chegg, which has grown rapidly by selling the answers to millions of official US college course questions, has been sued by publisher Pearson for copyright infringement.

Pearson filed a lawsuit against Chegg on Monday alleging that the California-based company had violated its rights on a “massive scale” by reproducing hundreds of thousands of questions from Pearson textbooks and selling them with answers as part of a $14.95 “homework help” subscription service for students.

The move comes as Pearson embarks on a strategic shift under new chief executive Andy Bird, with the FTSE 100 group launching a subscription service offering US students access to all its 1,500 textbook titles for a monthly fee of $14.99.

The move puts it into more direct competition with Chegg, which began in 2005 as a textbook rental service but now draws the majority of its revenue from the subscription service which provides students with answers to millions of US course questions.

Demand for Chegg’s services grew during the pandemic with subscriber numbers rising 67 per cent last year while its net revenue rose 57 per cent to $644.3m.

It now has 6.6m users and its $11.1bn market capitalisation is bigger than that of 177-year-old Pearson, but Chegg has attracted criticism from educators who argue its services enable widespread cheating. 

The company says on its website that its products “should never be used . . . for any sort of cheating or fraud” and are “designed to support learning, not replace it”.

Chegg’s subscription service includes a library of 21m solutions, written by “experts”, and end-of-chapter questions from textbooks, which have been largely hosted by contractual agreement with educational publishers.

Until recently, Chegg was licensed to publish materials by Pearson, but since June 1 its right to display content from the publisher expired, Pearson said.

In a lawsuit filed in a New Jersey court, Pearson accused Chegg of “systematically” continuing to publish answer sets from thousands of textbooks, replicating copyrighted material so students could “easily search for and find answers to the textbook questions they have been assigned”. 

It alleged this violated Pearson’s exclusive copyright, undermined educational progression and could encourage university lecturers to reconsider using textbooks for their courses. 

“Pearson and its authors devote an enormous investment of time, money and expertise to developing the world’s best learning content, including the end-of-chapter questions in our textbooks,” said Tim Bozik, president of Pearson’s higher education division. 

“We value that content, along with the people who create it and use it, which is why Pearson is acting to protect and preserve its assets.”

Chegg said it believed it was in “full compliance with copyright law” and would “fight Pearson’s allegations vigorously”. It said textbook-based content, of which Pearson content was “only ever a fraction”, currently generated less than 10 per cent of new subscriptions.

“Chegg has been helping millions of students learn and thrive for many years, in compliance with copyright laws, creating a transformative digital learning platform that helps them learn more in less time and at a lower cost,” the company said. 

Tom Singlehurst, an analyst at Citigroup, said the lawsuit was “surprising” given the previous contractual agreement between the companies but that it could be an attempt by Pearson to increase control of its content as it pushes Netflix-style subscriptions to students.

It was impossible to estimate the potential financial impact of a successful lawsuit on Chegg, he said, as the company’s study subscription packages offered a range of answers alongside any derived from textbooks, but the lawsuit raised “a question mark on Chegg’s contracts with the other textbook publishers”.

Shares in Chegg fell 0.7 per cent to $76.6 in early New York trading. Shares in Pearson were up 1.1 per cent.

Source: ft.com

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