03/18/2010 05:12 am ET | Updated May 25, 2011

Google Books and the High Bar for Approval: Why Opt-In May Sink the Deal

A week ago, I wrote the first of a three part series looking at why Google and its partners in the Book Search Settlement have their work cut out for them if they plan to address the Department of Justice's mountain of concerns about the deal. My first column dealt with the issue of de facto exclusivity identified by the Justice Department. That's a major hurdle, but far from the only one.

Two terms that were not even part of our cultural lexicon a decade ago will have a lot to do with whether this deal sinks or swims in its revised form - "opt-in" and "opt-out." If you have ever bought anything online, you are already familiar with this concept. When you make an online purchase, you usually see a little box that you either check or uncheck to tell the company whether you are interested in receiving emails and promotional offers from them in the future. If the box is already checked for you, that is an opt-out model - you're presumed to be "in" unless you say you want "out." An opt-in model works the opposite way - you start with the box unchecked and the company can only include you on their mailing list if you affirmatively check the box.

One of the major disagreements between DOJ and Google in the Book Search deal is whether that figurative box should be checked or unchecked as a starting proposition for authors and other copyright holders whose works will be contained in the digital database that Google has built. That is, is everyone presumed to be in unless they ask to be left out, or are they presumed to be out unless they ask to be let in?

First, a little background: Recall that the main dispute in the litigation was whether Google could "scan first, ask questions later" in building its database, requiring copyright owners to opt-out of Google's digital card catalog project. The publisher plaintiffs insisted that this activity amounted to copyright infringement. They argued that copyright law required Google to use an opt-in approach - excluding works from the database unless their owners gave permission. The proposed settlement did not resolve this question, but rather, Google and the plaintiff publishers agreed to disagree, and they proposed a way to deal with these issues. For books that are currently in print, Google must obtain permission to use them in future business models. But for out-of-print works, the settlement would allow Google to use the works without securing permission from the rightsholder. Instead, an entity called the Books Rights Registry (BRR) would be created to collect money from Google for future uses of books, with the money to the distributed to rightsholders. If a rightsholder could not be located within five years, the Registry (which unsurprisingly is controlled by the plaintiffs) would share the profits from the unclaimed licensing fees.

The litigation concerned only a narrow use of copyrighted books: scanning and indexing works to display "snippets" so users could locate a copy of the book. The proposed settlement, however, would go well beyond that narrow use and would allow Google to create a wide array of commercial uses that are clearly infringing in nature. And Google would not need to seek the permission of the copyright owner to do this. For these commercial uses, Google, unlike any other commercial or non-commercial entity, would operate under an opt-out model. Owners' works would be presumed to be in the database, or corpus, unless the owner affirmatively opted out and denied Google the right to use the work in the proposed way. Many opponents of the settlement howled at this provision because it turns copyright law on its head. Like it or not, U.S. copyright law is an opt-in regime. Would-be copiers must obtain affirmative consent from rightsholders before copying or exploiting their works. Many would prefer that copyright operate on an opt-out basis, and that is an entirely appropriate discussion to have with the U.S. Congress. But as of today -- just like every day since the first U.S. Copyright Act was passed in 1790 -- copyright law operates on an opt-in basis and Google's proposed settlement would use private litigation to change centuries-old legislation.

Also problematic with the proposed settlement's approach is that many rightsholders of out-of-print, orphan or foreign works may not even be aware that their rights are being impacted in this way. Google blithely ignored criticism about this opt-out approach from all quarters, but they cannot ignore the DOJ. DOJ has put opt-out firmly in its sights.

Noting that the proposed settlement "is one of the most far-reaching class action settlements of which the United States is aware," DOJ raises significant concerns over the use of an opt-out regime for the forward-looking provisions of the agreement. As a class action, the court must be concerned with issues of fundamental fairness in adequately representing the interests of absent class members. And the DOJ's language notes that an opt-out licensing model for these as-yet-unknown business models ("open-ended exploitation of the works of all those who do not opt out") is "far afield from the facts alleged in the Complaint."

As with the DOJ's concerns over de facto exclusivity, DOJ's concerns over the opt-out nature of the future business models envisioned by the settlement are hardly insurmountable from a legal perspective. DOJ even implies that an opt-out approach may work for the "specific allegations of infringement in the Complaint," referring to the scanning of works to display only snippets - the activities that Google said it was pursuing when it originally started on this book scanning endeavor. Additionally, there is nothing preventing Google and the plaintiffs from moving to an opt-in model for those future-looking business models that the DOJ finds so troublesome. Nothing, that is, except Google itself.

As I have stated before, the only way this book digitization effort makes business sense for Google is if it can amass control over a sizeable swath of rights and can monetize those rights at will in future business models. That need puts Google at odds with the realities of U.S. copyright law, and now it puts Google in the crosshairs of the DOJ. Expect to see Google try to address this concern because it is unthinkable that they would simply ignore it. But watch for the wolf in sheep's clothing. This settlement can either serve Google's interest and use an opt-out model, or it can serve DOJ's public interests and use an opt-in model. It simply cannot do both.