Google Books Settlement Rejected

This week a federal court put the brakes on Google’s plans to create a universal digital library by rejecting the company’s proposed settlement of class-action lawsuits filed by authors and publishers challenging the Google Books project. On March 22, 2011, more than a year after conducting a fairness hearing on the parties’ amended settlement agreement, judge Denny Chin rejected the plan that would have permitted Google, in exchange for royalty payments, to distribute copies of the millions of books it has scanned from the collections of some of the world’s largest libraries.

The Court’s decision vindicates arguments voiced by the many opponents of the settlement who submitted objections and testified at the fairness hearing. Indeed, Judge Chin’s 46-page opinion (PDF) cites and quotes from the objections of a variety of players, including the U.S. Department of Justice, several U.S. states and foreign nations, academics, literary agents, and individual authors. While the objectors raised a wide array of concerns, several points seemed to particularly trouble the Court.

Most of the issues highlighted in the Court’s opinion relate to the problem of “orphan works,” books that have not yet passed into the public domain but for which the current copyright holder cannot be identified. The settlement agreement proposed to allow Google to distribute such works and pay royalties into an independent “Book Rights Registry,” which would be tasked with attempting to locate owners to receive the royalties. (Unclaimed funds would be used for further search efforts and eventually donated to literary charities.) Authors who did not wish their works to be included in the Google Books project could opt out.

Judge Chin found this arrangement problematic for a number of reasons. He noted that an opt-out system contravenes the fundamental concept of an author’s exclusive rights under copyright law, which include the right to not distribute a work and merely prevent others from using it. The settlement would allow Google – and only Google – to distribute these works without the owner’s permission, giving the company an effective monopoly as a reward for an act of wholesale unauthorized copying. The existence of orphan works also raised concerns about the representativeness of the named plaintiffs, whose interests could be at odds with those of owners who do not come forward to either opt out or claim payment. The Court also observed that the proposed settlement, which would give Google a future license to sell entire works, went far beyond the scope of the pleadings, which addressed Google’s publication of “snippets” of works in search results; while Google had an arguable fair use defense to the latter activity, its counsel acknowledged that there was no colorable defense to the former. Finally, the Court suggested that the question of how – and whether – to address distribution of orphan works was better left to Congress, which has in fact considered proposed orphan works legislation in several recent sessions.

At the end of his lengthy opinion, Judge Chin observed that many of his concerns “would be ameliorated if the [agreement] were converted from an ‘opt-out’ settlement to an ‘opt-in’ settlement,” and invited the parties to submit a revised proposal. While Google has already secured opt-in agreements with many publishers, an opt-in arrangement would necessarily exclude orphan works, thereby making Google’s digital library far short of “universal.” It remains to be seen whether the project will still seem worth the effort in Google’s eyes. Google counsel, on Google’s web page describing the settlement, has remarked that the decision is “disappointing,” and that Google will review the decision and consider its options.  We may learn more about where the parties plan to go from here at a status conference the Court has scheduled for April 25.

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