Court Rejects Settlement Agreement In Google Books Class Action

Matt Lonsdale is a JD candidate at Dalhousie University.

The United States District Court for the Southern District of New York released their decision in the fairness hearing on the latest proposed settlement in the Google Books class action proceedings. Judge Denny Chin refused to grant final approval for the Amended Settlement Agreement (ASA). “The question presented is whether the ASA is fair, adequate, and reasonable. I conclude that it is not.”  The decision was released on March 22nd, 2011.

The lawsuit arises out of a project Google started in 2004 to digitize and make searchable books from the collections of several research libraries. This unauthorized copying drew the attention of authors and publishers, who commenced a class action lawsuit against Google for copyright infringement. The court’s preliminary approval of the ASA in 2009 triggered objections from hundreds of class members and intervenors, with the issue of how to handle orphan works (works for which the copyright holder cannot be found) arising in several contexts. In response, a fairness hearing was conducted on February 18, 2010. The significant number of class members who had raised objections played a substantial part in Judge Chin’s decision not to approve the settlement.

While the specific rights varied depending on whether a particular book was commercially available, the ASA would have granted Google authorization to digitize and make use of millions of books, including in some cases the non-exclusive right to sell online access to the work. Such broad powers do not come cheap: in exchange, Google would make an initial payment of a minimum $45 million to compensate rights holders for the unauthorized copying that has already occurred. Going forward, 63% of Google’s revenues from the project would be shared with rights holders. A “Books Rights Registry” would be established to help administer the revenue sharing, at a cost of another $35 million to Google. Rights holders would have the ability to request their works be removed from the Registry at any time.

A general objection was that a class action lawsuit simply isn’t the appropriate venue for a decision with such wide-reaching implications to be made. The effect of the ASA, it was argued, was akin to setting copyright policy through private litigation. In particular, it was stated, the “questions of who should be entrusted with guardianship over orphan books, under what terms, and with what safeguards are matters more appropriately decided by Congress than through an agreement among private, self-interested parties.” For this reason, as well as concerns about potential violations of international law, Judge Chin held that some of the issues addressed by the agreement were best left to Congress.

There were the obvious copyright concerns about the agreement. Under the ASA, rights holders were presumed to have opted-in to the service, unless they explicitly requested their works be removed. Objectors argued that this strayed too far from the intent of U.S. copyright law, which allows a rights holders to “[s]it back, do nothing and enjoy his property rights untrammeled by others exploiting his works without permission.” The ASA would have created a requirement that authors and publishers contact Google with each new publication to ensure their copyright was protected. This would be particularly problematic in the case of individuals who were simply not aware of the settlement or its ramifications.

Many of the objectors, including the U.S. Department of Justice, had antitrust concerns about the settlement. The rights granted to Google under the ASA were non-exclusive, meaning rights holders could authorize other companies to make similar uses of the books.  Since in the case of orphan works, it would be difficult or impossible for any other company to receive this necessary authorization, the agreement would effectively make Google their exclusive distributor.

Judge Chin outlined the copyright and antitrust concerns without addressing explicitly how they factored into his judgement, other than to note that he considered them valid. He did suggest, “[M]any 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”. Such an agreement would not give Google the necessary authorization to digitize and market orphan works, which is perhaps why Google has said in the past that an opt-in arrangement wouldn’t be feasible.

Concerns that the ASA might be a violation of international copyright law received similar treatment, with Judge Chin writing, “[I]n any event, I need not decide whether the ASA would violate international law. In light of all the circumstances, it is significant that foreign authors, publishers, and, indeed, nations would raise the issue.”

Judge Chin also noted the concerns of privacy advocates that without appropriate safeguards, the Google Books service created unprecedented potential to breach users’ privacy interests. Through the service, Google would be able to track not just which books users read, but also how long they spent on each book and which pages they focused on. If combined with data from other Google services, comprehensive user profiles could be developed. While Judge Chin was sympathetic to these concerns, they did not play a determinative role in his decision not to approve the settlement. “The privacy concerns are real. Yet, I do not believe that they are a basis in themselves to reject the proposed settlement.” He went on to say that the agreement appropriately protected the interests of the rights holders involved in the suit.

The limited scope of the pleadings may have been the final nail in the coffin for the ASA. The initial lawsuit centered around Google’s specific unauthorized acts: scanning the books and returning snippets to users in response to search queries. Google’s defense to the claim was fair use. The ASA went well beyond these topics, and constituted a “forward-looking business arrangement that would grant Google significant rights to exploit entire books, without permission of the copyright owners”. While he acknowledged the benefits that the digitization and online availability of books could bring, Judge Chin felt that this was going too far: “[T]he ASA would give Google a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission, while releasing claims well beyond those presented in the case.”

The ASA was rejected without prejudice, meaning that it’s likely we’ll see another attempt at a settlement. Perhaps Judge Chin’s comments in this judgement will provide some guidance to the parties on how they might find more success in the future.