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The Great Google Books Settlement Debate

Posted  February 22, 2010

The fate of the massive digital library that Google hopes to create now lies in the hands of U.S. District Judge Denny Chin, who heard nearly a full day of oral argument on Thursday from supporters and opponents of the proposed settlement agreement that would settle the class action brought on behalf of authors and publishers against Google Book Search.

The parties in The Authors’ Guild, et al. v. Google Inc. are moving for court approval of a class action settlement that would allow Google to provide varying degrees of access to a vast body of information, including subscriptions to its 12-million book library and displaying snippets of out-of-print books that are still covered by copyright.

After informing the parties and two courtrooms full of supporters and objectors that he would not rule on the motion that day, Judge Chin heard a veritable great debate over whether proposed settlement would benefit or harm consumers, authors and publishers.

Supporters of the settlement argued the benefits include public access to books including out-of print books and orphan works, locating rights holders for unclaimed works, and access for the digitally disenfranchised and visually impaired.

Opponents argued the settlement raised a plethora of issues, including raising antitrust concerns, violations of copyright law, and even jurisdictional and notice issues.

The hearing began with arguments from non-party supporters of the settlement.

Lateef Mtima, Professor at Howard University and Director of the Institute of Technology and Justice, argued that the settlement promoted equality in access to books and libraries and leveled the playing field for the digitally disenfranchised.

Janet Collum, for Sony Electronics, argues that Sony did not believe the settlement would give Google a competitive advantage because the rights conferred to Google would be non-exclusive and the Book Rights Registry created through the settlement would facilitate identifying unknown rights holders, shrink the pool of unclaimed works and reduce transaction costs for competitors who want to deal with the newly identified rights holders. Collum also argued that Google’s use of the open e-pub book format would foster competition for e-readers and drive demand for e-books and e-readers.

Marc Maurer, President of the National Federation of the Blind, argued that within a specific time of the settlement as many as 10 million books would be available for the blind and Google would create the largest specialized library for the blind.  He cited to the excitement of the visually impaired, many of whom attended the hearing to support the settlement.

Paul Courant, Dean of Libraries of the University of Michigan, argued that the unprecedented level of access to scholarly record which would be possible through the settlement was important for future academic research.  Physical proximity to academic libraries would no longer be necessary to ensure access. Users would be able to gain maximum benefit possible from library collections.

The final non-party supporter was John Morris of the Center for Democracy and Technology. The Center for Democracy and Technology supported the settlement but asked the Court to include provisions in the settlement regarding readers’ privacy.  A similar privacy concern was also raised by opponents to the settlement the Electronic Frontier Foundation, represented by Cindy Cohn and the Electronic Privacy Information Center, represented by Marc Rotenberg.

Following the supporters, the floor was given to some of the numerous opponents to the settlement.

Thomas Rubin, representing Microsoft, raised three points.  First, he claimed the settlement raised a Constitutional issue since only Congress could authorize fundamental changes to Copyright law and the settlement altered Copyright law.  Second, he argued that the settlement went beyond the issues presented by the case, which he described as the authors’ and publishers’ allegations that Google’s showing of snippets of scanned books was a copyright violation.  The settlement, he argued, covered the copying of entire books as opposed to snippets.  Finally, Rubin raised antitrust concerns and said competitors’ complaints were not “sour grapes.”  Analogizing Google to a trucking company that instructs its drivers to drive at 90 miles per hour, he said competitors who follow the speed limit – i.e., by obtaining a license from each rights holder – can’t compete.  Similar competitive concerns were raised by Michael Guzman, representing AT&T.

David Nimmer, representing, argued that the settlement agreement was an infringement on Copyright law and the rights holder’s ability to sit back and enjoy his intellectual property right.

William Cavanaugh of the U.S. Department of Justice stated that although the U.S. applauds the objective of mass digitization, it does not believe that the settlement is an appropriate vehicle.  He characterized the settlement as a “forward-looking commercial transaction” that bore no relation to the alleged harm in the complaint – the display of snippets.  He also argued that the parties were seeking to go beyond settlement of the claims in litigation. The “forward looking commercial transaction” is not purely remedial in nature to address an underlying harm but is rather conferring a benefit on Google it would not otherwise have achieved.  The settlement, Cavanaugh argued, also provides releases for future conduct, which are generally not allowed.

Cavanaugh explained how the use of Rule 23 and the class action specific “opt out” mechanism was being misused in this context as procedural rules were being used to modify substantive rights.  He re-iterated that an opt-in registry instead of an opt-out would be preferable. Other speakers also expressed preference for an opt-in procedure, including Dr. Irene Pakuscher, speaking for the Government of Germany, Hadrian Katz and Paul Rothstein.

With respect to the antitrust issues, Cavanaugh stated that the Department’s investigation was ongoing.  DOJ has identified a horizontal (price floor) problem in the settlement, but is not able to calculate exact effects of the settlement yet.  The Department did not view giving up the rights of non-available rights holders as reasonably necessary to achieve a pro-competitive outcome.

The parties were given the last word.

Michael Boni, representing the plaintiff Authors’ sub-class, spoke first.  He argued the settlement did not go beyond the issues raised in the case.  When Google initially started its book scanning project, authors and publishers were concerned about the project as a whole and what Google would do with the scanned books.  The injunctive relief they sought was for continued copyright infringements not just Google’s use of snippets.

Boni’s argument was echoed by Bruce Keller, representing the Publishers’ sub-class, who explained that the initial infringement for which Google was sued was the scanning of the work and the settlement was not outside the scope of the pleadings of the case.

Boni urged the Court to apply Rule 23 like in any other class action case and decide if the settlement was a fair and equitable resolution of the case and controversy.  Similarly, Keller argued the settlement was fair and reasonable because it was option-oriented. He emphasized that the standard for approving a settlement is that it be fair and reasonable – not perfect.

Boni also addressed the issue of adequacy of representation by pointing out that there was no fundamental conflict of interest that could shake the adequacy of representation requirements as to the authors sub-class.  He emphasized that there was no deadline for authors to come forward to be part of the registry and no deadline for them to decide to turn their book off from the registry.  He argued that the Registry would have a high success rate of finding parents for the orphan works.

Finally, Daralyn Durie, representing Google, argued that economic interests of rights holders would not be affected by the settlement, and that no one has argued that their economic rights would be affected. Rights holders retain the right to join the registry or pull their books from the registry at any time.  With respect to orphan works, she argued that the works would collect money while the search for rights holders is ongoing and this would provide an additional incentive for rights holders to come forward.

In response to Judge Chin’s question, Durie explained that the opt-out feature of the registry was essential because there was no other way to create a market for out of print works and find rights holders for orphan works.

With respect to the antitrust concerns raised by opponents, Durie argued that the Sherman Act was first and foremost a consumer welfare statute.  In the absence of a settlement, she said, millions of works would be locked away and one distribution channel or one way to access these otherwise unavailable works was better than none and in line with consumer welfare.  She argued that the settlement did not create barriers to other competitors – the registry would allow competitors to locate and contact authors and negotiate with them.  She claimed that Google has a zero percent market share in e-books and the competitive concerns raised by opponents were speculative.  She argued that if any of these speculative harms came to pass, private plaintiffs and the Department of Justice could assert a claim against Google.

Judge Chin reserved judgment.

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