Sunstein, Kann, Murphy & Timbers LLP

November 2009 IP Update

Google Book Project Tries to Placate the Critics: Will It Be Enough?

he Google book project began in 2002 as an effort to digitize millions of books. In December 2004, Google announced that it had entered into agreements with the libraries of Harvard, Stanford, the University of Michigan, and the University of Oxford, as well as the New York Public Library to "digitally scan books from their collections so that users worldwide can search them in Google." Google's press release said that it would make available "brief excerpts" of copyrighted material but that its use of these works would comport with copyright law.

In September 2005, the Authors Guild sued Google for copyright infringement. The Authors Guild styled its complaint as a class action brought on behalf of all authors whose books were on the shelves of the University of Michigan library. Several publishers joined the fray in October 2005, and their lawsuit was quickly consolidated with the Authors Guild litigation.

Three years later, the parties filed a detailed settlement agreement (the “Original Settlement”), which the IP Update discussed at the time. The Original Settlement would have allowed Google to compile and commercialize a database of virtually all books published anywhere in the world before 2009, or about 80 - 100 million books. Most of these books are still covered by copyright. To date, Google has digitized approximately 10 million of these books, and the process continues.

When the magnitude of Google’s copying first became apparent, the legal justification was that only snippets of the books would be made available through Google search, and that the publication of these snippets constituted fair use of the material. As discussions between Google, the Authors Guild and the publishers gained momentum, however, Google found itself in the rare position of being prodded to be more ambitious.

What emerged was an agreement that expressly authorized Google to keep copying books without the remotest connection to the University of Michigan library, such as books never published in the United States but included in the collections of other U.S. universities.

The Original Settlement authorized Google to make books available in a variety of commercial contexts, provided that the bulk of the profit was given to a newly formed “Book Rights Registry,” which would distribute the funds to (or for the benefit of) authors and publishers. For example, out-of-print books could be made available in their entirety in the form of .pdf downloads for a fee. The Original Settlement also authorized Google and the Registry to agree upon future forms of commercialization not specifically mentioned in the Original Settlement.

The Original Settlement promised to facilitate the creation of an almost limitless resource of writing that some have compared to the ancient library of Alexandria. As with all projects of enormous scope, it has its share of detractors. In recent months, those detractors have been joined by Marybeth Peters, the U.S. Register of Copyright, who appeared before the House Judiciary Committee on September 10, 2009, and delivered a statement critical of the Original Settlement.

The focus of her criticism was the broad sweep and intricate detail of the Original Settlement, which struck her as resembling legislation more than a private agreement, and therefore the business of Congress, not a federal district judge approving a class action settlement. More specifically, she objected that the Original Settlement:

Included books that had not been scanned when the lawsuit was initiated;
Had the effect of a compulsory license, something rarely granted by Congress and then only after public hearings and lengthy public deliberation;
Implicated U.S. treaty obligations, which are not the domain of either Google or the district court to modify. She noted that both Germany and France had filed objections in the court proceedings, citing possible treaty violations; and
Authorized copying far beyond the snippets originally contemplated in Google’s December 2004 press release.

The Copyright Office was soon joined by the Department of Justice (DOJ), which announced that it had initiated an antitrust investigation. In a “Statement of Interest” that it filed in the court proceeding in September 2009, the DOJ pointed to a potential conflict of interest between authors who were members of the Authors Guild and authors whom neither party could identify or locate, even though their books were in the collection. Joining the fray was a group of 33 antitrust law professors who signed a brief arguing that the Original Settlement was pro-competitive because it would make available millions of books that currently have no commercial outlet. (The author of the brief received funding from Google.)

The DOJ expressed concern that the copyright holders of such “orphan works” were likely to have their books commercially exploited, with the profits going to a Registry that did not represent them, later to be distributed to the authors whom the Registry could identify. The DOJ expressed doubt whether the named plaintiffs in this lawsuit could properly represent the authors of these orphan works.

The DOJ also expressed concern about the inclusion of works by foreign authors, and noted aspects of the Original Settlement that had the aura of price-fixing. The DOJ worried that the result of the Original Settlement would be a Google monopoly over the works that it had digitized, since no competitor would likely replicate Google’s work in the face of uncertainty regarding the outcome of any copyright infringement lawsuit that it might face from authors whose works had been copied without permission. The DOJ seemed to favor a legislative solution to the problems associated with the creation of a massive book database, rather than to entrust it to Google alone.

The brief filed by the Government of France notes with pride that French authors have won the Nobel Prize for Literature more often than authors from any other country, and made both philosophical and legal arguments. Two of its legal arguments were that:

European and French copyright law require that each author's consent must be obtained in order to digitally reproduce, display and distribute. The proposed settlement violates that law by giving unfettered copying power to Google;
The Berne Convention, to which both France and the US are party, prohibits any registration formality as a precondition for enjoying or enforcing a copyright interest. The settlement illegally re-imposes such formalities by requiring that authors register their works in order to enjoy any of the benefits of the proposed Settlement.

More philosophically, the French brief stated:

… By anointing Google with the power to rank books, choose algorithms for deciding what books are displayed in response to a research inquiry and to even decide what books may or may not be included in the publicly available database, the proposed Settlement homogenizes … and demeans those special elements that distinguish the unique cultural traditions of France by turning books into a merely industrial byproduct of a computer database. Furthermore, the proposed Settlement's protective provisions virtually assure Google the revenue flow necessary to preserve its concentration of power long into the future.

Robert Kunstadt, an author and an attorney, filed a brief in which he said:

Google will argue that class representatives and attorneys approve [the] settlement. But these self-appointed "guardians" are worse than no guardians at all. If the class-attorneys cannot obtain injunctive relief against unauthorized use of copyrighted works on an unprecedented scale, they are incompetent and deserve no fee. …

... The author should not be forced to comply with a proposed settlement's non-statutory formalities to protect the author's rights. The author need only comply with U.S. copyright law. Neither the parties nor the Court have the power to amend U.S. copyright law, creating an alternative regime by an ad hoc settlement.

Most of these criticisms were also voiced in a brief filed by David Nimmer on behalf of Amazon.com, Inc. In the brief, Amazon says:

Amazon is a member of the class by virtue of its ownership of a [U.S.] copyright... Amazon … has engaged in a book scanning project very similar to Google’s, with one major distinction: As to books still subject to copyright protection, Amazon has only scanned those for which it could obtain permission to do so from the copyright holder. Amazon’s scanning project has to date resulted in the lawful scanning of over 1 million English-language works and 3 million books in total.

The settlement proposed by the parties to this case should not be approved. It is unfair to authors, publishers, and others whose works would be the subject of a compulsory license for the life of the copyright …. It is anticompetitive … because it provides Google an effective monopoly in the scanning and exploitation of millions of [orphan] works... It also creates a cartel of authors and publishers—the Books Rights Registry—operating with virtually no restrictions on its actions …. Finally, the proposed settlement improperly seeks to stretch the boundary of this Court’s power beyond its lawful limits, using the class action mechanism … to create a massive and complex business arrangement of perpetual duration….

Google, the Authors Guild, the publishers and the DOJ had meanwhile been discussing amendments to the Original Settlement that might address some of these criticisms. In addition, Google engaged trade associations representing authors and publishers in Canada, the UK and Australia. On November 13, 2009, the parties filed an Amended Settlement Agreement that modified the Original Settlement in several ways, including:

Foreign works would be excluded, other than works published in Canada, the UK or Australia;
The Registry would include representatives of authors and publishers from those countries, as well as a representative charged with protecting the interests of authors of orphan works;
Unclaimed funds attributable to commercialization of orphan works would not be distributed to other authors. Up to 25% of the money could be spent seeking to identify the authors. If they had not been found within 10 years, the funds would be donated to literacy-based charities;
The commercialization opportunities would not be open-ended, but would still include downloading of entire books, print-on-demand, and consumer subscription;
Google would be able to discount prices without consulting first with the Registry (a concern of the DOJ, which felt that giving the Registry a voice in setting prices might amount to price-fixing among competitors);
Copyright holders could instruct Google to use different licensing models, and to give away their books for free; and
Google would be required to make the database available to third-party resellers, such as Amazon and allow them to keep the majority of the profit originally allocated to Google.

On November 19, 2009, the district court gave tentative approval to the settlement and set February 18, 2010 as the date of a final fairness hearing. Even if, as expected, the district court approves the settlement, several questions remain.

Will the Copyright Office and the DOJ continue to try to alter the settlement terms? The Copyright Office has long advocated a legislative solution to the problem of orphan works, and thus appears likely to continue to object to the judiciary’s perceived usurpation of functions properly carried out by the legislative and executive branches. The DOJ may be more reluctant to remain critical, since many of the antitrust issues have been blunted, as well as some of the treaty-based objections relating to foreign authors and publishers.

If the district court judge approves the settlement, will it be appealed? Amazon.com is the most likely to bring such an appeal, and many others would join it.

On appeal, would the Second Circuit Court of Appeals or the Supreme Court overturn the settlement as the work of an activist judge? The Supreme Court would likely find the arguments regarding the separation of powers, and the district court’s having exceeded its authority, compelling.

Competitors like Amazon.com are not the only source of challenges to the proposed settlement. Congress and the executive branch would likely prefer to be in the driver’s seat, setting the rules for how copyright will engage the digital age. This story has not been fully written, nor will the fairness hearing on February 18 represent the final chapter.

	Articles Our Newsletters Speaking/Press Other Useful IP Links	November 2009 IP Update Google Book Project Tries to Placate the Critics: Will It Be Enough? By Thomas C. Carey T he Google book project began in 2002 as an effort to digitize millions of books. In December 2004, Google announced that it had entered into agreements with the libraries of Harvard, Stanford, the University of Michigan, and the University of Oxford, as well as the New York Public Library to "digitally scan books from their collections so that users worldwide can search them in Google." Google's press release said that it would make available "brief excerpts" of copyrighted material but that its use of these works would comport with copyright law. In September 2005, the Authors Guild sued Google for copyright infringement. The Authors Guild styled its complaint as a class action brought on behalf of all authors whose books were on the shelves of the University of Michigan library. Several publishers joined the fray in October 2005, and their lawsuit was quickly consolidated with the Authors Guild litigation. Three years later, the parties filed a detailed settlement agreement (the “Original Settlement”), which the IP Update discussed at the time. The Original Settlement would have allowed Google to compile and commercialize a database of virtually all books published anywhere in the world before 2009, or about 80 - 100 million books. Most of these books are still covered by copyright. To date, Google has digitized approximately 10 million of these books, and the process continues. When the magnitude of Google’s copying first became apparent, the legal justification was that only snippets of the books would be made available through Google search, and that the publication of these snippets constituted fair use of the material. As discussions between Google, the Authors Guild and the publishers gained momentum, however, Google found itself in the rare position of being prodded to be more ambitious. What emerged was an agreement that expressly authorized Google to keep copying books without the remotest connection to the University of Michigan library, such as books never published in the United States but included in the collections of other U.S. universities. The Original Settlement authorized Google to make books available in a variety of commercial contexts, provided that the bulk of the profit was given to a newly formed “Book Rights Registry,” which would distribute the funds to (or for the benefit of) authors and publishers. For example, out-of-print books could be made available in their entirety in the form of .pdf downloads for a fee. The Original Settlement also authorized Google and the Registry to agree upon future forms of commercialization not specifically mentioned in the Original Settlement. The Original Settlement promised to facilitate the creation of an almost limitless resource of writing that some have compared to the ancient library of Alexandria. As with all projects of enormous scope, it has its share of detractors. In recent months, those detractors have been joined by Marybeth Peters, the U.S. Register of Copyright, who appeared before the House Judiciary Committee on September 10, 2009, and delivered a statement critical of the Original Settlement. The focus of her criticism was the broad sweep and intricate detail of the Original Settlement, which struck her as resembling legislation more than a private agreement, and therefore the business of Congress, not a federal district judge approving a class action settlement. More specifically, she objected that the Original Settlement: Included books that had not been scanned when the lawsuit was initiated; Had the effect of a compulsory license, something rarely granted by Congress and then only after public hearings and lengthy public deliberation; Implicated U.S. treaty obligations, which are not the domain of either Google or the district court to modify. She noted that both Germany and France had filed objections in the court proceedings, citing possible treaty violations; and Authorized copying far beyond the snippets originally contemplated in Google’s December 2004 press release. The Copyright Office was soon joined by the Department of Justice (DOJ), which announced that it had initiated an antitrust investigation. In a “Statement of Interest” that it filed in the court proceeding in September 2009, the DOJ pointed to a potential conflict of interest between authors who were members of the Authors Guild and authors whom neither party could identify or locate, even though their books were in the collection. Joining the fray was a group of 33 antitrust law professors who signed a brief arguing that the Original Settlement was pro-competitive because it would make available millions of books that currently have no commercial outlet. (The author of the brief received funding from Google.) The DOJ expressed concern that the copyright holders of such “orphan works” were likely to have their books commercially exploited, with the profits going to a Registry that did not represent them, later to be distributed to the authors whom the Registry could identify. The DOJ expressed doubt whether the named plaintiffs in this lawsuit could properly represent the authors of these orphan works. The DOJ also expressed concern about the inclusion of works by foreign authors, and noted aspects of the Original Settlement that had the aura of price-fixing. The DOJ worried that the result of the Original Settlement would be a Google monopoly over the works that it had digitized, since no competitor would likely replicate Google’s work in the face of uncertainty regarding the outcome of any copyright infringement lawsuit that it might face from authors whose works had been copied without permission. The DOJ seemed to favor a legislative solution to the problems associated with the creation of a massive book database, rather than to entrust it to Google alone. The brief filed by the Government of France notes with pride that French authors have won the Nobel Prize for Literature more often than authors from any other country, and made both philosophical and legal arguments. Two of its legal arguments were that: European and French copyright law require that each author's consent must be obtained in order to digitally reproduce, display and distribute. The proposed settlement violates that law by giving unfettered copying power to Google; The Berne Convention, to which both France and the US are party, prohibits any registration formality as a precondition for enjoying or enforcing a copyright interest. The settlement illegally re-imposes such formalities by requiring that authors register their works in order to enjoy any of the benefits of the proposed Settlement. More philosophically, the French brief stated: … By anointing Google with the power to rank books, choose algorithms for deciding what books are displayed in response to a research inquiry and to even decide what books may or may not be included in the publicly available database, the proposed Settlement homogenizes … and demeans those special elements that distinguish the unique cultural traditions of France by turning books into a merely industrial byproduct of a computer database. Furthermore, the proposed Settlement's protective provisions virtually assure Google the revenue flow necessary to preserve its concentration of power long into the future. Robert Kunstadt, an author and an attorney, filed a brief in which he said: Google will argue that class representatives and attorneys approve [the] settlement. But these self-appointed "guardians" are worse than no guardians at all. If the class-attorneys cannot obtain injunctive relief against unauthorized use of copyrighted works on an unprecedented scale, they are incompetent and deserve no fee. … ... The author should not be forced to comply with a proposed settlement's non-statutory formalities to protect the author's rights. The author need only comply with U.S. copyright law. Neither the parties nor the Court have the power to amend U.S. copyright law, creating an alternative regime by an ad hoc settlement. Most of these criticisms were also voiced in a brief filed by David Nimmer on behalf of Amazon.com, Inc. In the brief, Amazon says: Amazon is a member of the class by virtue of its ownership of a [U.S.] copyright... Amazon … has engaged in a book scanning project very similar to Google’s, with one major distinction: As to books still subject to copyright protection, Amazon has only scanned those for which it could obtain permission to do so from the copyright holder. Amazon’s scanning project has to date resulted in the lawful scanning of over 1 million English-language works and 3 million books in total. The settlement proposed by the parties to this case should not be approved. It is unfair to authors, publishers, and others whose works would be the subject of a compulsory license for the life of the copyright …. It is anticompetitive … because it provides Google an effective monopoly in the scanning and exploitation of millions of [orphan] works... It also creates a cartel of authors and publishers—the Books Rights Registry—operating with virtually no restrictions on its actions …. Finally, the proposed settlement improperly seeks to stretch the boundary of this Court’s power beyond its lawful limits, using the class action mechanism … to create a massive and complex business arrangement of perpetual duration…. Google, the Authors Guild, the publishers and the DOJ had meanwhile been discussing amendments to the Original Settlement that might address some of these criticisms. In addition, Google engaged trade associations representing authors and publishers in Canada, the UK and Australia. On November 13, 2009, the parties filed an Amended Settlement Agreement that modified the Original Settlement in several ways, including: Foreign works would be excluded, other than works published in Canada, the UK or Australia; The Registry would include representatives of authors and publishers from those countries, as well as a representative charged with protecting the interests of authors of orphan works; Unclaimed funds attributable to commercialization of orphan works would not be distributed to other authors. Up to 25% of the money could be spent seeking to identify the authors. If they had not been found within 10 years, the funds would be donated to literacy-based charities; The commercialization opportunities would not be open-ended, but would still include downloading of entire books, print-on-demand, and consumer subscription; Google would be able to discount prices without consulting first with the Registry (a concern of the DOJ, which felt that giving the Registry a voice in setting prices might amount to price-fixing among competitors); Copyright holders could instruct Google to use different licensing models, and to give away their books for free; and Google would be required to make the database available to third-party resellers, such as Amazon and allow them to keep the majority of the profit originally allocated to Google. On November 19, 2009, the district court gave tentative approval to the settlement and set February 18, 2010 as the date of a final fairness hearing. Even if, as expected, the district court approves the settlement, several questions remain. Will the Copyright Office and the DOJ continue to try to alter the settlement terms? The Copyright Office has long advocated a legislative solution to the problem of orphan works, and thus appears likely to continue to object to the judiciary’s perceived usurpation of functions properly carried out by the legislative and executive branches. The DOJ may be more reluctant to remain critical, since many of the antitrust issues have been blunted, as well as some of the treaty-based objections relating to foreign authors and publishers. If the district court judge approves the settlement, will it be appealed? Amazon.com is the most likely to bring such an appeal, and many others would join it. On appeal, would the Second Circuit Court of Appeals or the Supreme Court overturn the settlement as the work of an activist judge? The Supreme Court would likely find the arguments regarding the separation of powers, and the district court’s having exceeded its authority, compelling. Competitors like Amazon.com are not the only source of challenges to the proposed settlement. Congress and the executive branch would likely prefer to be in the driver’s seat, setting the rules for how copyright will engage the digital age. This story has not been fully written, nor will the fairness hearing on February 18 represent the final chapter.