DOJ Says Google Copyright Book Settlement Not Appropriate

By Gene Quinn
September 21, 2009

The United States Department of Justice on Friday filed papers with the United States Federal District Court for the Southern District of New York, challenging the settlement reached by Google and the plaintiffs in the copyright litigation challenging how Google is digitizing books and offering them for free. The DOJ told the court in a 32 page filing that the district court should not accept the class action settlement in The Authors Guild Inc. et al. v. Google Inc. as proposed due to concerns regarding whether the class adequately represents the interests of those who are not class members, copyright and antitrust laws. The DOJ indicated in its filing that its own review of the Antitrust implications are ongoing, and that since the parties have indicated a willingness to continue negotiations they should be encouraged to continue their discussions to address the concerns raised by the United States. The proposed settlement has been widely criticized because it would significantly alter that rights, and potentially de facto alter copyright law, not to mention that Google would be essentially handed complete and total rights to exploit digitized works. There are serious and significant copyright issues that remain, and the settlement as proposed would almost certainly grant Google a monopoly, which is hardly ideal.

In the filing the Department of Justice summarized its position as follows:

The United States strongly supports a vibrant marketplace for the electronic distribution of copyrighted works, including in-print, out-of-print, and so-called “orphan” works. The Proposed Settlement has the potential to breathe life into millions of works that are now effectively off limits to the public. By allowing users to search the text of millions of books at no cost, the Proposed Settlement would open the door to new research opportunities. Users with print disabilities would also benefit from the accessibility elements of the Proposed Settlement, and, if the Proposed Settlement were approved, full text access to tens of millions of books would be provided through institutional subscriptions. Finally, the creation of an independent, transparently-operated Book Rights Registry (the “Registry”) that would serve to clarify the copyright status and copyright ownership of out-of-print works would be a welcome development.

Nonetheless, the breadth of the Proposed Settlement – especially the forward-looking business arrangements it seeks to create – raises significant legal concerns. As a threshold matter, the central difficulty that the Proposed Settlement seeks to overcome – the inaccessibility of many works due to the lack of clarity about copyright ownership and copyright status – is a matter of public, not merely private, concern. A global disposition of the rights to millions of copyrighted works is typically the kind of policy change implemented through legislation, not through a private judicial settlement. If such a significant (and potentially beneficial) policy change is to be made through the mechanism of a class action settlement (as opposed to legislation), the United States respectfully submits that this Court should undertake a particularly searching analysis to ensure that the requirements of Federal Rule of Civil Procedure 23 (“Rule 23”) are met and that the settlement is consistent with copyright law and antitrust law. As presently drafted, the Proposed Settlement does not meet the legal standards this Court must apply.

In addition to the tradition issues relating to whether a proposed class settlement is appropriate under the Federal Rules of Civil Procedure, there are a couple substantive issues that present real and potential stumbling blocks for this settlement. With respect to copyright matters, the Department of Justice memo explains:

[T]he provisions of the Proposed Settlement that authorize the Registry to license Google to exploit the copyrighted works of absent class members for unspecified future uses (potentially derivative works or other uses) – essentially authorizing, upon agreement of the Registry, open-ended exploitation of the works of all those who do not opt out from such exploitations. See Proposed Settlement Agreement, dated Oct. 28, 2008 (“S.A.”) § 4.7 (allowing the Registry to authorize future business models without any class notification). Such licensing is far afield from the facts alleged in the Complaint. And 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). The parties appear willing to address this problem by limiting the future rights that may be controlled by the Registry and Google. The United States looks forward to working with the parties to address these concerns across the entire spectrum of provisions in the Proposed Settlement.

Although I do not see it directly articulated in the DOJ filing, what seems to be beneath the surface here is the fact that Google would not only receive the right to publish copyrighted works of those who do not opt out of the settlement, but Google would also receive the right to prepare and authorize the future creation of derivative works. The fact that any settlement would provide any copyrights to Google is alarming, because copyrights are a form of quasi-exclusive right. I call it quasi-exclusive because in no real sense do copyrights provide an exclusive right, not at least as that term is used in reference to patents, but copyrights to provide the owner significant rights to choose either to exploit or not exploit a work. Certainly, there are substantial fair use rights that can be enjoyed in education contexts, and in any context really if the amount used is small enough, but even given the generous fair use rights copyright owners must live with they still do have property rights. To force all those who do not opt out to lose those rights, both with respect to digital distribution and with respect to derivative works is unconscionable.  A settlement like this would strip rights away from copyright owners simply because they do not participate in the case or settlement.  That would be an enormous taking and redistribution of property rights to a private corporation on an unprecedented level.  The fact that it is difficult to identify who owns the rights does not mean that the rights are not owned.  Make no mistake, the rights are owned and they would be lost through massive redistribution to benefit Google.

With respect to the antitrust issues that continue to present real and substantial concerns, the DOJ expressed its concern in the following segments, which while not appearing altogether do come from the memo itself:

In the view of the Department, the Proposed Settlement raises two serious issues. First, through collective action, the Proposed Settlement appears to give book publishers the power to restrict price competition. Second, as a result of the Proposed Settlement, other digital distributors may be effectively precluded from competing with Google in the sale of digital library products and other derivative products to come. These problems are evident on the face of the Proposed Settlement and the concerns they raise have not to this point been convincingly addressed by the parties. The parties have indicated, however, a willingness to consider modifications that would address at least some of the concerns set forth below.

[T]he Proposed Settlement’s pricing terms appear to constrain competition among authors and publishers. Moreover, none seems reasonably necessary to achieve the stated benefit of the Proposed Settlement – breathing new commercial life into millions of long-forgotten, commercially unavailable works.

This de facto exclusivity (at least as to orphan works) 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. The seller of an incomplete database – i.e., one that does not include the millions of orphan works – cannot compete effectively with the seller of a comprehensive product. Foreclosure of newcomers is precisely the kind of competitive effect the Sherman Act is designed to address. See Assoc. Press v. United States, 326 U.S. 1, 13-14 (1945). At this stage in the Department’s investigation, it is not at all clear that this aspect of the Proposed Settlement can be “justified by plausible arguments that [it is] intended to enhance overall efficiency and make markets more competitive.” Nw. Wholesale Stationers, 472 U.S. at 294. To the contrary, the Proposed Settlement appears to share features of collective agreements courts have rejected.

The DOJ should be applauded for stepping up to the plate and pointing out the serious concerns, and hopefully the district court will nix the settlement and order the parties back to the drawing board. In the meantime, the DOJ should ramp up its investigation, because as it stands unless this settlement is reworked from top to bottom it has the potential to fundamentally alter the future of how books are bought, sold and presented over the Internet, not to mention the fundamental taking of rights from those who are not a party to this lawsuit.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 6 Comments comments.

  1. Eric Hellman September 21, 2009 9:52 am

    I think you mistake the term “derivative product” for “derivative work”. In the derivative products referred to in the DOJ filing are print-on-demand and subscription services.

    Interestingly, the State Attorneys General who objected to the Agreement argue that State abandoned property laws should determine who gets to control orphan works. What do you think of this angle? For more, see: http://go-to-hellman.blogspot.com/2009/09/in-which-judge-denny-chin-becomes.html

  2. Gene Quinn September 21, 2009 9:57 am

    Eric-

    I think it is absurd to talk about “abandoned” property. The copyright laws grant the owner the right to exploit or not exploit. Although exceptionally watered down, a copyright is still a form of exclusive right, which means the owners have the right to exclude and no affirmative right to do anything. If this or any other court takes rights away based on them being abandoned that would substantially alter copyright law and effectively allow corporations to wrestle away unused rights. That would fundamentally change the nature of a copyright and that would be unwise in my opinion.

    -Gene

  3. Eric Hellman September 21, 2009 10:25 am

    Gene,
    Suppose the agreement covered nothing more than payment of damages for infringement. Then there would be money that would certainly have to be treated as abandoned property. Is it still absurd?

  4. Gene Quinn September 21, 2009 11:40 am

    Eric-

    It sounds like you are heading down the path of compulsory licensing. There already is compulsory licensing in one way, namely statutory damages. The trouble is that the argument is that it is just to difficult to find out who are the owners of the orphan works, so they want them to be taken and given to Google. If it is to difficult to find out who owns them why then wouldn’t it also be to difficult to find out who payment is owed to? There are owners of abandoned works, and it seems like for the public good what is being said is that since it is to much work their rights are forfeited and transferred to Google, who will then do what they want and won’t pay the owners because it is to hard to find out who they are. Sounds like an egregious taking to me.

    -Gene

  5. EG September 21, 2009 1:08 pm

    “the State Attorneys General who objected to the Agreement argue that State abandoned property laws should determine who gets to control orphan works.”

    Eric,

    What the States Attorneys General suggest regarding the applicability of “abandoned property laws” in this situation makes no sense to me and shows they don’t have a clue as to how copyright law works, or what federal preemption means. As Gene noted, ever since the 1989 Berne Convention was adopted by the U.S., copyright exists the minute the author creates the work. The author owns the work, plain and simple, and controls the exclusive rights in the work, including the right to doing nothing with the work. The States can’t simply ignore the right of the author (or their heirs) to do noting to exercise exclusive rights in the copyrighted work. In fact, 17 USC 201(e) suggests that any such attempt at “involuntary transer” by the State, such as treating the copyright as “abandoned property” where there has been no voluntary transfer of the work by the author is prohibited by federal law.

    The SAG’s position that the “States have sovereign immunity and cannot be subject to a federal court’s order” is completely nonsensical. First, the 11th Amendment that is asserted only applies to actions for damages against the States, nothing else. Also, 17 USC 301 already preempts the State’s ability to create rights the same or similar to federal copyright makes it clear which law will prevail, and that is federal law. If the States’ view on “abandoned property” is in conflict with the federal copyright statutes, the States will lose under either 17 USC 301, or the general doctrine of federal preemption.

  6. Adam October 9, 2009 11:03 am

    Some additional information: The New York Times published this op-ed yesterday by Sergey Brin regarding the motivation for the Google Books project. It also includes rebuttals to what he perceives as some of the objections to the settlement:
    http://www.nytimes.com/2009/10/09/opinion/09brin.html?_r=1