If a recent flurry of opposition from Microsoft, Amazon, Yahoo, the U.S. register of copyrights and the governments of Germany and France — to name just a few — wasn’t a clear enough indicator of disaster for the historic proposed settlement between Google and book publishers and authors, the 32-page brief filed late Friday by the Justice Department seems almost certain to derail the agreement, at least as currently constructed.
“The breadth of the proposed settlement — especially the forward-looking business arrangements it seeks to create — raises significant legal concerns,” wrote the Justice lawyers, including William Cavanaugh of the antitrust division and Manhattan Assistant U.S. Attorney John Clopper. “This court should reject the proposed settlement in its current form and encourage the parties to continue negotiations to modify it so as to comply with [class action law] and the copyright and antitrust laws.”
But it wasn’t all bad news for Google. The Justice Department, which has reportedly been in talks with Google and book industry negotiators about changes in the terms by which Google would make millions of out-of-print books available online, said that a properly constructed deal could have tremendous societal benefits, particularly for the vision-impaired. According to the filing, Google and negotiators for the authors and publishers have told the Justice Department that they are working to amend the deal to address the government’s concerns.
The Justice Department urges Manhattan Federal District Court Judge Denny Chin, who is overseeing the proposed class action settlement, to consider a modified deal. Judge Chin has scheduled a fairness hearing for Oct. 7. Google and the publishers and authors have until Oct. 2 to respond to objectors to the settlement, who are so numerous that, according to Bloomberg, Judge Chin has had to set up a special procedure to decide who will speak at the hearing.
The proposed settlement, reached in 2008, resolved a 2005 class action by the Authors Guild and the American Association of Publishers to block Google’s announced project to create an online library of out-of-print books. The deal, which went far beyond the scanning and display copyright issues at the heart of the original case, would (as currently constructed) give Google a broad license to scan, display and sell out-of-print and in-copyright works, including hundreds of thousands of so-called orphan books whose copyright holders cannot be determined. In exchange, Google would pay $125 million to establish a book rights registry to manage the project. (The primary lawyers on the settlement were, for Google, Chief Legal Officer David Drummond and since-departed in-house lawyer Alexander Macgillivray; Michael Boni of Boni & Zack for the Authors Guild; and Jeffrey Cunard of Debevoise & Plimpton for the publishers’ association.)
Competitors quickly objected to the deal on antitrust grounds, claiming that it would give Google an unfair competitive advantage. Various authors and digital rights groups also jumped on the settlement, complaining that its opt-in provision would turn traditional copyright law on its head, trampling the rights of out-of-print authors while giving a financial benefit to Google and authors and publishers of in-copyright works.
In June, the Department of Justice announced an investigation of the deal for possible antitrust violations. Friday’s filing suggests that the outcome of that continuing investigation depends on whether, and to what degree, settlement negotiators address the government’s concerns — which, according to the brief, include the power book publishers have under the settlement to restrict price competition and the inability of Google’s competitors to obtain comparable right from the authors and publishers. It’s not reasonable, Justice argues, to expect Google’s rivals to mount their own book scanning operations without permission in the hope of prompting a class action that could be settled on terms similar to those in the Google agreement. “It would scarcely be sound policy to encourage deliberate copyright violations and additional litigation,” the brief says.
In fact, the Justice Department seems to have mixed feelings about the use of class action litigation to fundamentally reorder copyright policy in the book publishing business. “A global disposition to the rights of millions of copyrighted works is typically the kind of policy change implemented through legislation, not through a private judicial settlement,” the brief says. Yet the Justice lawyers also indicate that they don’t oppose such a solution. “A properly defined and adequately represented class of copyright holders may be able to settle a lawsuit over past conduct by licensing a broader range of conduct to obtain global ‘copyright peace,’” the brief says.
Bottom line? According to Justice, an online book deal can work — but only with the changes it’s demanding. “A properly constructed settlement,” the Justice Department filing says, “has the potential to breathe life into millions of works that are now effectively off-limits to the public.”
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.