The U.S. Department of Justice filed a "Statement of Interest" on September 18 recommending that Judge Chin disapprove the Proposed Settlement Agreement in the Authors Guild v. Google case. Although DOJ recognized that the public would benefit from greater access to books if the settlement was approved, it has concluded that the agreement in its current form does not satisfy legal requirements. The DOJ recommended that the litigants modify the agreement in some important respects before Judge Chin considers approving a settlement of the case. This is the most significant development since the settlement itself was announced.
The settlement drama in this case dates back to late last October when Google announced its intent to end the class action lawsuit brought by the Authors Guild and five publishers for copyright infringement arising from Google's scanning of millions of books from major research libraries, such as University of Michigan. Google committed $125 million to settle the lawsuit in exchange for which it would get a license from the settling class of authors and publishers to commercially exploit all out-of-print books (unless the rights holders said not to). Google intends to sell ads next to Book Search results, as well as selling individual books "in the cloud" and licensing the GBS corpus to libraries and other institutions. The settlement contemplates the establishment of a Book Rights Registry (BRR) which would pay out monies to rights holders from Google's commercializations. BRR also has power to consent to new modes of commercialization in the future.
The DOJ identified three principal problems with the Proposed Settlement. First, the DOJ perceives the Authors Guild and the publishers to have inadequately represented the diverse array of interests of authors and publishers who would be bound by the agreement. Of especial concern are the interests of foreign rights holders, many of whom have objected to the settlement because of its negative effects on their rights (a theme explored in an earlier Huffington Post piece onthe audacity of the Google Book Search settlement), and the interests of so-called "orphan book" rights holders (those who cannot readily be located through a reasonably diligent search).
Second, the DOJ regards the settlement as inconsistent with the default rules of copyright law which give owners the right to control commercialization of their works. Particularly troublesome are provisions that would bind class members to allow Google to make unspecified future uses of their works as long as Google and the BRR decided new revenue models should be implemented.
Third, the DOJ believes that the Proposed Settlement contains provisions that may violate federal antitrust laws. As an earlier Huffington Post article explained, the proposed settlement would give Google de facto exclusivity over all orphan and other books not registered with the BRR or with Google. "This de facto exclusivity (at least as to orphan works)," says the DOJ, "appears to create a dangerous probability that only Google would have the ability to market to libraries and other institutions a comprehensive digital book subscription." DOJ also raised questions about provisions of the Proposed Settlement that restrict price competition.
Among the most significant recommendations DOJ made for modifying the Proposed Settlement is one to ameliorate the risk of market foreclosure as to institutional subscriptions. DOJ suggests the parties should find a way to "provide some mechanism by which Google's competitors could gain comparable access to orphan works." That is, DOJ is recommending that Google, the Authors Guild and the publishers find a way to let firms such as Amazon.com and Microsoft get comparable licenses to out-of-print books, particularly to orphans. Google has previously denied that it was possible to include competitors in any license granted through the settlement. It will be interesting to see if the litigants want the settlement badly enough to conjure up a way to extend the license to firms other than Google.
Another significant modification proposed by DOJ concerns the "sweeping forward-looking licensing" provisions that allow Google and the BRR to commercialize out-of-print books for "unspecified future uses..., essentially authorizing...open-ended exploitation of the works of all of those who did not opt out." DOJ has several problems with the future use provisions.
Future use licensing is, for one thing, "far afield from the facts alleged in the Complaint." Furthermore, "the rights conferred are so amorphous and malleable that it is difficult to see how any class representative could adequately represent the interests of all owners of out-of-print works (including orphan works)." Third, and possibly most troubling, is a conflict DOJ perceives between the interests of those who negotiated the deal and many of the rights holders in the class. "The structure of the Proposed Settlement itself...pits the interests of one part of the class (known rights holders) against the interests of another part of the class (orphan work rights holders)." This is because monies collected from Google's exploitations of orphan and other unregistered books will be paid out to the BRR and registered rights holders if unregistered rights holders do not come forward in the first five years after the settlement becomes effective. At the very least, the DOJ suggests, there ought to be a longer escrow period for these funds or they should be spent on finding as many orphan rights holders as possible.
Google has already begun to renegotiate terms of this settlement. Yet, it remains to be seen whether it and the author and publisher groups will be able to reach an agreement that will satisfy them as well as the DOJ and the legal requirements for approval. While they are at it, Google should also be renegotiating meaningful limits on price hikes, privacy protections for users, and commitments to facilitate open access privileges of academic authors. Now that the DOJ has weighed in so forcefully, however, it would be astonishing if Judge Chin approved the settlement in its current form on October 7, when a hearing about it is scheduled.
Pamela Samuelson is the Richard M. Sherman Distinguished Professor of Law and Information at the University of California, Berkeley. She can be reached at pam@law.berkeley.edu.