Last week, Judge Denny Chin, sitting in the U.S. District Court, Southern District of New York, rejected the Google book settlement. He concluded that the settlement “is not fair, adequate, and reasonable.” This post discusses how he came to that conclusion.
Google began scanning library books in 2004. Many of those books were still protected by copyright. Google did not get permission from the copyright owners to copy the books. In 2005, a group of authors and publishers brought the class action copyright infringement suit against Google that gave rise to the Google book settlement. The parties filed a proposed settlement agreement on October 28, 2008, which was preliminarily approved on November 17, 2008. That proposed settlement received hundreds of objections. The Amended Settlement Agreement (ASA) just rejected by the court was filed for final approval on November 13, 2009. It was preliminarily approved on November 19, 2009, and it, too, was met with hundreds of objections. The court held a fairness hearing on February 18, 2010.
The Class covered by the ASA includes all people who own a U.S. copyright interest in books or inserts (forwards, etc.) affected by a use authorized by the ASA. Class members must affirmatively opt-out to be excluded from the settlement. Under the ASA, Google was authorized to “(1) continue to digitize Books and Inserts, (2) sell subscriptions to an electronic Books database, (3) sell online access to individual Books, (4) sell advertising on pages from Books, and (5) make certain other prescribed uses.” (Opinion, page 6). Google would pay rightsholders a percentage of the revenues from these uses and from net revenues from sales and advertising. A “Books Rights Registry” would administer the revenue distributions.
The Registry would be required to locate rightsholders using “commercially reasonable efforts.” Funds unclaimed after 5 years could be used to cover the expense of locating rightsholders of unclaimed works and after 10 years, unclaimed funds could go to literary-based charities.
Under the ASA, Google could not display in-print books without prior express authorization from the rightsholders. Google could display out-of-print books without prior express authorization from the rightsholders, but would be required to stop if directed to by the rightsholders. There are many nuances this brief description does not discuss.
The Court’s Opinion
The court’s opinion is organized around the kinds of objections received to the ASA. These objections are:
- Adequacy of Class Notice
- Adequacy of Class Representation
- Scope of Relief Under Rule 23
- Copyright Concerns
- Antitrust Concerns
- Privacy Concerns
- International Law Concerns
Judge Chin pointed out that the vast majority of the submissions filed commenting on the ASA objected to the ASA. Around 6,800 class members opted out, which he thought was an extremely high number. He thought the objections were great in number and some of the concerns significant.
A federal court cannot approve a class action settlement unless it is “fair, adequate, and reasonable, and not a product of collusion.” (Opinion, p. 14). Judge Chin applied that standard in evaluating the objections to the ASA.
Adequacy of Class Notice. Judge Chin thought the class received adequate notice. Over 1.26 million individual notices were sent to potential class members worldwide, in thirty-six languages. The Plaintiffs also maintained a website with information about the case. In addition, there was a huge amount of publicity. He thought it “hard to imagine that many class members were unaware of the lawsuit.” (Opinion, page 19).
Adequacy of Class Representation. Judge Chin concluded that “there is a substantial question as to the existence of antagonistic interests between named plaintiffs and certain members of the class.” He thought the differences were troubling.
Scope of Relief Under Rule 23. This part of the discussion refers to Federal Rules of Civil Procedure, Rule 23, governing class actions. Judge Chin determined that the ASA contains two distinct parts. The first part covers past conduct. Google would be released from liability for past copyright infringement. The second part covers future acts. It would transfer certain rights to Google in exchange for future and ongoing arrangements and would release Google from liability for certain future acts. Judge Chin found that the second part exceeds the scope of Rule 23. The US DOJ argued that the ASA “is an attempt to use the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute before the Court in this litigation.” (Opinion, page 21).
Further, Judge Chin thought “the establishment of a mechanism for exploiting unclaimed books” should be addressed by Congress, not the courts. He also reiterated that the class plaintiffs did not adequately represent the interests of some class members. For example, the interests of academic authors and The Authors Guild authors are not aligned, as academic authors seek maximized access to knowledge and The Authors Guild authors seek maximized profits.
Judge Chin also indicated that the ASA is unlike other class actions settlements in which class members who have not been heard from release their claims for purported past grievances. Under that ASA,
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.
(Opinion, page 30).
Copyright Concerns. Judge Chin’s first point is that under the Copyright Clause of the U.S. Constitution (Article I, Section 8, clause 8), Congress was granted the power to address copyright issues presented by technology. The courts were not granted that power.
Judge Chin’s second point is that the ASA opt-out provisions grant Google “the ability to expropriate the rights of copyright owners who have not agreed to transfer those rights” and that this may violate the Copyright Act, 17 USC §201(e). Section 201(e) provides that government bodies, other officials, and organizations cannot seize exclusive rights under copyright when those rights have not been transferred voluntarily by the copyright owner. The argument is that the ASA uses the court system to unlawfully seize these rights on Google’s behalf. Judge Chin did not think it was necessary for him to rule on this point, although he is troubled by it.
Judge Chin indicated that a copyright owner’s right to exclude others from using the work is beyond dispute. A copyright owner has no obligation to exploit a work. Under that ASA, absent class members who do not opt out of the class are “deemed to have released their rights even as to future infringing conduct.” (Opinion, page 33). Judge Chin stated
it is incongruous with the purpose of the copyright laws to place the onus on copyright owners to come forward to protect their rights when Google copied their works without first seeking their permission.
(Opinion, page 35).
Antitrust Concerns. The first concern is that Google would have a de facto monopoly over unclaimed works. The second concern is that Google would have control over the search market. Google would have the only complete commercial database of orphan works (works for which the copyright owner cannot be located), adding to its market power in online search.
Privacy Concerns. A privacy concern is that the ASA does not follow established law protecting reader privacy by limiting the disclosure of reader information. Judge Chin thinks the privacy concerns are real, but does not consider them by themselves a reason to reject the ASA.
International Law Concerns. Although Google argues that the settlement affects only U.S. copyright interests, it is in fact much broader than that. The U.S. is a 1989 signatory to the Berne Convention, so that all books published in any Berne Convention signatory country after 1989 are protected by U.S. copyright law. The ASA attempts to restrict its application to foreign books registered in Washington, D.C. or published in Canada, the United Kingdom or Australia on or before January 5, 2009. Foreign rightsholders are still concerned, though, because many foreign books were registered in the U.S. before 1989 to ensure U.S. copyright protection. Foreign rightsholders also object, arguing that the ASA would violate international law, such as the Berne Convention and WTO TRIPS (World Trade Organization Trade-Related Aspects of Intellectual Property Rights). Foreign authors also have trouble determining whether they are covered by the ASA, due to the unavailability online of Copyright Office records dated before 1978.
Orphan works are a problem all over the world, not just in the U.S. Foreign objectors point out that each country should address this problem and that a class action settlement in the U.S. is not the best way to solve a problem affecting global competition. Judge Chin thinks the objections of foreign nationals and governments are another indication that Congress should be the one to act, not the courts.
Conclusion. As indicated above, Judge Chin concluded “that the ASA is not fair, adequate, and reasonable.” He went on to say that “many of the concerns raised in the objections would be ameliorated if the ASA were converted from an ‘opt-out’ settlement to an ‘opt-in’ settlement.” (Opinion, page 46). He urged the parties to consider revising the ASA along those lines.