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Wednesday Midday Links: Judge Chin rejects the Google Book Settlement

Judge Denny Chin issued a clear rejection of the Google Book Settlement proposed by Google and the named plaintiffs to the class action suit brought against Google for the its scanning and indexing of copyrighted works. Skip down to the decision portion if you want to get to the analysis.

Basis of Suit

The basis of the lawsuit was whether Google’s Book Search project fell under fair use defense. As long time readers of Dear Author will remember, not all unauthorized copying is improper. Some unauthorized copying is considered fair use.

Under the fair use doctrine, individuals can use copyrighted material without the permission or consent of the original rights holder. The purpose of the fair use limitation is to promote creativity which is the underlying reason for the Copyright Act which is "the Progress of Science and useful Arts."

Google asserted that its scanning and indexing of works for search purposes was transformative and fulfills the original intent of the Constitutional drafters in furthering the progress of science and useful arts. The plaintiffs argued that this copying, scanning, and indexing without permission and renumeration was a bold faced slap to the face of copyright.

Suit morphs into Orphaned Works Problem

As the litigation progressed, somehow the suit against Google for copying and scanning copyrighted works for search purposes transmogrified itself into a debate about the control over orphan works. Orphan works or those works in copyright whose copyright holder is a) not exploiting the copyright or b) cannot be found or c) a combination of both. There are millions of books considered to be orphaned works. One calculation put the orphan works figure at 70% of the books Google has scanned, indexed and made available for search.

As I wrote in 2009
, the Google Book Settlement became more about recompensing individuals for past misdeeds (as lawsuits are ordinarily about) or enjoining Google from improperly using copyrighted works in the future, and instead became a way in which parties to the lawsuit could craft a private, non legislative “solution” to the orphaned works problem.

Consequently, Google Book Settlement Agreement (hereinafter "GBKS") became more than remediation/compensation or injunctive relief. Instead, GBKS created a prospective agreement altering copyright terms for all copyrighted books.

The settlement gave Google not only the right to scan and index books but also to SELL entire copies of those works.   As Mary Beth Peters wrote in her statement to the court (PDF),

Under copyright law, out-of-print works enjoy the same legal protection as in-print works.   To allow a commercial entity to sell such works without consent is an end-run around copyright law as we know it.

The Private Registry

The Settlement created an Unclaimed Works Fiduciary. This person would be appointed by a supermajority vote from the Books Registry Board and be subject to court approval. The Unclaimed Works Fiduciary will be vested with the power to grant use licenses for these Orphaned Works. The money generated from the use of the Orphan Work license will be held in trust until such time as the rightful owner can be identified. After the 6th year of existence, the Registry can authorize the use of up to 25% of the funds in that trust to locate the rightful owners. After 10 years, the Registry can apply for court approval of distribution of funds to literacy based charities.

Essentially, through the settlement, Google and the named plaintiffs (Authors Guild, publishers, and so on) tried to create something that didn’t exist in the law, in direct contravention of the law.

The Registry and the Unclaimed Works Fiduciary wants to stand in the shoes of the government to administer a program that would allow the use of orphan works, collect money, and hold the money in trust. If the money goes unclaimed, the Registry and the UWF would distribute the money in way that would ostensibly assist the public. Google profits off the use of Orphan Works by establishing a larger database of searchable works than any other company.

In theory, the offering of orphan works to the public is is a social good. Google wants to create a world library that would permit the public access to books that it would not have in the past. However, the approval of this settlement sets this precedent. Where the law is lacking, private organizations with money and power can come together to create a private solution and change the law without legislative process.

The Decision

Judge Chin said that this was overreach and that the settlement was not fair, adequate or reasonable.

The question presented is whether the ASA is fair, adequate, and reasonable. I conclude that it is not.

ASA is the term for the proposed settlement.   Judge Chin found fault with the adequacy of the class:

I conclude that there is a substantial question as to the existence of antagonistic interests between named plaintiffs and certain members of the class.

Over 6800 authors opted out of the settlement and there were over 500 objections,   numbers that made a big impact on Chin. Chin found that the scope of the settlement went far beyond what class actions are meant to address:

While it is true that in virtually every class action many class members are never heard from, the difference is that in other class actions class members are merely releasing “claims” for damages for purported past aggrievements. In contrast, here class members would be giving up certain property rights in their creative works, and they would be deemed — by their silence — to have granted to Google a license to future use of their copyrighted works.

The ASA, in requiring an opt out, would fly in the face of a   “copyright owner’s right to exclude others from using his property” which “is fundamental and beyond dispute.”

As counsel for Amazon argued: “[T]he law of the United States is a copyright owner may sit back, do nothing and enjoy his property rights untrammeled by others exploiting his works without permission.” Under the ASA, however, if copyright owners sit back and do nothing, they lose their rights. [citations omitted]

Allowing only Google to have control over the orphaned works would allow it to have an improper competitive advantage.

The ASA would arguably give Google control over the search market.    The ASA would permit third parties to display snippets from books scanned by Google, but only if they “have entered into agreements with Google.”    Likewise, the ASA would permit third parties to “index and search” scanned books only if they are non-commercial entities or they otherwise have Google’s prior written consent.   The ASA would broadly bar “direct, for profit, commercial use of information extracted from Books in the Research Corpus” except with the express permission of the Registry and Google.   Google’s ability to deny competitors the ability to search orphan books would further entrench Google’s market power in the online search market. [citations omitted]

Chin concluded by suggesting a settlement with an opt in provision versus an opt out provision would ameliorate many concerns.

What the decision says

The decision says that any settlement that requires an opt out will not be approved. Further, it suggests that any control over orphaned works should be done by the legislative process not through a private agreement between a few interested individuals.

Google did not scan the books to make them available for purchase, and, indeed, Google would have no colorable defense to a claim of infringement based on the unauthorized copying and selling or other exploitation of entire copyrighted books.Yet, the ASA would grant Google the right to sell full access to copyrighted works that it otherwise would have no right to exploit.

What the decision does not say

Chin does not address the problems of the foreign rightsholders saying, “I need not decide whether the ASA would violate international law. In light of all the circumstances, it is significant that foreign authors, publishers, and, indeed, nations would raise the issue….The fact that other nations object to the ASA, contending that it would violate international principles and treaties, is yet another reason why the matter is best left to Congress.”

Chin also does not address the issue of fair use. While Chin did say   “Google engaged in wholesale, blatant copying, without first obtaining copyright permissions”, he did not give any indication as to whether the scanning, indexing and displaying of snippets (short pieces for search results) was fair use.     If he had said that it was NOT fair use, that would be the end of the suit. It would be like a summary judgment.   The very basis of the lawsuit is over the issue of fair use and that continues regardless of this rejection of the settlement.

What’s next?

I saw some people indicate that they thought this was a blow to Google.   I don’t perceive it to be a blow to Google in any way.   In settling, the plaintiffs gave signals that they believed their copyright infringement claim was weak.   Post ruling signals repeat this.   From the publishers came this statement authored by John Sargent (the anti librarian guy from Macmillan), just hours after the decision was posted:

For more than a decade, publishers have been making substantial investments to enable and enhance online access to content in accordance with copyright laws and we will continue to do so regardless of the outcome of the litigation. We believe that the provisions of the Settlement would give these efforts a tremendous boost and would open a world of opportunities for readers, researchers, authors, libraries and publishers for decades to come.

For that reason, publishers are prepared to modify the Settlement Agreement to gain approval.

and from Sargent again:

Speaking for the publishers, John Sargent, chief executive of Macmillan publishing group, said he hoped the deal could be renegotiated.”The publisher plaintiffs are prepared to enter into a narrower settlement along those lines to take advantage of its groundbreaking opportunities. We hope the other parties will do so as well,” said Sargent in an email statement.

and from Authors’ Guild:

"Although this Alexandria of out-of-print books appears lost at the moment," said Authors Guild President Scott Turow, “we’ll be studying Judge Chin’s decision and plan on talking to the publishers and Google with the hope that we can arrive at a settlement within the court's parameters that makes sense for all parties."

For Google, however, settlement seems rather unnecessary.   There are many factors that drive settlement but the primary ones in litigation are risk v. reward.   The reward to Google under the proposed settlement was great. It would gain a search and retail monopoly over 70 % of the copyrighted works, essentially given to them by author and publisher organizations.   In exchange Google would pay $125 million toward the funding of the Unclaimed Works Registry; attorneys’ fees and costs.     (Some of the breakdown of that figure includes a minimum of U.S. $45 million into the Settlement Fund to pay Amended Settlement Class members whose Books and Inserts have been Digitized on or before May 5, 2009; $34.5 million to fund the launch of the Book Registry; $30 million to be paid for attorneys’ fees incurred by the Author sub class).

What is the reward for Google settling now? There is already an opt in settlement in place. It is called the Google Partners program and it is the basis for the Google eBookstore.   Why would it spend over $125 million in setting up an opt in book registry database that it wouldn’t even own for books it couldn’t sell?   Google would be better off spending that money pursuing the copyright holders individually, even if it was a   painstaking process.

What is the reward for Google going forward with litigation? If the case is tried and won by Google, it can go forth, scan, index, and throw up any work for searching regardless of orphan work, partner agreement book, or public domain book.   It would not have the right to sell those books, but selling books was never the intent of the Google Book project.   It was about creating an “Alexandria” (as Turow called it) of digital knowledge.

What is the risk of going forward with litigation for Google? In my estimation the risk, the risk is fairly low.   Google’s damages would be limited to the point in time in which each book was put online for searching purposes up to the point in which the respective rights holder signed the partner program.   No damages could be awarded to ANY publisher or author who is part of the Partner program for indexing and displaying text or even selling the work after the agreement had been signed (and the big 6 are already on board).

The settlement can’t include orphan works because that was the overreaching part, unless the orphan works is by opt in.   Which again, is the Partner Program.
Courtney Milan pointed out that statutory damages for willful infringers can be up to $150,000 per book which would not be inexpensive for Google.   However, it is unclear that Google would be deemed a willful infringer or that the outlay of money in the event that they lost would be so substantial that it isn’t worth knowing whether they were acting in fair use.
My money would be on no settlement.

Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She self publishes NA and contemporaries (and publishes with Berkley and Montlake) and spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty. You can reach Jane by email at jane @ dearauthor dot com


  1. Courtney Milan
    Mar 23, 2011 @ 10:21:06

    I don’t understand what the reward is for authors now. The settlement gives 70% of net to the Book Rights Registry (ASA 4.5(a)(i)), who will pass 100% of that on to the author on a timeline that I have not found in any of the settlement documents (Google needs to remit to registry within 60 days, but I can’t find anything about the timeline in which BRR remits to authors–if someone knows this, please tell me!). Authors with control over their backlist books can already beat 70% of net on unspecified delivery terms.

    To make it worse, while authors can specify the price (ASA 4.2(b)(i)(1)), “Google may provide discounts off the List Prices at its sole discretion.” (ASA 4.5(b)(i)).

    This doesn’t have any impact on the amount an author gets paid directly through Google (of course it doesn’t), but it does have an impact on the amount an author gets paid through Amazon if they have the work up there. If you want the 70% royalty on Amazon, you have to give them the right to price-match competing prices around the web. So if you set the price at $2.99 on both Amazon and through the GBS, GBS can undercut the Amazon price–and Amazon will drop their price to match–and you will end up losing your 70% royalty at Amazon.

    None of the terms of the latest royalties from Amazon/PubIt/Apple were available when this settlement was negotiated. One of the objections was the claim that locking in rates and terms in stone when we didn’t know what the future would be was a Very Bad Idea.

    We’re only a year or so later, and we can already begin to see why.

    Once you’re stuck with opt-in only, I think you have to consider that individual authors are capable of building Alexandria on their own.

  2. Julia Broadbooks
    Mar 23, 2011 @ 10:23:50

    Thanks for keeping us well informed. I’ll confess without your explanation, some of this would be over my head.

  3. Praxidike
    Mar 23, 2011 @ 11:21:34

    Oy, the attorney’s fees claimed by class action attorneys always makes me cringe. I just received my paltry settlement from the Bar/Bri class action and I looked online – the attorney’s fees were in the millions.

    This must be my insurance defense bitterness climbing to the surface.

    More relevantly, this is very interesting. I never bought Google’s explanation, and it appears Judge Chin doesn’t either.

  4. Martyn Daniels
    Mar 23, 2011 @ 14:01:17

    Thanks again for a accurate and well constructed walk through
    When I wrote my first piece the day after the initial announcement I thought I was alone but was convinced it was wrong. Others soon rallied but is was if we were questioning the teacher, we were asking whether the emperor had actually got new clothes, or no clothes! I will never forget the quote from someone at a major house who said that they didn’t understand it all but were convinced their boss knew what he was doing! Blind faith. The industry even gave a publisher an honour for the sterling work they had done! It was if we were spellbound by a few

    Two settlements later we still have an industry divided over it and many still just not getting it.

    Today however is the watershed opportunity when we should united to establish an open registry, protect orphans and move forward. My fear is yet another badly cobbled together revision as some seek to justify their previous bad judgement.

    i will link my blog to your article as i think others should read it

  5. Frances Grimble
    Mar 23, 2011 @ 15:32:49

    Actually, there was a lot of benefit in the rejected Settlement for publishers with big backlists of books with older contracts. That is, contracts that did not grant e-rights or POD rights to the publisher because there were none at the time. The rejected Settlement basically awarded those rights to the publishers and Google, not the authors. Many authors are reviving or planning to revive their older titles via e-book or POD self-publication. Those authors do not necessarily want to split the revenues with the print publisher or with Google.

  6. Eric Hellman
    Mar 23, 2011 @ 19:35:36

    One issue you overlook with regard to a renegotiated settlement is the position of the libraries whose books Google is digitizing. Removing their potential liability is a significant motivation for Google to seek a settlement.

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